Blackstone Buys 600 Townsend East in San Francisco for $50.5MM from Swedish Pension Fund Manager

Blackstone, 600 Townsend, San Francisco, Salesforce, Alecta, JLL, Blackstone Real Estate Partners, commercial real estate

By Jon Peterson

New York City-based Blackstone Real Estate Partners has paid around $50.5 million or $609 per square foot to acquire the 600 Townsend East office building in downtown San Francisco occupied by Salesforce, according to sources that were aware of the sale of the property.

Blackstone declined to comment when contacted for this story.

[contextly_sidebar id=”RD2pk0mkgLp7R0DZEPNYtPm1OsSDNrBj”]The sales price on a per square foot basis is significantly lower than the $750 per square feet price that is the average for creative office buildings in San Francisco. The reason for this is that the buyer will have to finish off some work to legitimize office use in the building, which should be completed at some point later this year, as stated by sources that were familiar with the current state of the building.

The seller of the property was the Swedish pension fund manager Alecta. The fund had owned the property on a direct basis. It had sold the property through the San Francisco office of JLL. This was done through the JLL Capital Markets team that included Rob Hielscher, Michel Seifer and Erik Hanson. JLL declined to comment when contacted for this story.

Blackstone made the acquisition of the property for its core plus investment strategy, as stated by sources aware of this transaction. This real estate manager has a core plus commingled fund that goes by the name of Blackstone Property Partners. It looks to invest in a mixture of properties in major markets across the country.

This commingled fund has a total investment value of $12.6 billion, according to the manager’s fourth quarter 2016 earnings report. The net IRR achieved on realized investments is 13 percent. Blackstone Property Partners looks to invest in assets that have moderate risk, and it uses lower amounts of leverage than it does on its opportunistic investment for the Blackstone Real Estate Partners fund series.

The asset was part of a directly owned portfolio of properties in the United States and United Kingdom that Alecta decided to sell in the first half of 2016. This portfolio included a total of six properties that are located in the San Francisco Bay Area, all of which have now been sold. The Bay Area properties were 10900 North Tantau Avenue in Cupertino, which was sold to San Francisco-based Swift Real Estate Partners for $78 million earlier this year. In December of 2016, Blackstone also purchased three of the assets for $291 million, and Chicago-based Shopcore Properties bought the Lakeshore Plaza retail center in San Francisco, located at 1501-1599 Sloat Boulevard, for $125,364,000.

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