Lone Star Funds, a Dallas-based private equity firm, is in advanced discussions to acquire 600 California Street, a 20-story office tower in San Francisco that was previously linked to WeWork. The potential acquisition would expand Lone Star’s focus on distressed commercial real estate into the Bay Area, according to a report from the Dallas Business Journal. The terms of the deal have not been disclosed and it has not yet closed.
The move aligns with Lone Star’s strategy following its recent $2.7 billion opportunistic fund raised in late 2024, which targets commercial properties facing pressure from lenders. The firm currently manages about $95 billion in assets and has recently made similar purchases, including a major downtown Denver tower for $132.5 million and Fort Lauderdale’s Bank of America Plaza for $221 million.
“Most transactions we see and expect are from the banks facing pressure to de-lever their books,” said Jerome Foulon, Lone Star’s global head of commercial real estate, to Private Equity Real Estate at the time of the fund closing. “A lot of investors have recognized this is a Lone Star kind of market.”
The 359,880-square-foot building at 600 California Street was acquired by a joint venture between WeWork and Rhone Advisors in 2019 for approximately $323 million. Their business model combined WeWork leases with property ownership but suffered after pandemic-related disruptions reduced office demand and lowered property values.
By spring 2023, the venture defaulted on its $240 million loan, prompting lenders to file lawsuits seeking receivership and judicial foreclosure. Later that year, WeWork filed for bankruptcy protection.
In November 2023, Trigild was appointed as receiver by a court while lenders paused foreclosure proceedings to test market interest. Newmark was hired by Trigild in September to market the property. According to CMBS data, the appraised value of the building has fallen sharply to around $109 million—less than one-third of its price in 2019.
WeWork initially occupied more than half of the building but has since reduced its leased space to about 43,000 square feet under renegotiated terms.
San Francisco continues to have significant levels of vacant office space; as of August this year JLL reported over 270,000 square feet available for lease at 600 California Street—leaving it roughly three-quarters vacant.
