San Francisco office buyers look for bargain-basement deals

Price collapse as low as $114 psf sets baseline for future market

SF Office Buyers Look for Bargain-Basement Deals
Blackstone Group's Stephen Schwarzman; 650 Davis Street (Google Maps, JLL, Getty)

It’s bargain bingo for office investors looking for cut-rate deals in San Francisco.

A rising number of empty offices coupled with limited demand from firms has created opportunities that at least one investor hasn’t seen “since the early ’90s,” the San Francisco Chronicle reported.

“San Francisco is on sale,” Mark Geisreiter of Newmark told the newspaper.

Investor Roger Fields was once unable to afford a stake in what had been the Bay Area’s hottest market. Not anymore.

This month, Fields’ Palo Alto-based Peninsula Land and Capital bought a 13-story office tower at 550 California Street in the Financial District. Wells Fargo had been poised to sell the 355,000-square-foot building for $40.5 million, or $114 per square foot — for a $68 million loss.

It’s the third office bargain deal in the last two months, ending a lull in sales during the pandemic. They’ve become a baseline for future deals.

Swig and SKS Real Estate Partners bought the longtime home of Union Bank, a 300,000-square-foot tower at 350 California Street, for $61 million, or $205 per square foot. That’s a 76 percent discount from its initial ask.

Locally based Presidio Bay Ventures teamed up with an unidentified “local family office” to buy a 157,000-square-foot office building at 60 Spear Street in the Financial District for $41 million, with plans to pour in another $50 million to fix it up. That’s less than half its value in 2014.  

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“There is a lot of new capital that wants to be here,” Geisreiter told the Chronicle. “If you are a family office, and you have a very long-term horizon for your capital, why wouldn’t you want to come invest in San Francisco and buy a building in the $200s per square foot? 

“We haven’t seen these values in eons.”

Other deals are in the works. At least four other Downtown office buildings have been listed, and valued well below their mortgages. Interest appears to be high, according to the Chronicle.

Blackstone Group is asking less than $90 million for North Park, a 294,000-square-foot, three-building office complex at 650 Davis Street in Jackson Square, unidentified sources told the newspaper. The price works out to $306 per square foot.

The New York-based investor, which bought the building in 2018 for $245 million, or $833 per square foot, has fielded 15 offers.


— Dana Bartholomew

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