By Jon Peterson
With uncertainty still lingering over the San Francisco commercial real estate market, some owners are considering testing the market for investment interest. Manhattan Beach, Calif.-based Vantage Property Investors is one of the owners that is offering up a property for sale. The company has put on the market the 16,668 square foot creative office building located at 1076 Howard Street, which it acquired in September of 2015 for just under $5 million, according to public records. The asking price on the current sale is $18.5 million, or just around $1,110 per square foot, according to the property’s offering document.
The seller is being represented in the transaction by the San Francisco office of Newmark. Working on the sale of the property are Mark Geisreiter, executive managing director, Seth McKinnon, senior managing director, and Nadav Kariv, associate director. Newmark declined to comment when contacted for this story.
The steep price on the asset is not entirely impossible to achieve, and the current tenancy gives the seller some leeway, since it is long term with a credit tenant. The property is now 100 percent leased. It’s leased to the City & County of San Francisco for the next 8.5 years. The asset was also renovated in 2021 to the tune of $11.1 million, which included improvements to the building’s structure, a new mezzanine was added, all new buildings systems, a new elevator, restrooms and kitchen.
Should the price point be reached, the sale would produce a cap rate of 4.62 percent, as stated in the properties offering document. The average cash-on-cash return for the asset is 7.85 percent.
The most likely capital sources to be interested in this property are projected to be either private buyers or 1031-exchange investors, according to industry sources.
Geisreiter’s team has two other properties in San Francisco it has placed on the market for sale. One of these is 300 Toland Street, which is an industrial asset that has 75,000 square feet of land.
This asset is currently owned by the Lucille N. Alderman Trust, according to public records, and the owners are asking around $25 million for the property, according to sources familiar with the sale details. The asset includes an 11,200 square foot garage building and a 13,400 square foot office building, as well. The 1.76-acre industrial site is zoned for PDR-2 and is 94 percent occupied with two tenants at rental rates that are estimated to be be paying below market rates.
The expectation is that this property will be attractive for traditional industrial tenants and possibly technology tenants who already have a presence in the submarket; companies like Amazon, Waymo (Google) and Lyft, are all in the vicinity of this property, as stated in the offering document.
300 Toland is located within the Bayview industrial sub-market in San Francisco. This area is now attracting technology companies requiring R&D, storage, distribution and manufacturing space close to their existing headquarters. Strong demand from both existing users and technology companies has reduced the vacancy rate in Bayview to 4.4 percent and rents have increased by 6.4 percent over the past 12 months.
The final property up for sale by Newmark is 700 Indiana Street. This is a development site located in the Dogpatch neighborhood at Indiana Street between 19th and 20th Streets. The site, which is owned by a private investor could be turned into a lab, R&D or residential asset in the future. There was no available pricing guidance on the property at this time.