By Jon Peterson
A private owner group based in Redwood City is looking to test the market with a mixed-use asset on one of San Francisco’s main thoroughfares – Market Street. The owners are putting up for sale the 22,220-square-foot property located at 1005 Market Street, which is comprised of 45 residential units and six retail units on the ground level, for an asking price of $10.25 million, or roughly $461 per square foot, according to the property’s offering document.
The owners have hired the San Francisco Capital Markets team from Newmark as the listing agent on the transaction and to help market the property. Those working on the sale include Mark Geisreiter, executive managing director, Seth McKinnon, senior managing director, and Steven Golubchik, executive vice chairman.
According to industry sources with knowledge of the property’s offering and market conditions in San Francisco, several types of buyers could be interested in the asset. They estimated that the most likely acquisition candidates could be high net-worth individuals, 1031-Exchange investors, or family offices.
The property’s 45 residential units span over floors two, three and four, while the six retail units are on the ground floor of the building. Should the asking price on the property be reached, the in-place cap rate on the transaction is projected to be 6.13 percent, according to the property’s offering document. In addition, the property has a current occupancy of 95.6 percent, according to the offering document, which should make this property an easy target for investors looking to own a piece of San Francisco’s Market Street.
In addition to the benefits of high occupancy, the property also has a value-add component that could entice new owners of the property. According to one estimate, the existing rents in the property are roughly 20 percent below market rates, which would allow the next owner an opportunity to increase net income as leases turn over. The pro forma cap rate on the property could then come in at 7.36 percent.
There are 15 residential units on each floor of the building and only one unit on the second floor is currently vacant. The apartments in the property are considered to be live/work units.
The first-floor retail totals 6,505 square feet, and the tenants in this space include Donut King, Tu Lan Restaurant, Rumpus Room, Gai Chicken & Rice, and Taqueria Cancun.
1005 Market was first developed in 1924 and was renovated in 2016. The property did have some vacancy issues right after the start of the COVID-19 pandemic. However, the building has now rebounded with nearly full occupancy for both the retail and residential parts of the asset.
The building has a very strong location from a mass transportation perspective. The residents and retail customers are just steps away from the BART and MUNI stops allowing them quick connectivity across the City.