By Jon Peterson
New York City-based Clarion Partners has acquired the 154,000-square-foot 60 Spear Street office building in San Francisco for approximately $107 million or $694 per square foot, according to sources familiar with the transaction.
Clarion acquired the property from a joint venture of San Antonio-based USAA Real Estate Company and New York City-based Ares Management. Both the buyer and USAA Real Estate declined to comment.
The cap rate on the property is 3.85 percent. This yield is based on the property’s current occupancy of more than 80 percent. Once the property becomes stabilized and nearly fully leased, the cap rate would be in the mid-5 percent range, according to sources familiar with the property.
The sellers sold the property through the San Francisco office of HFF. The people involved in the transaction were Senior Managing Directors Michael Leggett and Gerry Rhome and Managing Director Steve Golubchik. They did not respond to phone calls seeking comment for the story.
The 11-story property is mostly made up of office space. One of the tenants is a Starbucks for office space, and there is a Walgreens retail space on the ground floor. Two floors are empty. There is minimal lease exposure, with the existing tenants in the property for nearly four years.
60 Spear is considered a Class A asset, in part due to its location near city attractions and transportation, including the Ferry Building, BART and Transbay Terminal area.
The property is located within San Francisco’s South Financial District, a submarket that continues to show improvement. According to data from the San Francisco office of Colliers International, the vacancy for the South Financial District improved from 8.9 percent in the first quarter to 7.3 percent in the second quarter.
Effective rental rates in the overall Financial District for Class A space also picked up speed. Colliers stated in its research and forecast report that rents jumped 17.2 percent over the past six months, moving from $62.53 per square foot to $73.31 per square foot.
The South Financial District includes 98 office buildings comprising 24.5 million square feet of space.