Jamestown Buys 799 Market Street in San Francisco for $93.5MM

799 Market St. on Left

By Jon Peterson

Atlanta-based Jamestown Properties has paid $658 a square foot, or $93.5 million, to buy 799 Market St., a retail and office building with 142,000 square feet and a top-performing Ross Dress for Less department store.

799 Market St. on Left

The four-story Ross location with 55,000 square feet accounts for 51 percent of the income that is being generated by the property. “This store is a top-five producer for the whole Ross chain,” said Michael Phillips, Jamestown’s chief operating officer. The store’s lease expires in 2019.

“We feel very good about having them in our property for a long time going forward,” Phillips said.

The sale closed Oct. 1.

Atlanta-based Jamestown LP already owns San Francisco’s distinctive 801 Market St. Its new acquisition and the existing building face one another across 4th Street. Both properties are a stone’s throw from the Westfield San Francisco Centre, home to a Bloomingdale’s, BOSS Hugo Boss and dozens of other retailers.

801 Market, which is also known as 22 4th St., includes the 195-room Palomar Hotel, retail tenants like Old Navy, the Container Store, Levi’s and office space; it is a total of 429,000 square feet. Jamestown has conceived the two properties as a campus and will proceed with that vision in mind, Phillips said. Jamestown bought 801 Market St. for $189 million in 2004.

Connecticut-based Commonfund Realty owned 799 Market St. since 1999 when it paid $37.2 million. “I think there are several factors as to why the price went up so much for this property,” Phillips said. “One is that the rental rates for office space have gone up significantly since the property was bought by the previous owners.  They are now in the mid- to high-$40 a square foot for full service. Another factor is that the area around this property has become built out.”

Elsewhere in the Bay Area, Jamestown owns Alameda South Shore Center, a not-quite 600,000-square-foot center in Alameda. It is the only major shopping center on the 23-mile island.

The company also is known for its large-scale, creative redevelopment work. Jamestown’s Chelsea Market in New York City was a biscuit-factory complex in the meatpacking district that has been remade into 1.2 million square feet of offices and retail space. Office tenants include Google Inc. The market building itself is built around the High Line, a not-quite 1.5-mile elevated linear park built on the foundation of a former freight-train track that operated above the city streets for nearly 50 years until closing in 1980.

In July 2011, Jamestown announced that it had undertaken another mammoth project, this time in its Atlanta hometown. It planned a remake of a 2.1 million square-foot property constructed in 1926 by Sears, Roebuck & Co. as a retail store, warehouse and catalogue-distribution center. It is the largest brick building in the southeastern United States, and the site was linked directly to freight and trolley lines.

There is a chance to add value to the office component at San Francisco 799 Market because it is only 89 percent leased. “We are going to be as flexible as we can be with the office space with the tenants we will attract in the future. It will not be designed on a cookie-cutter basis. Instead, we will be very flexible in the hopes of attracting technology-oriented tenants,” Phillips said.

The new owners bought the property all cash, paying off a five-year $40 million bridge loan provided by San Francisco-based Prime Commercial Finance last year. Jamestown arranged a new $46.5 million mortgage with Bank of America.

Both buildings have been placed into the Jamestown Premiere Property Fund, an open-ended core commingled fund for which the company is seeking an initial capital raise of around $800 million, according to documents from the New Mexico State Investment Council.

One of the early investors is the Alameda County Employees’ Retirement Association, which approved a $20 million commitment earlier this year. Other investors include a $75 million commitment from the Kansas Public Employees Retirement System, $75 million from the New Mexico State Investment Council and $75 million from the Ohio Police & Fire Pension Fund.

Jamestown is to invest up to $50 million of its own capital in the fund, which is expected to buy existing properties with strong current income and the potential to gain value through a re-leasing or expansion. Properties are supposed to be no less than 80 percent leased and located in premier gateway cities including San Francisco.

“I’m from Palo Alto, so I am well aware what has been going on in the region for a long time,” Phillips said. “The Bay Area is a very attractive market to own real estate in, and that will continue to be the case in the future.”

Jamestown declined to provide the capitalization rate, or initial yield, related to the 799 Market St. purchase.

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