By Jon Peterson
San Francisco-based DivcoWest has become the new owner of The Gap Building in San Francisco located at 550 Terry Francois Boulevard. The company purchased the 309,399 square foot building for $356 million, or $1,151 per square foot, according to public documents filed with the city. The buyer of the asset declined to comment when contacted for this story.
Gap Inc. has been marketing the property through the San Francisco office of Eastdil Secured, which also declined to comment when contacted for this story. Gap had been the owner of the building since 2019 when it acquired the property for $342.5 million, according to public records and earlier reporting by The Registry. The property in the past had been used as the headquarters for Old Navy. Gap put the property up for sale after it announced that it would be moving from this location to the Embarcadero, a more centrally-located address in San Franciso.
Prior to its acquisition by Gap in February of 2019 from Hines, the Sobrato Organization was in contract just a month earlier to acquire the asset for $342 million, and it had placed a $25 million deposit. Hines owned the property since 2012 when it acquired it for $180 million. The 2019 sale was part of a strategy by the REIT to sell some assets in order to take advantage of the strength of the market in San Francisco and the prevailing demand of investors to own office buildings in the region.
The six-story, Class A office building contains 282,773 rentable square feet. It was designed by the San Francisco firm Studios Architecture, and it was completed in 2002, according to a Hines web page for the property. 550 Terry Francois contains two wings connected by a central open core forming an integrated J-shaped floor plate. The building contains 12-foot ceiling heights and a loft-like, spacious work environment. On-site amenities include a coffee shop and a large company-owned and operated cafeteria, as well as parking in an adjacent shared six-story garage with 308 stalls allocated to the property.
DivcoWest has plans to change the use of the property, according to sources familiar with what the future of the building may be. The asset is planned to be transformed into a building that would attract a mixture of life science and biotech companies. The life science sector has been on a tear in the last couple of years, and the vacancy in San Francisco for life science properties is virtually non-existent.
The property is considered to be part of the Mission Bay submarket of San Francisco. Vacancy last year for lab space in the region was 0.1 percent according to sources that track this information. Another factor of the property’s strong location is that it sits across the street from the Chase Center, which attracts many activities like Warriors NBA basketball games and major concert events.