Leasing activity at landmark property reinforces strength of office recovery in gateway markets

Axonic Capital LLC (“Axonic”), an alternative investment management firm specializing in structured credit and commercial and residential real estate debt and equity, announced the closing of a $50 million senior loan to refinance the historic Merchants Exchange Building, a 245,000-square-foot office property located at 465 California Street in San Francisco’s Financial District.

The three-year floating-rate loan carries two one-year extension options, allowing for the project’s sponsor, The Clint Reilly Organization, to refinance the existing senior debt on the 16-story landmark building while offering the opportunity to build on leasing momentum and benefit from ongoing recovery in the San Francisco office market.

The Merchants Exchange Building is more than 80% leased to a diversified roster of approximately 40 tenants, including government agencies, law firms, financial services firms, technology companies and international consulates. Originally built in 1903 and extensively renovated over time, the landmark property also features the Julia Morgan Ballroom and the Merchants Exchange Club, two renowned event venues that contribute to the building’s unique positioning within the market.

“We see that certain gateway markets continue to experience recovery, and Axonic is selectively increasing our office exposure where we believe tenant demand is rebounding and the rejuvenation of legacy assets creates upside potential for future leasing,” said Erik Nygaard, Principal and Portfolio Manager at Axonic. “San Francisco is showing clear signs of stabilization, particularly among smaller and mid-sized tenants seeking quality space in prime locations like the Merchants Exchange Building. Our financing reflects our commitment to supporting the asset through stabilization and our conviction in both the sponsorship and the building’s long-term fundamentals.”

Affinius Capital, with whom Axonic recently launched a strategic partnership for construction lending, was the incumbent mezzanine lender and remained in the capital stack. Northmarq arranged the transaction on behalf of the borrower. Other terms of the transaction were not disclosed.

About Axonic Capital
Founded in 2010, Axonic Capital is a New York-based alternative investment manager with approximately $8 billion in assets under management. The firm has deep expertise in structured credit, commercial and residential real estate debt and equity, and systematic fixed income. Axonic’s flexible capital base includes private limited partnerships, separate accounts, insurance company mandates, and publicly listed fund structures. For additional information, visit axoniccap.com.

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