Bank takes back 600 B Street office tower in downtown San Diego

A symbol of downtown San Diego’s faltering central business district, the 24-story office tower at 600 B St. has gone back to its lender after a monthslong foreclosure process.

Late last month, Western Alliance Bank took back the building from former owner Rockwood Capital through a forced sale triggered by the real estate investment firm’s unpaid bills.

The bank purchased the property for $44.4 million — or the amount of the unpaid debt, as listed in the trustee’s deed upon sale — in an Oct. 30 public auction, according to information filed with the county.

Opened in 1974 and upgraded in 2007, the 359,278-square-foot office building at 600 B St. takes up an entire city block between Sixth and Seventh avenues downtown. The building is 41.9% leased with 235,660 square feet of space available for rent, according to data from real estate tracker CoStar.

WeWork had long been the building’s largest tenant, occupying around 100,000 square feet of space, but all of the coworking company’s space was listed as vacant by commercial real estate firm CBRE as of mid-2024, said Joshua Ohl, CoStar’s senior director of market analytics. The city of San Diego and the city’s fire-rescue department are smaller tenants in the building.

San Francisco-based real estate investment firm Rockwood Capital — using the entity 600 B Street San Diego LLC — purchased the 1.38-acre property for $109.5 million in August 2017. The tower was 90% leased at the time of the transaction.

The company initially took out a short-term, $81.2 million loan with HSBC Bank to finance the buy, property records show. In October 2021, Rockwood then refinanced its debt with Western Alliance Bank, taking out a $77 million, variable-rate loan from the bank. Eighteen months later, the real estate investor stopped making its monthly payments.

In late June, after more than a year of delinquency, First American Title Insurance Company, acting as trustee, filed a notice of default and initiated the foreclosure process on behalf of the bank. The notice of default listed the total amount owed as $83.8 million.

“When a loan is in default, under California civil code, you can commence a non-judicial foreclosure,” said Gordon Gerson, whose commercial real estate law firm, Gerson Law, represents financial institutions.

The foreclosure begins with a notice of default recorded against the property and, if the loan is not repaid within 90 days, eventually wraps up with a public auction on the courthouse steps, he said.

“It looks like here there was no bidder at the foreclosure sale and because of that, the trustee’s deed upon sale shows that it went back to the lender,” Gerson said.

It’s not clear why the $83.8 million debt listed in the notice of default varies substantially from the $44.4 million amount identified in the trustee’s deed of sale. Gerson said the discrepancy is not common in the foreclosure process, but could be the result of a negotiated agreement between the bank and Rockwood.

Western Alliance Bank declined to comment. First American Title did not respond.

The 600 B St. building is one of a handful of office towers in downtown’s central business district, on or near B Street, that have traded hands through forced or fire-sale transactions in the past year.

Last year, the overhauled and rebranded Twenty by Six property at 450 B St. and 451 A St., was transferred to a new owner for an undisclosed sum through a deed in lieu of foreclosure. In September, Irvine Company, San Diego’s biggest office landlord, sold Symphony Towers for cheap. And, last month, a local real estate developer got a deal on the 530 B St. building and intends to convert vacant floors into residential units.

“They’re all suffering from the same issue, which is declining occupancy and concomitant lower lease rates, and that process is going to take some time to shake out,” said real estate analyst Gary London, a principal of local firm London Moeder Advisors.

“The pandemic (took the market) from an evolutionary change that was brought on by technology, in terms of occupancy and need for office space, to a revolutionary change,” London said. “We’re going to see a continuation of the decrease in demand in office space in every market, but it’s particularly acute in the central business district markets throughout America.”

Going forward, 600 B will likely have another new owner in short order.

“Lenders are not in the business of owning and managing property,” Gerson said. “There are parties probably lining up at that lender’s door right now offering bottom-fishing prices for the property.”

As it stands, the bottom of the market was set by Irvine Company, which sold Symphony Towers for $84 per square foot.

The San Diego Union-Tribune previously occupied four floors at 600 B, before giving back two floors in 2023 and vacating the other floors earlier this year.