June 13th, 2008
San Francisco Building Update: 500 Terry Francois Blvd. Trades for $149M
The ownership shuffle continues in Mission Bay as 500 Terry Francois changes hands after the completion of construction. This transaction gives an insight into the different business models development and real estate investment groups use to create a return on the dollar.
Some firms specialize in land banking and will wait for area growth patterns to shift their way before selling. Some firms specialize in early stage development consisting of getting the proper entitlements and architectural work done before selling. Some firms specialize in completing construction while marketing a property for “pre-lease” and then selling at the completion of construction. Some firms specialize in buying a built asset and taking responsibility for the lease-up of the property. Some firms only buy assets with existing tenants with a long-term hold in mind.
This property is clearly set for continued value growth over a long period, but may struggle in the very near future in my opinion. Threats of a nationwide recession, ongoing difficulties in the biotech field, and a potential softening of the San Francisco office market all lead me to believe that potential tenants may sit on the sidelines for short while to see what direction rents are headed.
In the bigger picture however, eventually 4th Street will be a shopping district starting South of King St, the current parking lot for the Giants will be developed into a likely mixed-use concept, and the rest of Mission Bay will be completed. All of these factors make 500 Terry Francois an excellent lease and hold opportunity at this time.
The following is an article pulled from Globest.com, an industry website that puts out informative, daily information for people in my industry.
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SAN FRANCISCO-CB Richard Ellis Investors’ Strategic Partners U.S. IV fund has acquired 500 Terry Francois Blvd., a newly completed, 291,000-sf class-A office building overlooking Mission Bay. The seller was an investment client of Lowe Enterprises, which developed the building. The sale price, not released by those involved, was approximately $149 million, an industry source tells GlobeSt.com. The fund reportedly paid cash.
The six-story glass-and-brick skinned building includes conference rooms, a 4,000-sf fitness facility and 9,000 sf of street-level retail space. Floor plates range from 32,000 sf to 61,000 sf, a raised-floor system and ceiling heights range from 10 to 12 feet. The triple-net asking lease rate is expected to be approximately $45 per sf, one local broker tells GlobeSt.com.
“This newly constructed speculative class A office building in a major market with low vacancy rates and high barriers to entry is consistent with the office repositioning strategy of this Strategic Partners fund,” says fund principal Phil Hench in a prepared statement.
When Lowe’s investment client acquired the site in 2006 it had already been entitled for the project and the foundations already had been poured. Lowe reportedly paid $83 per entitled sf.
Mission Bay is a 303-acre master-planned development that will eventually hold 5 million sf of office and commercial space, 6,000 residential units, 750,000 sf of retail, 500 hotel rooms and the 43-acre UCSF research campus.
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If there is anything I can do to help you as a Tenant Representative in the commercial real estate world, please do not hesitate to get in touch with me.
Thanks for visiting,
Tom Poser, Jones Lang LaSalle, San Francisco
www.sanfranciscotenantrep.com
