A Dallas-based investment group is adding to its San Francisco retail portfolio, picking up 11 Hayes Valley-centered retail properties in five buildings for $10.9 million on top of its buy of the Burberry building at 225 Post in Union Square this summer.
The retail condos add up to 16,232 square feet in one of the city’s most popular neighborhoods, at a price of $671 per square foot.
The buyer is an ownership group led by Douglas MacMahon, a principal at Dallas-based Moran Capital, but he clarified that the portfolio deal and the Union Square purchase were both investments made with a different partnership group, and not Moran Capital.
“My partners and I are long-term investors and we believe San Francisco in the long-term is a great market for investing in real estate,” MacMahon said, adding that they are looking to add more retail, plus hotel and office buildings to their San Francisco holdings.
Earlier this month, Strategic Realty Trust sold the Dallas group the ground-floor commercial condos in buildings at 400 Grove Street, 8 Octavia Street, 450 Hayes Street and 388 Fulton Street — all in Hayes Valley. It also sold two adjoining condos in the Lucky shopping center at Fulton and Masonic, which had formerly been occupied by a Chase and is now vacant.
SRT, which has its main office in Chicago as well as a secondary office in San Rafael, bought the San Francisco properties in 2016 and 2017. In an SEC filing this month, it said that the $9.8 million it netted from the sale was used to pay down the debt on what it calls its “Silverlake Collection,” five storefronts totaling 10,500 square feet in the Silver Lake neighborhood of Los Angeles. The loan on those properties dropped to a balance of $8.1 million after the sale, according to the filing.
The company did not respond to a request for comment.
The portfolio was marketed by Peter Mikacich and Julie Taylor of Colliers. The same brokers were retained by MacMahon and his investors after the sale to handle leasing at the properties.
Most commercial buyers have been local of late, and MacMahon said lived in the city from 2001 to 2006 so he is “familiar with the market.” The group was not put off by the city’s retail vacancy issues either.
“We have made a number of investments in retail in the past so we are very comfortable with the asset class,” MacMahon said.
This partnership’s first San Francisco buy was 225 Post Street, which sold for $17.4 million this summer. The 17,000-square-foot Union Square property had been owned and occupied by Burberry since 2001, when the British luxury brand’s then-parent company purchased the four-story building for $16.6 million. Burberry plans to move to the former Yves St. Laurent location at 110 Geary, according to the San Francisco Business Times. The French fashion house doubled its space when it moved to the former I. Magnin building in Union Square last year.
Kazuko Morgan of Cushman & Wakefield listed 225 Post and has been hired to lease the building for the new owners as well, MacMahon said. Morgan said she is just starting to market the property for lease and that it is “rare that these types of flagship fully-user building opportunities come available in Union Square.”
She pointed to this sale as well as the recent sale of 795 Folsom Street in SoMa to a buyer from Alaska as proof that the locals-only buying pool might be broadening.
“The majority of interest in these recent sale deals have been from local investors who remain extremely confident in the San Francisco and Union Square market, so to have an out-of-town investor recognize and seize the opportunity is great,” she said.
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