New York Private-Equity Firm Buys First San Francisco Building

By Jon Peterson

New York City-based Brickman, a real estate private equity company, has agreed to buy 550 Kearny St., its first San Francisco Bay Area property. The company is paying $78 million, or $398 a square foot, for the 196,000-square-foot office building, according to people familiar with the transaction.

550 Kearny St San Francisco The Registry real estateTony Fineman, executive vice president with Brickman, declined comment until after the transaction closes. He did not say when that would be.

The sellers are San Francisco-based Montgomery Capital Partners and El Segundo, Calif.’s. Highridge Partners. The sellers acquired the property for $37.7 million, or $190 a square foot, in March 2011. The property at that time was 50 percent occupied. Neither company responded to calls seeking comment.

According to Cassidy Turley Commercial Real Estate Services, the property is now 93 percent occupied. The brokerage firm considers 550 Kearny to be a B-quality property, primarily based on its age, Garrick Brown, director of research for Cassidy Turley, said in an email. The 10-story property was constructed in 1957.

Dwell Media, which occupies 10,000 square feet, signed its lease in 2009. It runs until May 2015. The Weather Channel, iCrossing and The United Way of the Bay Area also have become tenants during the ownership of Highridge and Montgomery.

Other tenants include Sullivan International Group, Environmental Science Associates, Six Waves Inc., the Law Office of Robert B. Jobe and Tactical TeleSolutions Inc.

CBRE Inc. includes the property in San Francisco’s North Financial District office market, where there are 26.2 million square feet. At the end of the first quarter, the area had a vacancy rate of 8.6 percent, according to CBRE. The average asking rent in the submarket is $51.98 on an annual full-service gross basis, CBRE said.

Brickman currently owns no assets in San Francisco. Its West Coast properties include five office buildings and a hotel in the Los Angeles area and two office buildings in Seattle, according to its Web site.

The company was formed in 1992 and has made 78 investments with 2.2 million square feet of office, hotel and residential real estate totaling $3.4 billion of total capitalization. Overall, the company pursues investments across the risk spectrum from somewhat conservative to opportunistic.

Brickman’s most recent investment fund was Brickman Fund V, according to its Web site. It raised $225 million of equity in capital commitments and was initiated in November 2010 to pursue opportunity in the distressed-debt and distressed-property arenas.

Photo courtesy of 42 Floors.

West Coast Commercial Real Estate News