By Jon Peterson
Seattle-based Bentall Kennedy has paid $216.5 million or $603 per square foot to purchase the 358,590 square foot 600 California Street office building in downtown San Francisco.
The buyer sees that this property represents a very strong leasing opportunity.
“We believe that this property has a strong leasing play. Within two months the close to fully leased property will have its occupancy fall to 59 percent. The reason for this is that two important tenants in the property, Merrill Lynch and Wells Fargo will be leaving the building,” says Ashley Powell, a senior vice president with Bentall Kennedy. He is responsible for the company’s acquisition efforts on the West Coast.
Powell sees there is a big market demand for tenants looking for space in excess of 100,000 square feet and not much supply to accommodate this need. “There are now at least 12 tenants in the marketplace that are seeking space requirements in the range of 100,000 to 200,000 square feet. We will be one of only four buildings that can satisfy this kind of space,” said Powell.
The buyer sees the acquisition of this property being a value-added transaction. Bentall Kennedy declined to comment what the expected cap rate may be on this investment. The property does have a history of being a fully occupied property for a long time.
The leasing efforts on the property going forward will be led by JLL. The main listing agent will be Chris Roeder, a managing director in the firm’s San Francisco office.
The seller of 600 California Street was New York City-based Clarion Partners. It declined to comment when contacted for this story. This real estate manager had paid $180 million or $502 per square foot to acquire the property in the summer of 2012.
The property was sold in an off-market transaction, and the listing agent on the sale was Stephen Van Dusen, a managing director with the San Francisco office of Eastdil Secured. He did not respond to phone calls seeking comment for this story.
Bentall Kennedy acquired the property on behalf of its commingled fund, The Multi-Employer Property Trust. Through the third-quarter of this year, the private equity real estate fund had $5.38 billion of net assets. It invests mostly in the four main property types of office, industrial, retail and apartments on a nationwide basis. This commingled fund was first established in 1982.