The California State Compensation Insurance Fund has put its downtown San Francisco headquarters up for sale. The 1275 Market St. property is next door to the proposed headquarters for Twitter Inc.
The decision to put the 345,000 square-foot building on the block was made by the owner in the last week and a half. The property is to be sold as an empty building because the insurance fund will be moving out by the end of September.
Industry sources estimate it will sell for $46 million to $48 million, or about $135 a square foot.
The proximity to Twitter, presuming the company ultimately decides to locate nearby, should augment investor interest as should current discussion by the Board of Supervisors to enact limited tax-breaks for companies that locate in the neighborhood, said Steve Hermann, a broker for CB Richard Ellis who has been retained to market and sell the property.
“There also is the possibility down the road of a light-rail connection nearby that would lead to Caltrain,” he said. The area already has two forms of public transit close by with BART and Muni, San Francisco’s surface transit system including streetcars and busses.
Hermann and Bob Gilley, who is also marketing the building, are executive vice presidents in CB Richard Ellis’ Investment Properties-Institutional Group in its San Francisco office.
The brokers expect to announce next week a deadline for bids that is likely to be in early May, Hermann said. “I think that this property will attract an opportunistic kind of buyer or a user,” he said.
San Francisco’s Board of Supervisors is considering an ordinance to grant payroll-expense tax exclusions to companies that locate in its Central Market Street and Tenderloin districts in an effort to goose revitalization of a downtrodden and economically depressed area. The exclusion is proposed for a period of eight years from the effective date of the city ordinance, but specific businesses could only claim it for a maximum of six years.
The Central Market region extends from about Fifth to Tenth streets along Market Street and includes both this property and the Twitter property. The Tenderloin district is a roughly six-block by six-block area immediately to the north.
The proposed tax-exemption policy specifically excludes the insurance fund’s building, according to a city staff report dated April 5, as well as 1455 Market St., the more than one million square-foot building acquired by Hudson Pacific Properties for less than $100 a square foot in December.
San Francisco charges businesses a 1.5 percent tax on payroll expenses, excluding companies with annual payrolls of $250,000 or less. The contemplated tax exemption is aimed at Twitter, which is located at 795 Folsom St. in San Francisco now but is considering a move to 1355 Market St., the former Western Furniture Exchange and Merchandise Mart.
Shorenstein Properties is widely understood to have agreed to buy the furniture mart building for $110 a square foot or about $110 million. The property would need extensive improvements.
“There should be good interest in the [insurance fund] asset given where the property is located,” Hermann said.
Jennifer Vargen, senior vice president of marketing and communications for the insurance fund, said the workers’ compensation insurer is selling the San Francisco property because it is moving employees to locations in Vallejo, Pleasanton and Sacramento. A few employees will stay in San Francisco, she said, but how many is not yet clear. The fund intends to lease space to accommodate that need, she said.
The company has one existing building that it owns in Vallejo at 1020 Vaquero Circle. In Pleasanton, it owns three buildings on Owens Drive, with one of the buildings being 5880 Owens. The company also holds ownership in a property in Sacramento at 2275 Gateway Oaks Drive.