Matterport CEO Discusses CoStar Acquisition

Matterport CEO RJ Pittman’s inside look into the 3D modeling company’s $1.6 billion acquisition by CoStar was among the top Bay Area real estate news stories this week.

The deal, which was finalized at the end of February, started when Pittman and CoStar Founder and CEO Andy Florance got together to talk about “how we could really push CoStar into the 21st century” using Matterport’s visualization and AI features. The pair ended up having “inspiring conversations” that led to the acquisition negotiations, Pittman said.

“If there was a chance of doing a one plus one equals five or 10, a real force multiplier, I came to the conclusion that this would be it,” he told The Real Deal.

The deal puts Matterport in an “exponentially larger number of buildings” while providing an “expansion mechanism” for CoStar, he added.

Outside of concerns about the possibility of in-office work mandates, Pittman’s “Matterpeeps” have not had any major issues thus far with CoStar’s company culture and were on board with the acquisition, he said. He added that CoStar has been “very gracious” about figuring out a way to “gracefully” bridge the gap between Matterport’s remote-first set up and CoStar’s in-office culture.

The merger will have an impact on Matterport’s office footprint, both locally and globally. In San Francisco, where Pittman lives, it will be moving out of a WeWork in Salesforce Tower and into CoStar’s offices at 101 California when its contract with the coworking firm is up, he said. The London operations, Matterport’s second-biggest hub outside the Bay Area, will also merge into CoStar’s new offices there, Pittman said.

Matterport is also looking to leave its Sunnyvale headquarters and sign a lease on a new, and hopefully turnkey, office in the Palo Alto area later this year, he said. Matterport hasn’t decided on a specific space yet, but it is envisioned as a flagship R&D center for Matterport, plus a customer and executive briefing center that would also “welcome any and all CoStar teams,” he said.

New gig

In other news, Douglas Wilson Companies has assumed control of Parkmerced after owner Maximus Real Estate Partners defaulted on loans amounting to $1.8 billion. Lenders plan to invest more than $70 million into the 3,221-unit, 152-acre property located in southwestern San Francisco next to San Francisco State University “to address immediate health and safety issues and to stabilize the community, which is currently 80 percent leased,” according to a news release from the receiver.

In a follow-up interview with TRD, Wilson said he has a “laundry list” of several dozen items that will take up the $70 million supplied by the lenders. About $50 million will go toward immediate improvements, he said, including $5,000 to $10,000 per unit that the company is trying to turn over at an expected rate of 50 to 75 units a month to increase occupancy.

The rest of the changes would be spread out over the next 18 months to two years that he expects his company to control the property, he said. At that point, it could be sold through a receivership sale or Maximus, which still owns the property, could bring in more capital. San Diego-based DWC has brought on Brick + Timber, an affiliate of the San Francisco-based real estate firm Ballast, to manage the community of over 8,000 tenants.

“Whatever happens, we want to make sure it’s vastly improved, and we’re going very quickly as a part of that,” Wilson told TRD. “We’re kind of a SWAT team.”

Holding on

On the distress front, there’s new hope for 225 Bush in downtown San Francisco, where owner Kylli might be able to hold onto the building, even after a default on the $350-million CMBS loan last fall.

A few months ago, lender Deutsche Bank looked to be pursuing a sale of the debt on the 580,000-square-foot downtown tower, with servicer notes at the time reporting that there “does not appear to be a viable pathway” for a modification. But more recent servicer comments indicate that, while all options are still on the table, the lender is “working with the Borrower to determine if a modification is a viable option.”

The trend has been toward borrowers walking away from loans, according to experts, so banks have typically been open to working with the dwindling number of borrowers who are trying to hold onto their buildings.

“If the borrower shows a willingness to negotiate in good faith, it usually behooves a CMBS servicer to try to work toward a resolution and avoid the expense of foreclosure, owning and managing the property, then marketing it and disposing [of it],” said David Putro, an analyst at Morningstar.

That’s especially true if the building is valued at well below the loan amount, like 225 Bush, according to a new appraisal. At $153 million, or about $264 per square foot, the new value amounts to less than half of the $350 million loan that Kylli took out in 2019, after buying out minority partner Flynn Properties. Kylli, the Burlingame-based subsidiary of China-based Genzon Investment Group, failed to pay off the commercial mortgage backed security when it matured in November, sending the century-old former Standard Oil headquarters in the Financial District into special servicing.

Big deals

Turning to residential news, the tiny Marin town of Sausalito saw a big new listing this week as a historic former tavern turned 10,000-square-foot mansion hit the market asking $28 million.

Oral surgeon Dr. Alex Kashef and his wife Hani are listing the eight-bedroom, ten-bath estate after previously failing to sell it at the start of the pandemic and then spending two years on a major restoration.

Kashef listed the mansion for $11.8 million in 2020 while it was under renovation. The couple sunk about $20 million into the waterfront property, on roughly half an acre, and finished remodeling it in 2022, according to the Wall Street Journal.

“I never imagined selling it, but life changes,” Kashef told WSJ, citing a desire to be closer to their daughters’ school. “We built it as a family home, but the problem was that it took so long to build that unfortunately, time goes on.”

According to the Sausalito Historical Society, the property originally opened as a tavern in the 1890s called Valhalla. In the late 1940s, the restaurant was purchased by a former San Francisco madam who would go on to become the mayor of the waterfront town.

The original 1893 bar, where the gangster known as Baby Face Nelson once worked as a bartender, is still intact in what has become the home’s open-plan kitchen and great room. The original “Valhalla” sign is displayed in the entry courtyard, which has planters made from the wood ceiling of the original restaurant.

One San Francisco neighborhood saw a price point usually reserved for only the city’s premier northern district with the record-breaking nearly $12.5-million sale of a newly built “fortress”.

Ben Ling, founder of early stage tech-focused Bling Capital and a former executive at Facebook, YouTube and Google, built the 9,700-square-foot estate in Glen Park. It went on the market for $22 million in 2023. A price cut to $17.5 million came in February and the home sold for just under $12.5 million last week, or about $1,300 per square foot, according to several listings sites.

Frank Nolan of Vanguard had the listing and represented the buyers as well, but declined to comment on the sale. Nolan told the Business Times in 2023 that the biggest Glen Park sale until that point was $10 million. It appears that no home has broken that record in the last two years.

The only Glen Park home that has even come close belonged to Ling’s neighbor, “Paypal Mafia” member Keith Rabois, who sold his home on the same street for $8.7 million in 2023 to former Obama campaign manager Jim Messina, according to property records and loan documents. Rabois is also the managing director at Khosla Ventures, where Ling was a general partner from 2013 to 2018. Ling backed Lyft and Instacart, among other start-up successes, during that time.

Ling and his partner Christopher Coudron, the co-founder and CTO of cryptocurrency liquidity company Hedge Labs, are neighbors of Rabois once again. The couple bought a nearly $30-million Miami Beach mansion in September 2021, not far from where Rabois also bought a Miami Beach property for just under $29 million in December 2020.