Luxembourg Pension Fund Buys 420 Taylor in San Francisco

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420 Taylor San Francisco The Registry real estate

By Jon Peterson

Newport Beach-based Professional Real Estate Services (PRES) has acquired the 46,024 square foot office 420 Taylor Street office building in San Francisco on behalf of a pension fund based in Luxembourg.

The purchase price of the property was $28.2 million with a cap rate in the low 5 percent range, based on current rent in the property, according to sources familiar with the transaction. The property was purchased on an all-cash basis.

The seller of the property was San Francisco-based Werbe RT Properties, a family trust. It was represented in the sale of the property by Cushman & Wakefield in its San Francisco office. The capital source with which PRES worked is Optimum Asset Management-USA Property Fund I. Both the buyer and seller declined comment on the sales price and cap rate on the transaction.

“This property gives us a chance to add some value to the property in the future. This could be releasing the property in the next several years or bringing the current rent to a market level when the current lease expires,” says Brian Veit, a principal with PRES, who works out of the company’s regional office in San Francisco.

The property is 100 percent leased to Practice Fusion, a medical data company. The lease runs through 2016, and the current rental rate of the property is in the high $20 per square foot range. This puts the property well below the market rents that are now in the mid $50s per square foot.

“One of the interesting features of this property is that it also includes an institutional quality parking garage. By this I mean, that if just the parking garage was put up for sale, there would be institutions that focus on this property type trying to buy it,” says Seth Siegel, a senior director with Cushman & Wakefield in San Francisco. He was involved in brokering the sale on 420 Taylor for the seller. The parking garage has room to hold more than 200 vehicles. The total square footage of 420 Taylor reaches 79,000 square feet when the parking facility is included.

420 Taylor is considered to be a Class B property, according to data from Colliers International. The property is located within the Union Square sub market. The area has 60 buildings totaling 4.1 million square feet, as stated by Colliers in its third quarter 2013 research & forecast report for office buildings in San Francisco. The current vacancy in the sub-market is 7.6 percent, which increased from the 5.6 percent in the second quarter of this year.

PRES will be managing the 420 Taylor going forward. “I think that this property is a good fit for our value-added and opportunistic strategies that we look for in our transactions,” said Veit. The company is a California focused investor in both the San Francisco Bay Area and the Los Angeles region. Its current portfolio includes 15 office buildings and three hotels. It also has interest in apartment development.

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