Flynn Properties, DRA to Buy Market Center for $177 Million

The sale of a major commercial building at a big discount in downtown San Francisco led the real estate news for the Bay Area this week.

Flynn Properties, joined by New York-based investor DRA, will pay about $177 million for what’s left of the $416 million ING loan on Market Center, a 770,000-square-foot office complex. It marks the highest sale price for an office property in the city since 2022 when DivcoWest purchased 550 Terry A. Francois Boulevard — now the offices of OpenAI — from Gap for an undisclosed price.

The deal is about 25 percent of what Paramount Group bought Market Center for in 2019. At the end of 2023, the property value had sunk below the value of the debt used to acquire it, and the firm signaled last year that it would shed the property in the near future.

The two-tower Market Street complex will be the third office property built by Standard Oil to be purchased by billionaire Greg Flynn, who also bought the Huntington Hotel on Nob Hill. Flynn’s Flynn Properties previously owned and sold office towers nearby at 115 Sansome Street and 225 Bush Street.

Flynn told the San Francisco Business Times he plans to make Market Center “the most fun office opportunity” in San Francisco, turning unused meeting space on the ground floor at 555 Market Street into a multiuse activity center called The Break Room. Plans include a massive video screen, basketball court, rock climbing wall and outdoor sports bar. Another floor in the 21-story tower once used by Uber will be turned into two or three pickleball courts and a meeting space.

San Francisco mayor prioritizes safety, cleanliness

Mayor Daniel Lurie released his budget for San Francisco recently, and the $16 billion proposal shows some of the biggest cuts directed toward homelessness and supportive housing services. It is one of 21 departments to see funding decreases, according to an analysis by the San Francisco Standard.

The cuts will not take place across the board, however. The budget would either increase funding or maintain current levels for safety-focused services like the San Francisco Police Department, the public defender’s office and the district attorney’s office.

In a sit-down interview with The Real Deal, Lurie said his office was prioritizing safety and clean streets in an effort to bring businesses back to the city.

“We’ve been knocked, but property crime is down 35 percent, violent crime is down 15 percent and car break-ins are at a 22-year low. We have work to do and that’s what we’re focused on, day in and day out,” he said.

Lurie said the city needs to create certainty in its zoning in order to see forward momentum on some of the approved housing projects stuck in the development pipeline.

“Right now, you can go in for a permit, and you don’t know if it’s going to be three months, nine months or 24 months,” he said.

His “family zoning plan” would allow the city to meet state guidelines by allowing more density but not heights higher than 40 feet in the vast majority of locations, he said. He said he appreciates calls to maintain neighborhood character, though he also argued it was “time” for more multifamily housing in the northern and western areas of the city that have long fought it.

“Those neighborhoods haven’t seen a change in their zoning for over 50 years,” he said.

Developers going all in on Oakland

Across the Bay in Oakland, some developers told TRD they are taking on an activist investor mindset to help the East Bay city with its recovery.

“It’s too early if you want everybody else to do the work for you,” said Colin Behring of Behring Companies. “The easiest way to predict the future is to build it yourself.”

At the prices Oakland properties are trading for, investors can afford to take some chances. Behring Companies bought a 21-story Oakland office building with an adjacent parking garage near its newly built mixed-use apartment and coworking tower last fall for $14.4 million, or just $20 per square foot for both structures. Isaac Abid of Lakeside Group bought the distressed debt on 180 Grand along Lake Merritt for $30 million — 82 percent off its last trade in 2017.

Abid and Behring agreed that family offices, or very small internally controlled funds, are leading Oakland investments because they can wait out the next five years and instead focus on a longer time horizon. Both say they are interested in buying more properties.

“Like any good developer, we’re impatient. We don’t want to wait,” Behring said when asked if the current conditions in Oakland would make him hold off on further investments. “A pause is the worst thing you can do. If you don’t like something, then do something about it.”

One of a kind

Piedmont notched a home sale record.

A historic home at 65 Sea View Avenue — owned for decades by Julian Orton, founder of Orton Development — sold for $13.9 million, setting an on-Multiple Listing Service record for the East Bay Enclave.

It sold for well under the overall price record. A home across the street, at 26 Seaview, sold for $23 million in a private sale in 2022. That’s the same year the previous MLS record was set, when a 10,000-square-foot 115-year-old Tudor-style home went for $12 million.

Orton’s 11,000-square-foot, eight-bedroom, 7.5-bathroom home comes with a swimming pool and sits on about two-thirds of an acre.

It was commissioned in 1926 by a founder of Hills Brothers Coffee Company, who hired the famed architects Newsom & Newsom and the same builders as Hearst Castle. Many original details are still intact in the Mediterranean-style home, including its Italian-made green roof tiles and a tiled backsplash in the kitchen featuring coffee pots and steaming cups of coffee.

“People want to be in Oakland, Piedmont and Berkeley,” said Adrienne Tunney Krumins of The Grubb Company, who co-listed the property along with her mother, Anian Tunney. “That’s what this sale is saying.”

Orton, whose company specializes in historic redevelopments, bought the property in 1994 for $922,000, according to public records.

Dreamy ocean view for $100K

An oceanfront home in Carmel that is one door down from the region’s famous Frank Lloyd Wright house is on the market for $100,000, but don’t pack your tools!

The 4,200-square-foot lot comes with an unusual twist: you can’t build a thing on the site, SFGATE reported.

“Non-Buildable lot for sale,” the property description says. “Ocean-front Carmel lot for the person who has everything.”

A deed restriction has been in place for more than a century.

It states that the lot is intended “for the perpetual benefit of the Pedestrian Public, and none other.” Pedestrians can enter or pass through for activities like “sightseeing, fishing, sketching or picnicking” but not activities like camping or “the setting up or maintaining of tents or other shelters.”

In January 1923, Carmel Development sold it to Margaret Macintyre for $10, equal to about $191 today. Roughly a year later, Macintyre sold two lots across the street and the undevelopable parcel to Lily White, again for $10. The transactions were filed by the Bank of Carmel on April 22, 1924.