Why drill for oil or pan for gold in Alaska when there are bargains on office buildings in San Francisco?
Fountainhead Development might offer an explanatory tale. The Fairbanks-based investor dipped down to the Lower 48 to buy the 187,000-square-foot property at 795 Folsom Street in the Financial District, its first-ever deal in San Francisco. Fountainhead paid $48.3 million, or about $258 per square foot, the San Francisco Business Times reports.
The seller ASB Real Estate Investments paid $109.6 million for the six-story property — nearly $600 per square foot — in 2013.
ASB, run by CEO Robert Bellinger, appears to have hit its range on price, according to Business Journal, which reported that sources said the buyer was looking to get somewhere in the mid- to high-$200 per square foot range.
With the deal, Fountainhead grows its portfolio of commercial, residential and hospitality assets to nearly 2 million square feet. Most of its holdings are in Alaska but its office division counts four buildings in Kent, Washington, a suburb of Seattle.
Neither Fountainhead nor ASB could be reached for comment on the deal for 795 Folsom, which closed in advance of a pending sale by ASB of 989 Market Street. The 117,000-square-foot building in the Mid-Market District is expected to trade to Los Angeles-based BH Properties for $13.5 million, or $115 per square foot.
The long-ailing San Francisco office market appears to have found bottom and begun working its way up lately — albeit in small steps. Another Southern California investor, Irvine-based LBA Realty, earlier this week took control of the 183,000-square-foot office building at 255 California Street in the Financial District through a $55 million deed-in-lieu value that came to around $300 per square foot.
Redco is in talks to acquire the 87,000-square foot 400 Montgomery Street, also in the Financial District for around $26 million, another deal pegged at around $300 per square foot.