A Framework for Asset Recovery in Los Angeles and San Francisco’s Multifamily and Office Markets
Distressed property is no longer a fringe concern in Los Angeles and San Francisco. It has
become a defining feature of both cities’ office and multifamily markets, though not in the way
the headlines suggest. Rather than a broad market failure, both markets are going through a
strategic shift: some assets are stabilizing and returning to strength, while others continue to
fall further behind.
For owners, lenders, and investors holding a distressed asset in either market, the more useful
question isn’t whether distress exists; it’s how to move a specific asset from distressed to
performing, and who has the operational depth to get it there. “You don’t just want someone to
hold the keys,” says Andy Chen, Vice President at Trigild. “You want someone who can execute
a business plan to recover your capital.”
Trigild, powered by Lincoln, has built a full continuum of asset recovery services to answer
exactly that question, ranging from court-appointed receivership to hands-on asset
management and disposition. This continuum gives owners and lenders a path forward no
matter where an asset sits along the spectrum from crisis to full performance.
“At Trigild, successful asset recovery happens at the intersection of national resources and local expertise. Our nationwide platform allows us to deliver hands-on solutions that help transform challenged assets into performing investments.” – Chris Neilson, Managing Partner, Trigild
Distressed Commercial Real Estate: How Bad Is It in Los Angeles and San Francisco’s Office and Multifamily Markets?
When it comes to Los Angeles and San Francisco’s office and multifamily markets, the two
aren’t distressed in the same way, and neither is uniformly distressed across asset types.
In San Francisco, the office market is as much of a capital-stack story as it is a demand story.
The vacancy rate continues to be high at around 30%, and valuations have dropped 50-70% from
2019 peak levels, even as vacancy has declined for consecutive quarters and net absorption
recently hit its strongest level in years. Leasing fundamentals, in other words, are recovering
faster than the capital structures underneath many buildings.
Like San Francisco’s office market, the city’s multifamily market is experiencing similar patterns,
albeit on a faster timeline. A sharp, pandemic-era decline concentrated in rent-controlled
properties led to a number of lender-led sales from 2022 to 2023, but the market recovered
quickly with the AI boom starting in 2024, and now rents are growing at a double-digit pace year
over year. The capital stack hasn’t kept pace with the improvements — KBRA puts the city’s
multifamily distress rate at 49.7%, the highest of any major market nationally. This is a reminder
that loans underwritten at 2021-era valuations and rates can stay distressed for an extended
period even after a property has recovered operationally.
Los Angeles runs in the opposite direction on office, and in a steadier one on multifamily.
“Distressed” is a fair description for certain submarkets like Hollywood and Downtown LA, but
other places like Century City and the South Bay are seeing increasing demand and growth.
Specifically, while technology and entertainment tenants that drove leasing activity in parts of
the Westside, Hollywood, and Burbank during the prior decade have been contracting,
aerospace, defense, and advanced manufacturing tenants have increasingly occupied space in
the South Bay. Given the lack of new supply in that submarket due to how difficult entitlements
have become, this trend has helped spur recovery in the overall Los Angeles office market.
Multifamily, by contrast, has stayed relatively stable, with vacancy up only modestly to around
5.6%, but without the over-leverage that some other West Coast markets are seeing.
The common thread across both markets and both asset types is that distress today is
frequently a capital-stack problem, not a demand problem. Rents and occupancy in many of
these assets could still support a viable business, but the debt underneath them often can’t.
Distressed Property vs. Performing Asset: What the Terms Actually Mean
Not every distressed asset arrived that way because of poor fundamentals. Class A buildings,
new construction, and landmark properties can all become distressed just as easily as older or
lower-quality assets. Distress describes an asset’s current financial and operational condition —
it’s not a judgement of its underlying quality or potential. “Most of the distress in LA office right
now is demand- and capital-markets-driven on buildings that are otherwise sound assets, not
necessarily obsolete or broken,” says Rob Kane, Senior Executive Vice President for Lincoln’s
Southern California region and co-leader of its Corporate Advisory & Solutions platform. “Our job
is to diagnose whether the problem is the building, the tenant base, or the balance sheet, before
acting on the wrong assumption.”
“Performing,” by contrast, has a specific meaning. A performing asset generates enough
revenue to comfortably cover its expenses, including debt service, insurance, and taxes, while
still funding the capital reserves needed for leasing costs and ongoing capital improvements.
This has to hold up over multiple quarters, not just one strong quarter. That means occupancy
in line with or exceeding the surrounding submarket, lease-up spreads that are flat to positive to
expiring rents, and no backlog of deferred capital expenditures. Reaching that point may require
restructuring a challenged capital stack, executing a capital improvement program, improving
leasing performance, or repositioning the asset for a more productive use. Recovery isn’t a
single action or reactive event, but a disciplined, institutional process like the one below.
The Asset Recovery Framework: How Trigild Moves a Distressed Property to Performing
Every distressed asset is different, but the institutional process used by Trigild to recover one
follows four consistent phases:
Stabilize. The immediate priority is control. This means securing the asset, taking over cash
management, and conducting a rapid operational and financial assessment. When a lender
needs to protect collateral or an asset requires a neutral, court-appointed party to take control,
Trigild steps in as a receiver, inspecting everything about the property and correcting deferred
maintenance and code or life-safety issues before returning operations to a normal standard.
