By Jon Peterson
San Francisco-based SKS Partners has placed on the market for sale the 82,805 square foot medical office building in San Francisco located at 3838 California Street. This property has an estimated value of $65 million, according to sources that are familiar with the property.
The listing agent on the sale is HFF. One of the people involved in the sale is David Dokko, a senior director in the firm’s San Francisco office. Other people working on the sale include Evan Kovac, Andrew Milne and Trent Jemmett.
“It’s our opinion that this sale will represent the first sale of an institutional core medical office building in San Francisco in at least 10 years. It should attract a great deal of interest,” said Dokko.
The anchor tenant in the property is Sutter Health. This tenant has recently signed a significant lease extension and expansion on the 8th floor and now represents 38 percent of the in-place tenancy with a weighted average lease term of over seven years. Some of the other tenants in the building are California Pacific Orthopedics & Sports Medicine, California Skin Institute, San Francisco Ear Nose & Throat and Brown & Toland Physicians.
The new owner of the property will have an opportunity to increase the income produced by the property with two actions. One would be to lease up the 13,117 square feet of empty space in the property. There also is a change to move some of the existing rents up to market rents as 12,605 square feet in the property will be expiring in the first 16 months of the new ownership and these rents are 36 percent below market.
SKS has completed its business plan on the property. This included a renovation that involved an updated lobby, new designs for the common areas and corridor and improvements made to most of the major systems in the property, as was stated by the seller on its website.
The San Francisco market is one that is a tough one for investors to access medical office buildings. “Both San Francisco and the West in general are tough regions to crack as far as finding medical office buildings to buy. San Francisco in general is not adding new medical office assets given the demand there is for other kinds of commercial real estate like traditional office buildings,” said Dokko.