By Jon Peterson
Another San Francisco office building is coming up for sale. The 46,752 square foot building located at 634 Second Street, and home to a technology tenant, is hitting the market.
The listing agent on the sale of the property is the San Francisco office of Newmark Cornish & Carey, and the team working on the sale is Kyle Kovac, senior managing director, Michael Taquino, senior managing director, Daniel Cressman, executive managing director, and Mandy Lee, associate director. They declined to comment when contacted for this story.
The current ownership has held the property since 2007. The sales price of the asset at that time was reported at $16 million. According to the offering documents on the property, the current owner has invested $6.1 million in building improvements and $2.5 million in tenant improvements totaling $184 per square foot since it has owned the asset.
All of the office space in the property is occupied by Okta, a major player in the cloud computing business. Its current lease runs through September of 2024 and its rental rate is around 10 percent below market. It also includes one five-year option to extend the lease at market rates. The ground floor of the property was recently leased to Merigan’s, a café that offers rustic and soulful southern Italian lunch cuisine.
There is a potential for the new owner of the property to add some value to the asset in the future. There is additional density allowed in the property where an approximately 20,000 square feet could be added to the building in the future. Since this figure falls under the 50,000 square foot limit for the Prop M allocation, it would not be affected by that regulation. For the additional space to be added the new owners would need to go through the entitlement process with the city of San Francisco.
The supply/demand characteristics of the sub-market where 634 Second sits are very strong. According to the offering document, the property is located in the SoMa sub-market. This neighborhood has a current vacancy for Class A space at 1.9 percent and boasts over four million square feet of tenant demand. The property has excellent access to transportation as it is located two blocks from the 4th and King Caltrain station, which serves SoMa to the points south toward Silicon Valley.
634 Second is an asset managed by Manchester Capital Management on behalf of the ownership group. This firm currently operates a diverse real estate portfolio valued at over $450 million. These assets are located throughout the United States.