The pattern holds consistently: earlier intervention preserves more value. The longer a
distressed asset operates without stabilization, the more its physical systems and tenant base
erode, often in ways that a lender’s periodic inspections don’t catch. “If you think you have an
issue, there are probably many other issues you don’t know about,” says Nancy Daniels. “Even
with inspection rights, a lender doesn’t see everything. A receiver takes full control of the
property and inspects every aspect.”
Diagnose. Once an asset is stable, the work of evaluating its real options begins. This involves
deep market research, cash flow modeling, and running alternate return scenarios to determine
if the asset needs a light repositioning, a heavier capital injection, or a complete conversion. In
Los Angeles, this stage now has a new lever available for office assets. The city’s Citywide
Adaptive Reuse Ordinance, effective February 2026, expanded eligibility for residential
conversion from pre-1974 construction to any buildings that are at least 15 years old,
meaningfully widening the pool of eligible office buildings. “It shifts the entitlement and political-
risk variable, but not the physical constraints,” says Kane. “Floor-plate depth, window line,
parking ratio, and seismic condition still determine feasibility regardless of what the ordinance
allows.”
Execute. This is where the chosen strategy is implemented — overseeing major capital
expenditure programs, managing project timelines and cost controls, and executing aggressive
leasing or disposition strategies.
Optimize. The final phase of the process transitions the asset into long-term, performing
ownership. This means institutionalizing reporting, maximizing net operating income, and
preparing the asset for a successful recapitalization or disposition.
Not every asset goes through all four phases with the same team, though. A receivership is, by
design, a temporary, court-supervised role that usually ends in a receiver sale, foreclosure, or,
less commonly, a return to the original borrower. A standalone receiver has legal authority but
not the operating platform; a standalone property manager has the team but no independent
fiduciary standing. Putting both under one roof lets Trigild take control fast and immediately
deploy institutional-grade leasing, property management, and construction management. There
is no time lost sourcing and vetting a new operator mid-crisis, which preserves the value
generated throughout each phase. “Stepping into a distressed asset is significantly different
than a stabilized asset,” notes Nancy Daniels, Senior Vice President at Trigild. “Having a trusted
operating partner creates a seamless transition that allows for immediate improvement in the
asset.”
Office vs. Multifamily Real Estate: Do Distressed Assets Recover the Same Way?
The four-phase framework applies to both property types, but the levers pulled at each phase
diverge significantly.
Multifamily assets are frequently more physically distressed than office, even when their capital
problems are less severe. Because they are residential properties, tenant needs are more
pressing and a wider range of things can go wrong. “Multifamily tends to have amplified issues
with life-safety concerns, water and sewer leaks, non-operational HVAC, code violations, pest
issues, non-working elevators, and fire damage,” explains Nancy Daniels. Landlord-tenant law is
also usually more involved on the residential side, which influences how quickly and
aggressively a recovery plan can move. Because the underlying rental demand for multifamily
usually remains intact even in a distressed situation, the playbook focuses heavily on
restructuring the debt, infusing preferred equity, optimizing operations to reduce expenses, and
executing targeted unit renovations to push rents to market.
Office recovery, by contrast, often hinges on structural repositioning. Because the demand
problem in office is typically secular — for example, hybrid work — the solution usually requires
significant capital to amenitize the building, break up large floorplates into smaller suites, or
explore converting the asset to a different use.
Lincoln Property Company’s Perspective: Commercial Property Recovery in San Francisco
San Francisco’s 353 Sacramento — a 284,751-square-foot, 23-story Class A office tower,
offering views of the Bay, Transamerica Pyramid, and the Ferry Building — shows the framework
working end to end. Lincoln Property Company acquired the building in 2025 through a
discounted note payoff and deed-in-lieu foreclosure, after a lack of liquidity in the market had
pulled occupancy down from more than 90% to 30%. Because Lincoln acquired the asset at a
much lower basis, the team was able to reinvest in the building. They invested in upgrades to
the building’s amenities, built out spec suites, and offered competitive concession packages to
meet the market where it was. In just the 12 months since taking ownership, Lincoln has
brought occupancy from 30% back up to 50%, attracting new tenants and retaining many
existing ones. “353 Sacramento is now one of the most sought-after buildings in the market for
growing AI and tech giants,” says Brandon Wang, Executive Vice President at Lincoln.
Conclusion
Distress in Los Angeles and San Francisco’s office and multifamily markets isn’t a single story,
and it isn’t a permanent one. Assets move from distressed to performing through a disciplined,
sequenced process, not by waiting for the market to improve or hoping a buyer appears. “It’s not
passive investing,” says Andy Chen. “It’s hands-on, institutional-grade business execution.” That
process looks different for a multifamily building with a broken capital stack than it does for an
office asset facing a structural conversion decision, but the underlying discipline is the same:
stabilize, diagnose, execute, and optimize.
Trigild, powered by Lincoln, brings that full continuum together: receivership and fiduciary
expertise on one side, and national operational and capital markets scale on the other. For
owners and lenders navigating a distressed asset in Los Angeles or San Francisco, that
combination means a single point of contact from the first sign of trouble through a successful,
performing outcome.
Owners, lenders, and investors who want to continue the conversation are invited to join Trigild,
powered by Lincoln, at the Trigild Annual Conference on October 5-7, 2026, at the Waldorf
Astoria Monarch Beach Resort & Club in Dana Point, California, the industry’s longest-running
conference dedicated to non-performing commercial loans.
