San Francisco-based Shorenstein Properties LLC has acquired a 136,000-square-foot Class A office building in South San Francisco, paying approximately $35 million for the nearly empty building, according to a source with direct knowledge of the transaction.
The four-acre 801 Gateway Blvd. campus is immediately adjacent to the Caltrain line and close to the South San Francisco Caltrain station. The sale includes an on-site parking garage with 636 spaces.
The five-story building and four-story garage are a stone’s throw from Shorenstein’s existing Oyster Point Business Park and Marina Village at 385 Oyster Point Blvd. also in South San Francisco. Oyster Point is currently improved with not quite 500,000 square feet of industrial, office and retail space and a small hotel, but Shorenstein has marketed its redevelopment into 2.25 million square feet of research and development space.
Shorenstein declined comment through a spokesperson.
The property was marketed by Cushman & Wakefield of California Inc. on behalf of the seller, Torchlight Investors, a New York-based, registered investment advisor and the former lender. Torchlight acquired the building when the previous owner, Archon Group L.P., which paid approximately $390 a foot, or $53 million, five years ago, gave it up after Genentech, which occupied a large portion of the building, vacated.
The property was developed by Hines “as the centerpiece of the North Gateway Campus,” according to the Hines Web site. The property was designed to be flexible enough to accommodate pure office, high tech or biotechnology and life science tenants.
Cushman received more than a dozen offers, said Richard A. Ingwers, a C&W vice chairman who led marketing. The turnout underscores the continuing strong investor demand for “quality office buildings in the Bay Area,” Ingwers said.
The demand is of particular note because South San Francisco has at times led the region into slumps and often follows the larger market in recovery, he said. Historically South San Francisco has benefitted from spillover from San Francisco and Silicon Valley when choices in those locations became limited.
Still, he said, “The market fundamentals are such that people feel like they are getting a risk-balanced return on their investments in the Bay Area.”
The Peninsula office market, after two years of occupancy gains in 2010 and 2011 lost momentum in the first half of this year. The third quarter brought new gains, with more than 220,000 square feet of new occupancy. South San Francisco, with 2.9 million square feet of offices, added to the forward movement, according to new numbers from CBRE Inc. There is marginally less office space occupied on the Peninsula today than there was nine months ago. Overall, there are 40 million square feet of office buildings from Daly City to Palo Alto.
Shorenstein made the purchase for its 10th fund, Shorenstein Realty Investors Ten L.P., which was formed in 2010 with $1.233 billion of committed capital, including $75 million from Shorenstein. The same fund already owns 350 West Mart Center, a 1.3 million square foot two-building office complex in Chicago, and Seaport Center, a 461,000-square foot two-building office complex in Boston.
Besides Ingwers, also on the marketing team for C&W were Senior Director Grant Lammersen and executive directors Bradford F. Rogers, George Eckard and Seth Siegel.