A lender has moved to sell a 580,000-square-foot office tower in San Francisco’s Financial District after Kylli defaulted on a $350 million mortgage loan.
Deutsche Bank suggested it doesn’t expect to strike a loan modification with the unit of China-based Genzon Investment Group for the 22-story tower at 225 Bush Street, the San Francisco Business Times reported.
Locally based Kylli, led by Ou Sun, failed to pay off the loan when it matured in November, sending the historic building into special servicing.
Deutsche intends to interview brokerages to market the building for future sale, according to notes sent to commercial mortgage-backed securities bondholders.
The German-based bank has contemplated options for the 103-year-old building, from selling the troubled loan to settling for a discounted payoff by Kylli to hash out a loan modification, according to CMBS reporting.
But there doesn’t “appear to be a viable pathway” for a modification, Deutsche said.
The bank and its attorneys at Los Angeles-based Sheppard Mullin issued Kylli a notice of default and are moving to request the building be placed in the hands of a receiver to assume control of maintenance and operation.
A sale of the building or its $350 million loan would make it the largest building in San Francisco to come up for grabs since November’s $400 million loan backed by the 745,000-square-foot Market Center complex, according to the newspaper.
Flynn Properties, based in the city, is poised to pick up the former Chevron headquarters for around $230 per square foot, or $171.4 million.
A sale of the 103-year-old former Standard Oil building could also break the $100 million threshold, if valued at around $200 per square foot.
Kylli bought a majority stake in the building in 2014 for $350 million, or $600 a square foot, according to the Business Times. Five years later, it bought out Flynn Properties, a minority owner, for an undisclosed sum.
In 2019, Kylli refinanced the building with the $350 million loan from Deutsche, when the building was fully leased and appraised at $589 million. As of November, the building was 60 percent vacant after Sunrun uprooted its headquarters last summer.
— Dana Bartholomew
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