Another SoMa Building Goes on the Block

Jon Peterson

Iowa-based insurer Aegon Americas has put a 55,000 square-foot office building in San Francisco’s South of Market up for sale.

The U.S. operation of Aegon N.V., a global Dutch life insurance, pension and investment company, has owned 2 Bryant St. for roughly 15 years. It gained ownership after being the property’s lender.

Aegon hopes to snag a buyer for the three-story building before the end of the year and anticipates a sales price in the $400 a square foot range, said Seth Siegel, an executive director with brokerage Cushman & Wakefield.

“The leveraged IRR (internal rate of return) on the deal should be in the low teens,” Siegel said. The building is currently 100 percent leased but about two-thirds of the leases expire in the next two years.

Siegel, Executive Director George Eckard and Senior Director Grant Lammersen are handling the listing on behalf of Aegon. Aegon did not respond to phone calls seeking comment for this story.

Siegel anticipates interest from institutional investors and high net-worth individuals. The purchase price should be inflated by the building’s location across The Embarcadero from a pier that is slated for renovation as part of the 2013 America’s Cup finals and the Louis Vuitton Cup, the challenger series that precedes the final event.

The America’s Cup is expected to have a Bay Area-wide economic impact of $1.4 billion and to create nearly 8,800 jobs.

The SoMa office market has seen major improvement since the first quarter of 2010. The vacancy rate in the area has dropped from 17.4 percent in the first quarter of last year to 11.4 percent through the third quarter of this year, according to Jones Lang LaSalle. Average asking rents have moved from $29.38 a square foot to $36.30 a square foot in the last seven quarters. Technology tenants represent 40 percent of the demand for office space in the SoMa market, said Colin Yasukochi, a vice president of research for Northwest U.S. markets for Jones Lang.

Perhaps not surprisingly, investment activity has been robust in the district with at least eight SoMa buildings selling in the third quarter alone. Last month, Los Angeles-based Kilroy Realty Corp. paid $103.3 million, or $331.50 a square foot, for 201 Third St. The building was 90 percent occupied. Meanwhile, Hudson Pacific Properties, which is also a Los Angeles-based real estate investment trust, paid $56.4 million for 625 Second St., or $411.70 a square foot. The building was 100 percent leased.

Other SoMa buyers in recent months have included San Francisco-based Swift Realty Partners, which bought 140 Second St., Manulife Financial Corp. and Beacon Capital Partners.

West Coast Commercial Real Estate News