Vornado to ink 46K sf lease expansion at 555 California in SF

Vornado Realty Trust boasts of having the “best building in San Francisco” — a nearly full 52-story office tower with a financial services tenant that wants to enlarge its footprint.

The New York-based Vornado and The Trump Organization are finalizing a deal with the unidentified tenant to renew its lease and expand it by 46,000 square feet at 555 California Street, in the Financial District, the San Francisco Business Times reported, citing an earnings call. Terms of the pending deal were not disclosed.

Michael Franco, chief financial officer of Vornado, would only describe it as one of the building’s leading financial services tenants.

The 1.5 million-square-foot building, once known as Bank of America Center, is outperforming the city’s office market, where 37 percent of its workplaces stand empty, according to CBRE.

At the end of last year, the building’s vacancy was 2.3 percent. CBRE is now marketing 76,000 square feet for lease, suggesting its vacancy has ticked up to 5 percent.

The 66,000-square-feet worth of leasing activity completed at 555 California during the second quarter commanded rents of just more than $99 per square foot, Vornado said in public filings. The uptick in leasing was largely attributed to law firm Jones Day, which renewed its lease for 62,000 square feet for 10 years.

“I think what we are seeing in 555 is that it is the best building in San Francisco,” Vornado President and Chief Financial Officer Steven Roth told analysts. “This building is really insulated from the overall market and what you are seeing statistically in the city.”

The expansion deal, if completed, would be another win, according to the Business Times.

At least two prominent financial services firms have leases expiring next year: Mutual fund company Dodge & Cox, which leases 110,000 square feet; and Bank of America, which leases close to 250,000 square feet.

North Carolina-based Bank of America, the building’s largest tenant, already recommitted to its offices at 555 California through 2035. But the terms of the renewal, namely the rental rates the bank will pay, were slated to be finalized this summer. 

Some 339,000 square feet of leases are set to expire at 555 California next year, and another 270,000 square feet in 2026, according to Morningstar.

If tenants in the building decide to downsize or move out as their leases roll, the 46,000-square-foot expansion deal could serve as a kind of buffer.

Franco said Vornado was “in late stage letters of intent” with several major tenants at 555 California, whose leases cumulatively cover some 250,000 square feet in the building and are set to expire in 2025 and 2026. The company expects those deals will be done at the same rents the building is now commanding, Franco said.

“We feel very good about the rental rates we are achieving right now. We are ahead of the market,” he told analysts.

Vornado owns 70 percent of the equity interest in the three-building, 1.8 million-square-foot 555 California campus, but has sole decision-making authority. The firm announced in 2021 it had completed a $1.2 billion refinancing of the property, which matures in 2028. The Trump Organization owns a passive minority stake.

— Dana Bartholomew

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