Tom Poser, Jones Lang LaSalle, San Francisco
www.sanfranciscotenantrep.com

BrightTALK, a webcasting company, signed a 7,500-square-foot sublease on the second floor.

Practice Fusion, a free, web-based electronic health record system, inked a 7,500-square-foot deal on the first floor.

Twilio, a company that builds voice and SMS apps for businesses, agreed to a 3,750-square-foot sublease to occupy half of the third floor.

Jambool, which operates Social Gold, a system that enables online game developers to create and manager their own virtual currency, will occupy half of the third floor as well. It inked a 3,750-square-foot sublease.

The three-story, 30,000-square-foot brick and timber office building was built in 1920, and is in the SOMA submarket.

Tyler Kellogg and Doug Houghton of CresaPartners represented Activision. No brokers were mentioned for the subtenants.

Tom Poser, Jones Lang LaSalle, San Francisco
www.sanfranciscotenantrep.com

The price Sierra Maesta Properties paid for the Class B building was not disclosed, but sources familiar with the transaction put it at about $4.3 million, a rock-bottom price of $80 a square foot. The seller was Amalgamated Bank, which foreclosed on the property. The prior owner was Ray Tonsing, who spent three years entitling the building for downtown lofts. He subsequently had a change of heart and unsuccessfully attempted to unload it as an office building for $18.5 million in 2007 when that market was peaking.

Sierra Maestra Properties is run by Scott Haskins, a preservationist who owns a number of historic Class B office buildings and sits on the board of San Francisco Architectural Heritage.

Michael Taquino, Dan Cressman, and Kyle Kovac of Grubb & Ellis represented the buyer.

“This property has been on our client’s radar screen for years and they are thrilled to have the property and excited about re repositioning it as a core downtown asset,” said Taquino, who declined to discuss the financial terms of the transaction.

The 1909 structure, known as the Sherman Clay Building, is about 80 percent vacant and has 11,800 square foot floor plates. The Walgreens on the building’s ground floor is a separate retail condominium.

“It was a good transaction,” said Tony Crossley of Colliers International. “He didn’t steal it but he got a fair price.”

The Kearny Street building is one of two failed office-to-condo conversion projects the Amalgamated Bank has been trying to unload for the past year. Offers were due recently on the other property, One Ecker St., and 24 buyers made bids, according to industry sources. Bidders included Carmel Partners, Lowe Enterprise, and the Emerald Fund.

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In late March, Prudential will take title to the 550,000-square-foot tower, called the Citigroup Center, and has brought on the Barker Pacific Group to manage the property, according to multiple sources familiar with the transaction.

The deal comes on the heels of Morgan Stanley’s decision to transfer five office buildings to AREA Property Partners and Hines’ calculated move to default on 333 Bush St., which paved the way for Brookfield Real Estate Finance to take ownership. In recent months, nine downtown San Francisco office properties, totaling more than 2.5 million square feet, have either been foreclosed on by lenders or, in most of the cases, handed over to lenders in lieu of foreclosure in a consensual transaction.

Like most of the surrendered properties, One Sansome was purchased near the pinnacle of the building-buying boom. In December, 2006, Broadway Partners, a private real estate investment and management firm headquartered in New York, paid $3.3 billion for a 10-building national portfolio that included four San Francisco properties. While values were never broken out for individuals properties, One Sansome St. was likely valued at more than $600 a square foot, about $350 million, when Broadway bought it. In June of 2008, South Korea-based Mirae Asset MAPS Investment Co. had the property in contract for $365 million, but backed out when the financial crisis worsened that fall.

Since then commercial property values have plummeted 30 to 50 percent, depending on the income the building generates. In the current environment, the building would likely be valued between $175 million and $225 million.

Broadway seemed to have found a way to hold on to the portfolio as recently as June. At the time, Broadway and equity partner Lehman Brothers Holding announced that it had restructured and resolved near-term debt obligations on the 10-property portfolio. Under the agreement, Broadway agreed to contribute capital and retain an ownership interest in a majority of the portfolio, which includes 1000 Wilshire Blvd. in Los Angeles, 116 Huntington St. in Boston and two properties in Virginia. As part of that deal, one of the Broadway properties, 188 Spear St., was deeded to mezzanine lender Prudential Real Estate Investors. Prudential then sold the property to Shorenstein Properties for $25 million, or $173 a square foot.

At the time, Broadway said the capital investment would allow it to “maintain the Class A nature of the properties” and will ensure a “stable and positive experience for current and future tenants,” according to a statement from the two companies.

For now Broadway appears to be holding on to 100 California St., as well as to 50 Beale St., which is leased to the Bechtel Group and Blue Shield of California.

One Sansome St. has about 30 percent vacancy with 10 full floors and four partial floors available, according to the CAC Group, which leases the property for the owners. The biggest tenants are Citigroup, the law firm Lewis Brisbois Bisgaard & Smith LLP, and Lumetra Healthcare Solutions.

Diane Olmstead, a managing partner with W3 Partners, said she expects more downtown building owners who have seen their equity evaporate to hand properties over.

“The value of properties is down and that is working terribly against property owners because at the same time net operating income is down and you have few options, if any, for refinancing your loan,” said Olmstead.

