By Jon Peterson
In today’s commercial real estate environment, it is difficult to sell properties. One exception has been buildings with single tenant occupancy with a long-term lease and strong credit rating. In some cases, even those types of assets will have a difficult time finding new owners given the uncertainty surrounding office utilization. If a nearly vacant property hits the market, one could assume that finding a willing party to buy it would be even harder. We may find out over the next few months.
The Wong 1997 Revocable Living Trust is one owner that is bringing to the market an office building located at 111 New Montgomery in San Francisco with such features, according to sources familiar with the property. While there is no pricing guidance available on the building at this time, it should be noted that the 30,974 square-foot property is only 5 percent occupied, according to its offering document. The market will soon determine if this was a good time to bring such a property up for sale, and it will give industry insiders one more data point to help understand the level of risk buyers are willing to bear.
The current ownership of the property has held title to the asset since March 2017 when it paid $5 million for the building and obtained a $3 million loan on the property, according to public records. The owners have selected the San Francisco office of CBRE to be the listing agent on the sale. Those working on the planned sale include Kyle Kovac and Michael Taquino, both executive vice presidents with the firm. CBRE declined to comment when contacted for this story.
The only tenant in the property is The Bird, a fried chicken sandwich shop. It has a lease for 1,636 square feet that runs until June 2026. The building has seven stories, and it could allow the next owner a value-add investment opportunity. The office space could be leased in the future to a single tenant or several tenants. The property also has two vacant retail spaces on the ground floor that could be combined to attract one larger tenant for this part of the property.
111 New Montgomery has a strong location for transportation and other San Francisco amenities. It is close to the Montgomery Street BART Station, MUNI light rail on Market Street and the under-construction Central Subway Station planned to open next month. The office asset is also near many museums, hotels and restaurants.
The property is located within the South Financial District in San Francisco. The overall Financial District sub-market has seen 9.3 million square feet of leasing volume since the first quarter of 2020. This represents 68 percent of San Francisco’s leasing activity during the time period, according to the property’s offering document.
111 New Montgomery is in a neighborhood that has a current vacancy of 16.2 percent and total availability of 21.2 percent through the second quarter, according to research by CBRE. The Class A office buildings in the area total 22.3 million square feet.