Beacon Capital to Test the Market in San Francisco With Sale of 888 Brannan

888 Brannan, San Francisco, Beacon Capital Partners, California State Teachers Retirement System, CalSTRS, commercial real estate, AirBnB

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By Jon Peterson

Boston-based Beacon Capital Partners will test the office building sales market in San Francisco as it has plans to bring to market for sale the 445,395 square foot property at 888 Brannan. The potential sale price could reach the ballpark of $700 per square foot, according to sources that track office building sales in San Francisco.

[contextly_sidebar id=”9SWnvjLLHjVXpIEfooXIcDYm8y1EN8jX”]A representative of Beacon Capital did not respond in time for a comment on this story.

Should Beacon approach or reach the $700 per square foot range, than the sale of the property will garner the real estate manager a very good profit on the sale in a year’s time of owning the property. Beacon acquired 888 Brannan in April of last year for $190 million or $427 per square foot.

When the company purchased the property, it had some vacancy issues. Beacon was able to correct this and bring in some new tenants. One of the main tenants in the building now is AirBnB, the San Francisco-based online lodging service company. It has a lease for 169,000 square feet.

Beacon Capital is not going to be forced into a sale of the property. The real estate manager acquired the property for its commingled fund, Beacon Capital Partners VI. Given that this commingled fund is still out in the marketplace buying properties, the real estate manager does have the option of pulling the property off the market if it’s not happy with the offers that it receives.

Beacon had raised a total of $2.5 billion of equity for Partners VI. Two of its investors were a $300 million commitment from the California State Teachers Retirement System and $200 million from the Pennsylvania Public School Employees Retirement System. This is value-add/opportunistic commingled fund that looks to buy existing office buildings that it can improve. San Francisco is one of the commingled fund’s target markets. Some of the others are Seattle, Los Angeles, Boston, New York and Washington, D.C.

There have been some recent examples of office building sales in San Francisco reaching the $700 per square foot range in San Francisco. One example of this was in February when Zurich Alternative Asset Management paid $703 per square foot to buy 135 Mississippi Street.

888 Brannan is considered to be part of the SoMa West sub-market in San Francisco. This region of the city remains very tight. According to the 2014 4th quarter report from the San Francisco office of Colliers International, vacancy dropped in the fourth quarter for the sub-market from 5.6 percent to 5.3 percent. SoMa West has 41 buildings totaling 3.4 million square feet.

Photography courtesy of Gensler

West Coast Commercial Real Estate News