By Jon Peterson
Bethesda, Md.-based ASB Real Estate Investments, a division of ASB Capital Management, has acquired the 180,000 square foot 795 Folsom Street office building for just over $600 per square foot or $110 million, according to sources familiar with the transaction. The property is located in the Yerba Buena district of the South of Market area in downtown San Francisco. The Registry reported the intent of the former Twitter headquarters building to be put for sale in early August.
“There are several factors that we like about the San Francisco market. We are urban guys and this city fits in with us. It has strong market features including properties near transportation, good job growth and is a place where young professionals and empty nesters want to live/work,” says David Quigley, a managing director and chief investment officer with ASB. He works out of the company’s regional office in Palo Alto.
The deal was closed on October 7th in an all cash deal.
“I think that this deal reflects that the San Francisco market is still attracting a great deal of interest from core institutional buyers. This was a true bidding war, with several rounds of offers and the buyers upping their pricing on several occasions,” says Adam Lasoff, a director for Cushman & Wakefield in San Francisco.
His company had the sales listing on the office building for the seller, Hartford, Conn.-based Cornerstone Real Estate Advisers. This firm had owned 795 Folsom since 2011, when it paid $70 million or $370 per square foot for the property, according to published reports.
Lasoff declined to comment on the sales price and the cap rate on this transaction. The lead person on the sale for Cushman & Wakefield was Grant Lammersen, senior director. Other brokers involved were Lasoff, George Eckard and Seth Siegel, both executive directors.
The cap rate on the deal was in the low five percent range, according to sources familiar with the deal. This return is based on the current net operating income being produced by the property.
795 Folsom is a fully leased property right now. The new owner will have a chance to add some value in the future. Two floors in the property are occupied by AT&T. This tenant has a lease that runs until 2016, and the rent for this space is around $30 per square foot. This puts it well below the current market rents of $60 per square foot.
ASB Real Estate acquired the property along with local real estate firm Union Property Capital. The San Francisco-based company will be the local operating partner on the property going forward. These two firms are involved in a couple of other properties together. One is the 28,000 square foot 135 Mississippi office building in San Francisco and some land at 350 Bush Street.
ASB bought 795 Folsom for its core open-ended commingled fund, the ASB Allegiance Real Estate Fund. This $3 billion fund was formed in 1984. The real estate manager has a portfolio in Northern California valued at $400 million. These assets are a mixture of office, residential, retail and industrial assets.
The retail assets that it looks to buy are typically single-building high street retail in sub markets such as Union Square in San Francisco.
ASB is a national real estate investment manager. The company has a regional office in Palo Alto at 540 Cowper Street. The firm manages a gross real estate portfolio valued at $3.8 billion, according to its Web site. This portfolio totals 16 million square feet in a combination of office, industrial, retail and apartments. Its investment strategy includes core, value-add and development. The manager invests on behalf of 180 institutional clients.