San Francisco-based retailer The Gap is the new owner of the 289,402 square foot 550 Terry Francois Blvd. office building in San Francisco’s Mission Bay neighborhood. The company, which also occupies the property, paid $342.5 million, or just over $1,183 per square foot, for the building, according to public documents. The Gap beat out The Sobrato Organization, which was under contract with seller Hines for $342 million, according to a filing with the Securities and Exchange Commission.
Sobrato had placed a $25 million deposit down on the property. As of this reporting, it is not clear if that amount was non-refundable.
The seller of the property was Houston-based Hines. The company is selling the office building on behalf of its real estate investment trust that goes by the name of Hines Global REIT. This real estate entity had selected the San Francisco office of Eastdil Secured to be the listing agent on the sale.
The six-story, Class A office building contains 282,773 rentable square feet. It was designed by the San Francisco firm Studios Architecture, and it was completed in 2002, according to a Hines web page for the property. 550 Terry Francois contains two wings connected by a central open core forming an integrated J-shaped floor plate. The building contains 12-foot ceiling heights and a loft-like, spacious work environment. On-site amenities include a coffee shop and a large company-owned and operated cafeteria, as well as parking in an adjacent shared six-story garage with 308 stalls allocated to the property.
Hines has owned 550 Terry Francois since 2012 when it acquired the property for $180 million. This sale is part of a strategy by the REIT to sell some assets in order to take advantage of the strength of the market in San Francisco and the prevailing demand of investors to own office buildings in the region.
The office building is the home of the clothing company Old Navy, an organization that is part of the global casual fashion and sports brand The Gap. The company occupies the entire building.
According to a public document Hines filed with Securities and Exchange Commission, the estimated going-in cap rate in the property is 8.2 percent. There was a lease modification with Gap in 2017, which has resulted in a reduction of revenues in excess of expenses by $2.4 million for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017.