Brookfield to Buy The Monadnock Building in San Francisco

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Palace Hotel and Monadnock Buildling in San Francisco The Registry real estate
The Palace Hotel and The Monadnock Building on Market Street in San Francisco

By Jon Peterson

Toronto and New York City-based Brookfield Office Properties has its first office building purchase in San Francisco under contract. This is the $80 million acquisition or nearly $391 per square foot for the 204,625 square foot 685 Market Street office building known as The Monadnock Building, according to sources familiar with the transaction.

Brookfield had no comment on this deal when contacted for the story. The same response came from the seller, Newark-based Prudential Real Estate Investors. The real estate manager has Jones Lang LaSalle as the exclusive advisor on the sale. This company did not respond to phone calls and e-mails.

There is going to be an additional $8 million invested in the property by the buyer, according to sources who are aware of the deal. This capital will be used for seismic work on the building.

The property now is 76.4 percent occupied. One of its main tenants is Macys.com, the online entity of one of the country’s biggest retail companies. This tenant covers floors six to 10 of the 10-story property. Its space amounts to 46 percent of the building and the lease runs through March of 2018.

The property does have a ways to go before it reaches the overall market occupancy for office buildings in downtown San Francisco. The current vacancy is 8 percent, according to data supplied by CBRE.

685 Market was originally built in 1906 and was renovated in 1986, according to its Web site. The property is considered to be a Class A building.

The San Francisco office market is still pushing rents north this year. “For 2013, rents have increased by 10 percent to 12 percent,” says Russell Ingrum, vice chairman and managing director with CBRE in its San Francisco office.

San Francisco as a market is going to be off by nearly two thirds this year in total investment volume. “In 2012, the total transaction volume in San Francisco was $6.5 billion. Through the first six months of 2013 it was $900 million and we are expecting a total volume of $2.5 billion by yearend,” said Ingrum.

Brookfield Office Properties is a publicly traded company that has Brookfield Asset Management as its parent. The office building company owns a 110-property portfolio totaling 80 million square feet. It invests in the US, Canada, Australia and the United Kingdom.

In the US, the company owns assets in seven major markets. These are New York City, Washington, D.C., Houston, Los Angeles, Denver, Boston and Seattle. The vast majority of its assets are downtown properties. The only exception is that it does own some buildings in the suburban markets around Washington, D.C.

Photo courtesy of Flickr

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