Laurus Earns Sub 6 Cap Rate on Sale of 1155 Market St. in San Francisco

1155 Market Street, San Francisco, Laurus Corporation, San Francisco real estate news, Bay Area news, Patson Companies, Starwood Capital, Canyon Capital

By Jon Peterson

Los Angeles-based Laurus Corporation has sold the 140,000 square foot 1155 Market Street office building in San Francisco at a sub 6 percent cap rate.

1155 Market St in San Francisco real estate The Registry“This return is based on the property’s current net operating income,” says Philip Cyburt, chief executive officer for Laurus.

The buyer of this property was San Francisco-based Patson Companies, a firm that had two capital sources that participated in the transaction.

“We had hired Kurt Scheidt with Cassidy Turley Commercial Real Estate Services in its San Francisco office to source the debt and equity capital we needed for this property,” said David Harrison, a co-founder with Patson.

There was a $58 million first mortgage put on the property provided by Starwood Capital based in Greenwich, Conn. The major equity provider was Los Angeles-based Canyon Capital. It provided up to 90 percent of the equity cost of the purchase. This figure includes some build out work and tenant improvements.

Patson as part of the deal has brought in San Francisco-based Lighthouse of the Blind to lease three floors within the building, which will make the property 100 percent occupied. At the beginning of the marketing process, the office building, which was constructed in 1982, was 72 percent occupied to the City and County of San Francisco.

The Lighthouse of the Blind will be buying its three floors from Patson in the future. The tenant would not comment on what price it will be paying for the 40,000 square feet of space.

“This move by us will mean a major expansion for our company. We are now in 13,000 square feet in our current location at 214 Van Ness. We probably have around 40 employees at our current location. I would think we would end up have more than 100 employees working at the property in 1155 Market,” says Bryan Bashin, executive director and chief executive officer for Lighthouse of the Blind.

The tenant had been looking for a new building for its expansion needs. “We had been looking for a new site since 2007. We restated this process a couple of years ago. We really like the location of 1155 Market. This is especially important for us as 100 percent of our 3,000 clients don’t drive. Our new location is clearly within walking distance of a BART station,” said Bashin.

Laurus made a significant gain on the sale of the property. It had paid roughly $27 million for the property in 2011. The seller then invested another $14 million into the renovation of the building.

The company had owned the asset for its real estate fund, the Ethika Diversified Real Estate Fund. This is a commingled fund that has mostly high net-worth individuals as its investors, some from Mexico, according to the company.

Laurus would like to find more assets to buy in the San Francisco area. “We think that San Francisco is one of the top markets to own real estate in for the entire country. The other comparable markets would be New York City and Houston,” said Cyburt. The company looks to acquire a mixture of office buildings and mid upper-scale hotels.

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