Alexandria Backs Out of Townsend Building Purchase in San Francisco and Forgoes $10MM Deposit

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Image courtesy of Newmark Knight Frank

By Jon Peterson

Alexandria Real Estate Equities has made the decision to walk away from its intent to acquire the Townsend Building in San Francisco, according to multiple sources that were aware of this decision and statements from the company in its first quarter of 2020 conference call. This action resulted in the publicly-traded REIT of foregoing a $10 million deposit.

“So, the size of the deal is roughly $150 million to $160 million, in that range. And it really came down to economics at the end of the day, during the diligence period. We constantly revisit the cash flow analysis and our views on the performance of the holding period in the near-term was [meaningfully] different. And when we took in totality with our business today and where we want to deploy capital. It was a pretty simple decision, even though we don’t take these decisions lightly, because you’re talking about $10 million. But it’s the only transaction I can think of in the history of the company where we’ve had to do that,” said Dean Shigenaga, chief financial officer for Alexandria, during the company’s first-quarter 2020 earnings conference call.

The Townsend Building is a 137,624 square foot office building. Its two addresses are 123 Townsend and 118 King Street. The asset is still owned by Manchester, Vermont-based Manchester Capital. The firm has held ownership of the building since October 2003, when it had purchased the property for $18.3 million per public records.

The property was put up for sale in June of last year, and the pricing guidance on the sale at that time was $160 million, according to sources that were aware of the asset and what ownership was seeking. The listing agent on the sale was the San Francisco office of Newmark Knight Frank. Newmark did not respond to an email seeking comment for this story.

When it was up for sale, the property was considered to be a core asset, and it was fully leased at the time. The anchor tenant in the building was PayPal, which at the time had occupied around three quarters of the net rentable square feet of the property. The average remaining lease term in the building was eight years with rents being approximately 28 percent below market rates.

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