Lone Star Funds has shelled out roughly $130 million for the distressed loan tied to 600 California Street, the 20-story Financial District tower once owned by WeWork. The Dallas-based investor now controls the CMBS note on the roughly 360,000-square-foot building, giving it a prime seat at the table on whether the property is foreclosed, sold or repositioned. The deal is another sign that cut-rate office debt is quietly reshaping who really controls downtown San Francisco real estate.
According to CoStar, Lone Star acquired the distressed CMBS note on the 359,883-square-foot tower at 600 California St. for about $130 million. The outlet reports that the debt was purchased from WeWork Capital Advisors and Rhône Group at roughly a 46% discount.
How the loan changed hands
Brokerage firm Newmark arranged the sale and said the marketing effort drew significant institutional interest. In a press release, Newmark described the process as “the deepest and most institutional bid pool San Francisco has seen in years” and confirmed Lone Star as the winning buyer.
WeWork's role and the building's slide
The loan behind the property originally totaled about $240 million, and lenders sued to foreclose after WeWork stopped paying rent, according to court filings cited by Bisnow. That foreclosure action and the appointment of a receiver have been unfolding since 2023.
Independent valuations have plunged, with appraisals cited as high as $183 million and as low as $124 million in 2024, leaving the property worth far less than the debt, according to The Real Deal.
What comes next for 600 California
Because the loan has been transferred to an investor that paid a steep markdown, Lone Star now has several potential plays: push ahead with foreclosure, negotiate terms with the receiver, or position the building for sale. As Connect CRE noted, the purchase positions [Lone Star] "to take ownership of the San Francisco office tower through foreclosure” unless another resolution emerges.
Why this matters for San Francisco
The transaction is another signal that institutional capital is returning to San Francisco, but much of it is coming in through the debt side rather than splashy trophy-building trades. As The San Francisco Standard reported, investors are circling downtown assets and baking in hefty markdowns.
Legal background
Lenders previously asked a court to appoint a receiver to stabilize operations at 600 California, and the receiver has been tasked with marketing the vacancy and overseeing leasing while legal options play out, according to Bisnow. Those court-supervised steps will help determine whether Lone Star pursues a foreclosure-driven takeover or works with the receiver to prepare the property for a sale.
For San Francisco, the outcome will hinge on whether Lone Star decides to become the long-term owner or opts to cash out by selling the tower. Either path will ripple through the Financial District’s Class A office inventory, and market watchers can expect leasing and disposition updates in the coming months as the note-holder, the receiver, and any remaining tenants negotiate what comes next.
