201 Spear Goes to KBS Realty for $121MM

By Jon Peterson

Newport Beach-based KBS Realty Advisors has been chosen as the buyer of the 266,048 square foot 201 Spear Street office building in downtown San Francisco, according to sources familiar with the transaction. The purchase price is around $121 million or $454 per square foot. A closing date for the transaction has not been established.

201 Spear San Francisco The Registry real estateThe cap rate on this transaction is in the high four percent range, according to industry sources. This yield is based on the current net operating income being produced by the property.

KBS did not respond to phone calls for this story.

The seller of the property was Hartford, Conn.-based Cornerstone Real Estate Advisers. The real estate manager hired Eastdil Secured in its San Francisco office as the leasing agent on the transaction. The person overseeing the sale was Stephen Van Dusen, a managing director for the brokerage firm. He did not respond to phone calls seeking comment for the story.

Cornerstone will be achieving a significant gain on the sale of the property once it closes. The real estate manager purchased the property in 1999 for $62.5 million or nearly $235 per square foot, according to research from the San Francisco office of Cassidy Turley Commercial Real Estate Services. This transaction produced a 6.5 percent cap rate. The seller was Equitable Life Assurance Society.

201 Spear is a Class A office building that was built in 1985. When the asset was put up for sale in August of this year, the current occupancy was 82.6 percent. New leases signed this year included deals with MacFarlane Partners and Corrum Capital Management.

201 Spear is located within the South Financial District in San Francisco. The building’s vacancy is well below the sub market vacancy level. According to the research and forecast report for the third quarter 2013 for office buildings in San Francisco put together by Colliers International, the South Financial district has a current vacancy of 7.3 percent. This region has a total of 97 buildings totaling 24.2 million square feet.

Cornerstone owns 201 Spear for its open-ended commingled fund, The Cornerstone Patriot Fund.

As of August 2013, the Patriot Fund had total assets valued at $2.1 billion. This commingled fund has a core investment strategy, and it buys on a combination of office, industrial, retail and apartments on a nationwide basis. Core assets typically are those that are less than 10 years old and have an occupancy of 80 percent or greater.

KBS has made investments in seven properties in the San Francisco Bay Area, according to its Web site. The properties that it owns are the 187,000 square foot 7007-7151 Gateway Boulevard office and R&D building in Newark, the 27,000 square foot 370 San Aleso Avenue office building in Sunnyvale, the 85,000 square foot 3200 North First Street office/R&D building in San Jose, the 142,700 square foot 350 East Plumeria Drive office/flex building in San Jose, the 259,000 square foot 1800-1850 Embarcadero Road office/R&D complex in Palo Alto and the 615,000 square foot 100 Headquarters Drive & 200-475 Holger Way office campus in San Jose. The real estate manager has a first mortgage on the 425-room Tuscan Inn at 425 North Point Street in San Francisco.

West Coast Commercial Real Estate News