By Jon Peterson
Oslo, Norway-based Norges Bank Investment Management will soon be adding another office building in San Francisco to its investment portfolio. The real estate investment manager and New York City-based TIAA-CREF are coming together to buy 405 Howard Street in San Francisco for around $350 million which puts it around $750 per square foot, according to sources who are aware of the transaction.
These two firms that will be part of the new ownership both declined to comment when contacted for the story.
The current owners of the property are a joint venture with San Francisco-based Langley Investment Properties and its equity partner, Stamford, Conn.-based GE Asset Management. Langley did not respond to phone calls seeking comment.
The cap rate on the sale of the asset is projected to be in the high 3 percent to 4 percent range, according to sources who know about the transaction. This return is based on the property’s current net operating income.
405 Howard is known locally as the Orrick Building. According to Langley’s Web site, the property is a 10-story complex totaling 521,555 square feet. Included in this square footage is a 142-space parking garage.
This office building is now considered to be a fully occupied asset. The property was built in 2003, and the main tenants include Axiom Legal, BlackRock, Moody’s KMV and Orrick, Herrington & Sutcliffe.
There are two tenants looking to sublease their space, according to sources that are aware of the situation. On the second floor of the property there is a space totaling 58,688 square feet that is now occupied by BlackRock. This space is being marketed by CBRE and the sublease runs through 2017. On the third floor of the property there is additional space on the market for sublease by Moody’s. This tenant is scheduled to move out in August.
When the deal on 405 Howard closes, it will become the second office building acquired by Norges Bank in San Francisco. In January of this year, the Norwegian financial institution bought a 47.5 percent interest in 425 Market Street. This property was purchased as part of a joint venture with New York City-based MetLife.
This venture looks to buy core office buildings in the top five or six markets in the U.S., San Francisco being one of these. The others are Los Angeles, New York, Boston and Washington, D.C.
Norges Bank invests in office buildings on behalf of the Norwegian Government Pension Fund Global. These investments are done through TIAA-CREF, MetLife and Boston Properties in the United States.
Photo courtesy of Studios Architecture