(Bloomberg)—A venture started by WeWork Inc. and Rhone Group defaulted on a loan for a San Francisco office tower.
The $240 million loan was for a building at 600 California St. that is owned by funds managed by a venture formed by WeWork and Rhone in 2019 to buy and oversee real estate. The property, which includes a WeWork coworking space as an anchor tenant, is located in San Francisco’s Financial District.
Spokespeople for Rhone and WeWork Capital Advisors declined to comment.
Office property defaults are starting to pile up as landlords including Pacific Investment Management Co.’s Columbia Property Trust grapple with the pressure from rising rates and seek to kickstart negotations with lenders. Markets such as San Francisco have been under particular strain as technology companies slash jobs and pull back on their office space.
WeWork, the coworking company co-founded by Adam Neumann, reached a deal for a major restructuring last month to help reduce its debt and secure more capital commitments. Under its new chief executive officer, Sandeep Mathrani, the company has been cutting expenses as it continues to try and turn a profit.
The defaults on office properties are ratcheting up pain for lenders, with billionaire investor Warren Buffett warning Wednesday that there will be problems for banks in the commercial real estate sector. The biggest US banks start reporting first-quarter earnings this week.
--With assistance from John Gittelsohn and Ellen Huet.
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