Former SF WeWork Location Up for Sale at 70% Discount
An office building attached to San Francisco’s iconic Golden Gate Theatre is now up for sale, marking a significant real estate event in the city’s commercial landscape. This property, located at 25 Taylor Street, was once a bustling WeWork location but has since gone into receivership.
The building’s history with WeWork began nearly a decade ago when the co-working space provider leased 42,565 square feet of the overall 50,000-square-foot structure. However, in a post-pandemic world, that chapter has closed, leaving the property vacant since WeWork’s departure in 2021. The shift in tenancy, as well as its financial challenges, enabled current circumstances where the building is on the market.
While the property’s specific asking price has not been disclosed, it has undergone significant devaluation. Originally valued at $28.1 million in 2014, a 2023 appraisal reduced its worth dramatically to $9.5 million, showcasing a steep decline precipitated by broader economic and social changes in the area.
Legal battles also had a hand in shaping the property’s current market position. When WeWork vacated the location in 2021, the landlord, War Horse Cities, found itself with a near-vacant building during a tumultuous economic period. Subsequently, War Horse Cities initiated a lawsuit against WeWork for more than $11 million, citing breach of lease and breach of guaranty. However, this lawsuit was dismissed by March 2023.
Financial complexities further included an $18.5 million default on a loan associated with the building. This loan, initially secured by private equity investor Scott Plank of JSP Ventures, defaulted in 2021, and eventually, in February 2023, it was transferred into special servicing with a remaining balance of $16.9 million. A new receiver was appointed by the end of 2023 to manage the situation.
Notably, the Golden Gate Theatre, adjoining the property, is under separate ownership by ATG Entertainment and is not included in the sale. The property, constructed in 1922, received substantial enhancements when WeWork occupied it starting in 2013. Additionally, the building qualifies for federal and state historic rehabilitation tax credits. These incentives provide up to a 40 percent benefit on eligible rehabilitation expenses, potentially sweetening the deal for potential buyers.
WeWork’s financial difficulties culminated in a bankruptcy filing in November 2023, making headlines and influencing the real estate market with its strategy to abandon seven leases in San Francisco, including the 25 Taylor property. Other notable leases the company plans to forfeit are located at 430 California Street, 1455 Market Street, 222 Kearny Street, 180 Geary Street, and 800 Market Street, all of which have ceased operations.
The Mid-Market area, where the property sits, has faced significant challenges in the aftermath of the pandemic. Several high-profile tenants have vacated office spaces, driven by declining foot traffic and changing neighborhood dynamics. Companies like Uber, Reddit, and others have sought alternative locations, further adding to the economic shifts in the region.
Contrasting the bleak scenario in San Francisco, there is a glimmer of opportunity southwards in Silicon Valley, where Amazon has collaborated with WeWork to relocate some of its workforce into offices subleased by the co-working company. These spaces, notably in Santa Clara and Mountain View, represent ongoing endeavors to adapt to new workplace demands.
In summary, the sale of the 25 Taylor Street property reflects broader trends impacting commercial real estate in urban centers across the United States. It highlights the volatility and transformation within the office market, especially in adapting to new normals post-pandemic. As the building looks for a new owner, investors might find value not just in the space itself, but in its potential for historical tax credits and its integral part of San Francisco’s storied architectural landscape.