For well-capitalized lenders like Prudential, it makes sense to hang onto the building until the market recovers, she said.

“Rather than choosing to sell the property at a significant discount to future values they have the flexibility to earn their way out of a loan, and they will do that by bringing in an outside partner with new equity to operate the property for them,” she said. “The return they will eventually get will be superior than if they brought it to market now.”

Broadway Partners and Prudential declined to comment.
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Please contact me if there is anything I can do to help you as a
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Tom Poser, Jones Lang LaSalle, San Francisco
www.sanfranciscotenantrep.com

The city and SFMOMA have reached a land agreement that is critical to the art museum’s planned expansion.

Under the agreement, announced today by Mayor Gavin Newsom’s office, the city will give SFMOMA the existing fire station on Howard Street. In exchange, the museum will build the city a state-of-the-art fire station on Folsom Street, a deal that essentially translates to a $10 million gift from museum leadership to San Francisco, the mayor’s office said.

Securing that property was a prime hurdle to SFMOMA’s expansion, though the museum’s chairman, Charles Schwab, said back in September 2009 that he expected the city and the museum to reach precisely this agreement. Conversations between the parties were already advanced, Schwab said at the time — just after the museum said that it had reached an agreement to display the 1,000-piece contemporary art collection of Don and Doris Fisher.

SFMOMA said earlier this month that it had raised $250 million of a planned $480 million campaign. $100 million of the money raised will go to double the museum’s endowment. The museum declined to say how many donors gave the $250 million, or to share specifics on who the donors were, but Neal Benezra, director of SFMOMA, said the donations came from “core museum leadership.”

Benezra said that $480 million would likely include another $100 million for the endowment.

“I have to think a number of museums are looking at us with envy,” Benezra said. “More often than not, great museums and great collectors have not found it easy to work together. One entity tends to override the other. We have been able to marry ourselves in a very positive way that I believe suits the needs of the museum and the needs of the Fisher family, and benefits the public.”

Benezra said that the capital campaign can begin in earnest once SFMOMA has hired an architect for the project. It hopes to have one selected by the end of the summer.

The expansion will add 100,000 square feet of new gallery space and offices.

SFMOMA celebrates its 75th anniversary in May. Over 600,000 people visit the museum annually.

Construction of the new fire station is expected to begin in 2011. Benezra said it will be about four years before SFMOMA breaks ground on the expansion.

The fire station would kill a proposed eight-story, 75-unit condo project that had been planned for the parcel. The housing development, proposed in 2006 when residential real estate boom was in full swing, was being planned by Eugene, Ore.-based condo developer Spring Capital Group. Spring Capital bought the 14,000-square-foot property in 2005 for $4.1 million.

The building at one point was home to the Hotel Owners Laundry Co. warehouse and in the early 1980s it became a squat for about 30 punk rock anarchists, according to the online historical web site Shaping San Francisco. The two-story warehouse at 935 Folsom St. last made news five years ago when the U.S. Department of Justice raided the property as part of a multi-agency investigation into illegal sweatshop operations.

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Please contact me if there is anything I can do to help you as a
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Tom Poser, Jones Lang LaSalle, San Francisco
www.sanfranciscotenantrep.com

While truly plugged-in people have known about the proposed development of 222 Second Street on the corner of Howard for well over two years, details for the proposed 26-story development are now online via a Draft Environmental Impact Report (EIR).

As proposed, the project would be a rectilinear tower of diminishing bulk from the building base to a height of approximately 350 feet. At the fifth floor, the north façade of the building would be set back 5 feet from Howard Street and the west façade would be set back approximately 20 feet from the westerly property line. At the 17th story, the east façade would be set back 24.5 feet from Second Street, and the South façade would be set back 44.5 feet from Tehama Street. In addition, the fifth floor would include a further 5-foot recess, or “reveal,” on all four facades, intended to emphasize a visual break above the first four stories of the building—at a height of about 60 feet—and thereby establish a sense of continuity with nearby historic structures.

The site is currently occupied by a surface parking lot. As part of the project, the sponsor proposes to acquire and incorporate into the project site a 1,650-square-foot (20-foot–by–82.5-foot) portion of the adjacent property, which would increase the size of the project site to 25,575 square feet, and to demolish the existing loading dock at 631 Howard Street, which occupies the portion of the adjacent parcel to be acquired. The existing building at 631 Howard Street would remain.

Two basement parking levels would be provided beneath the project site, with access provided via a two way driveway from Tehama Street for a total of 54 marked parking spaces, with capacity for approximately 80 vehicles with valet parking. The basement would also include approximately 46 bicycle parking spaces, which would exceed the 12 spaces required by the Planning Code. Three additional service van spaces would also be provided in the basement.

Construction is estimated at 21 months with occupancy as early as 2013. The project architect is Heller Manus in association with Thomas Phifer and Partners.

And yes, the “TS” in “TS 222 Second Street, L.P.” stands for Tishman Speyer.

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Tom Poser, Jones Lang LaSalle, San Francisco
www.sanfranciscotenantrep.com

Please contact me if there is anything I can do to help you as a
Tenant Representative in the commercial real estate world.  Visit my
LinkedIn profile for recommendations.

Tom Poser, Jones Lang LaSalle, San Francisco
www.sanfranciscotenantrep.com