Over its 118 years of existence, the six-story office building at 149 New Montgomery St. has weathered two devastating earthquakes and several economic downturns.
Now it’s set to have a new owner. San Francisco real estate firm TMG Partners is to acquire the debt on the property and gain control of the building, sources say. With interest and penalties, the debt amount has ballooned to more than $25 million.
The owner, San Rafael-based developer Monahan Pacific, defaulted on its mortgage in February, forcing its lender to put the 76,000-square-foot property up for auction this month.
Sources say Monahan Pacific had been quietly marketing the building for sale while trying to renegotiate its loan terms. It purchased the property in 1998 for $11 million, roughly $21 million when adjusted for inflation. Afterward, it invested in a full seismic upgrade and interior renovations to woo tenants to the previously empty building.
Last year, the Class B office building was appraised at $270 per square foot, nearly a 40% decline from its 2014 appraised value.
Two vacant floors, totaling nearly 18,000 square feet, are being marketed for lease. However, more office space is technically available, since coworking company Werqwise occupies 42,000 square feet that can be leased, and tech firm Marin Software is in the process of dissolving itself.
TMG declined to comment on the deal, which has yet to close. Beacon Default Management, which is overseeing the process, said this month’s auction was postponed until September. Foreclosure experts say an auction could be postponed if a settlement is reached with the borrower or a new buyer emerges whom lenders prefer.
Monahan Pacific, led by Thomas Monahan and filmmaker Jonathan Parker, did not respond to a request for comment. According to its website, the firm owns dozens of Bay Area properties, including a brick-and-timber office building in San Francisco and a recently renovated 140-room hotel in San Rafael.
Bernard and Michelle Hong have owned and operated the French bakery Cafe Madeleine on the ground floor of 149 New Montgomery St. for nearly 25 years. Their lease was set to expire this month, but Bernard Hong said they are negotiating a deal to stay for at least three to four years.
TMG Partners, which has operated in the Bay Area for more than 40 years, has developed and owned more than 30 million square feet of office, residential, and retail space.
Deals it has struck since the pandemic have defied market norms and expectations. For instance, TMG offloaded the 28-story office building at 300 Lakeside in Oakland to PG&E last month for more than $900 million, double the price it paid for the property in 2020.
The company started this year by reshuffling its leadership team to expand the roles of some junior executives. Since then, it has been linked to the purchase of two major retail properties in San Francisco: The Metreon and the Macy’s building in Union Square.