San Francisco Business Times
By J.K. Dineen
October 30th, 2009

San Francisco’s Del Monte Foods will relocate and expand its corporate headquarters to One Maritime Plaza, a 153,000-square-foot deal that is the city’s largest lease of 2009.

The new Del Monte headquarters, 27 percent larger than the company’s current home, will consolidate 400 workers from two locations: the Landmark at One Market, where Del Monte has 93,000 square feet, and 50 California St., where it leases 19,000 square feet.

The new headquarters will centralize the organization and will “further support execution of the company’s accelerated growth strategy,” the company said in a statement to the San Francisco Business Times. Del Monte has been based in San Francisco for more than 100 years.

“Bringing our San Francisco teams together under one roof is important for Del Monte and its continued growth, and a smart move for us to make financially given the opportunities provided by the current real estate market,” said Rick Wolford, chairman and CEO of Del Monte Foods.

The move comes a year after Del Monte centralized its brand support functions, including pet marketing and pet and operations finance, in its San Francisco office, increasing headquarters staff by approximately 25 percent. Prior to that, the company’s pet food and snack brand support functions operated out of its Pittsburgh office.

The Del Monte lease includes the top two floors of the 25-floor One Maritime Plaza, breathtaking view space that owner Morgan Stanley was looking to lease for $95 a square foot as recently as June of 2008. While the tenant did not disclose the rate they will pay, market sources put the rent for the top two floors between $55 and $60 a square foot. For the entire seven floors, which include five lower floors, the leasing rate averaged closer to $45. It’s not known whether the deal includes a period of free rent.

The deal is the latest in a wave of leases as tenants take advantage of cheap rents and a high availability rate — some 20 percent of office space in the city is available for the taking. Other recent major deals include the biotech firm Nektar, which scored four years of free rent in a 102,000 square-foot Mission Bay sublease; Twitter, which will move to 30,000 square feet of sublease space at 795 Folsom St.; and Cisco Systems recently took 37,000 square feet at China Basin to accommodate growth of subsidiary Pure Digital. Another major lease, social gaming company Zynga’s relocation to 137,000 square feet at 500 Terry Francois Blvd. in Mission Bay, is still under negotiation.

Average asking rates have dropped 26.8 percent in a year and the average deal includes 10 months of free rent, according to a recent report from the tenant rep firm Studley.

Michael Cohen, who heads up economic development for Mayor Gavin Newsom, said the growth of old-economy firms like Del Monte nicely complements the tech, green tech and life science companies that have been driving the city’s economy in recent years. “It is also critically important that we retain our corporate companies like Levi’s and Del Monte,” said Cohen.

Cohen said he expects a burst of positive absorption similar to the one seen during the bleak days after the dot-com bubble burst in 2001. “Because office rents are so steeply discounted right now we fully expect to see more and more consolidate from elsewhere in the Bay Area into the San Francisco (central business district),” said Cohen.

Del Monte’s targeted occupancy date of One Maritime Plaza is early 2011. Del Monte was represented by CAC Group principals Gary Arabian and Bill Cumbelich, who declined to comment on the transaction.

In addition to 25 manufacturing plants and distribution centers and 13 regional sales offices across the country, Del Monte also has an administrative office in Pittsburgh, a sales and operations office in San Ramon, and research and development offices in Walnut Creek and Terminal Island, Calif. In total, Del Monte Foods employs approximately 5,400 full time and 9,400 seasonal employees worldwide.

Del Monte sells foods under the S&W, Contadina and College Inn brands as well as pet food under the Meow Mix, Milk-Bone, 9Lives and other brands. Del Monte Foods reported earnings rose 42 percent to $71.5 million in its fiscal fourth quarter, which ended May 3. For the full year, Del Monte netted $172.3 million, up 29 percent. Sales grew 20.7 percent in the latest quarter to $1.06 billion. For the year, sales grew 14 percent to $3.6 billion.

Photo Courtesy of Mike Smith Via Flickr

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