Lender Prompts Disposition of Distressed Market Center

SAN FRANCISCO-The 727,242-sf Market Center office development is headed to market in a lender-driven disposition that follows a loan default by building owner Tishman Speyer Properties.

With a $160-million loan from Morgan Stanley Dean Witter, Tishman-Speyer acquired the two-tower former Standard Oil of California headquarters in 1999 for $190 million and proceeded to fill it up with Internet-related tenants that were paying rents as high as $70 per sf per year. By early 2001, however, the dot-com boom was bust and the 1970′s development was back to half empty.

According to a Moody’s downgrade of the loan published at the end of January, the properties are currently 17.1% occupied and do not generate enough cash flow to cover debt service or even all of the operating expenses. “Debt service and operating expenses are being paid from a cash collateral account that has a balance of approximately $56 million,” according to the Moody’s report. “Midland Loan Services, the special servicer, continues to explore resolution strategies for the debt.”