Mortgage-Free SF Landlord to Cash Out of FiDi Office

DWS Group has listed a 315,000-square-foot office building in San Francisco’s Financial District for around $95 million.

The German-based investor put the 24-story building up for sale at 505 Montgomery Street for around $300 per square foot, the San Francisco Business Times reported, citing unidentified sources.

The listing by Eastdil Secured would put the building at around $94.5 million.

DWS Group, based in Frankfurt, bought the office building in 2005 for $118.5 million, or $376 per square foot. There is no debt on the building, according to Colliers, which handles its leasing.

Selling the building for a targeted $300 per square foot may depend on whether the landlord can coax its largest tenant, Latham & Watkins, to extend its lease beyond 2028.

The Los Angeles-based law firm renewed its lease for 117,000 square feet in 2020,, according to Compstak.

Talks between DWS and Latham over a possible extension of the lease there are ongoing, two unidentified sources told the newspaper.

The 330-foot-tall granite building, built in 1988, was designed by Skidmore, Owings & Merrill to evoke the Art Deco skyscrapers of the 1930s. It opened with a 40-foot inflatable gorilla hanging off its spire.

In February, Colliers was marketing 126,600 square feet for lease, indicating a 60 percent occupancy. Tenants include Regus, a coworking firm that signed an eight-year lease for 30,000 square feet in 2021; law firm Clark Hill; wealth management firm Whittier Trust; and Atel Capital Group, a financial services firm.

The building’s listing comes as investors have begun to tiptoe into San Francisco’s office market, which cratered after a pandemic shift to remote work. Vacancy hovers at a stubborn 36.6 percent, according to CBRE.

This year, a slew of office properties have traded hands, while more investors have struck deals on buildings that have yet to close, according to the Business Journal.

Last year, total office purchases in the city hit $916 million, according to CBRE. This year, office buys could exceed $1 billion. But leases are king.

Though leasing demand has improved, investors can no longer count on a steady stream of leases to prop up the value of their office buildings like they could before 2020. Such leases determine a building’s values — as ongoing talks between DWS and Latham suggest.

The average price per square foot of office investment purchases in San Francisco rose to $310 last year, according to CBRE, up from $253 in 2023. The value of individual properties remains heavily reliant on tenancy, occupancy, location and build out, according to the Business Times.

— Dana Bartholomew