Madison Capital’s $12MM Repositioning of 360 Spear is Underway

San Francisco, Madison Capital, PGIM Real Estate, Digital Realty Trust, Newmark Knight Frank, Embarcadero, Transbay, BART, Verizon Wireless, AT&T
Image Credit: Madison Capital

By Meghan Hall

San Francisco’s South of Market neighborhood has been one of the most prominent submarkets in the city over the last decade, and the total assessed value for property in the area grew by $564 million over the course of 2017, according to the San Francisco assessor-recorder’s office. This is good news for Madison Capital and PGIM Real Estate, who acquired 360 Spear St. in the neighborhood for $95 million, or about $592 per square foot, from Digital Realty Trust back in October 2018. The companies are nearing the end of a more than $12 million dollar repositioning of the former Navy and Marine headquarters, originally constructed in 1924. With expected delivery of the renovated building anticipated for early summer of this year, Madison Capital has partnered with Newmark Knight Frank to begin looking for tenants.

“We are currently proceeding with a complete overhaul that is focused on amenitizing the building and modernizing base building systems,” said Justin Cesario, vice president at Madison Capital. “In terms of the design, the character of our repositioning is an ode to the building’s original use as the former Navy and Marine headquarters.”

Updates to the 5-story, 174,000 square foot building include 13-foot clean concrete ceilings, floor-to-ceiling windows with water views and a new, operable storefront leading to a 275-foot urban green space along Spear St. A ground floor amenity space with private parking, locker room and showers are a few of the other amenities that will be added to the building, as well. The building will feature 40,000 square foot floor plates and is a block from the Embarcadero. The Transbay Terminal, BART and Interstates 80 and 280 are all also easily accessible, as are a myriad of different shops and restaurants.

When completed, the building will be new-to-market for the first time in over 20 years and will have 112,800 square feet available to lease. Currently the remaining space is leased by Verizon Wireless and AT&T. NKF Executive Managing Directors Charlie Withers, Bill Benton and Liz Hart, along with Senior Managing Director Roman Adler are the leasing agents for 360 Spear. With PDR, office and biotech uses permitted at the building, Cesario said that 360 Spear has garnered a lot of interest since marketing for the property began at the beginning of February.

According to Cesario, interest has come from a variety of different types of tenants and while no formal agreements have yet been signed, Madison Capital and NKF have received inquiries from brokers representing tenants with current active space requirements.

“We’re really pleased with the feedback that we’ve received thus far from the market after our official launch,” said Cesario. “We are in active discussions with a couple of groups.”

NKF and Madison Capital are marketing the property as “SoMa’s premier mixed-use building,” and believe that demand for such a property is high in a market as competitive as San Francisco’s.

“We definitely agree that there is a strong demand in the market right now from office, PDR and biotech tenants,” explained Cesario. “When we acquired this building, we thought that there was a strong opportunity to amenitize it and use design to create an environment that ultimately would allow us to deliver a differentiated product. We felt we could capture a higher caliber of tenant by repositioning the building into a Class A offering.”

The property is the second New York-based Madison Capital has invested in with PGIM. The two companies worked together to purchase 105,000 square foot 150 Post St. in San Francisco’s Union Square for $69.33 million, or around $660 per square foot in September 2017.

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