By Jon Peterson
New York City-based Tishman Speyer has an agreement to acquire the 542,743 square foot 333 Bush Street office building in San Francisco for just shy of $700 per square foot, or $380 million, according to sources that are following the transaction. The deal is not under contract, and it has not closed yet.[contextly_sidebar id=”FiQBJo6RmGLoylg7oYNad4v6JiFsS0HJ”]The San Francisco office of Tishman Speyer declined to comment when contacted for this story.
The planned new owner of the property looks at 333 Bush as kind of a core plus/value add play, according to industry sources. There is strong current income being produced by the property. Value could be added to the asset as the property has a current occupancy in the high 80 percent range.
The seller of the property is a relationship between the Boston-based Massachusetts Pension Reserves Investment Management Board and San Francisco-based DivcoWest Properties. The pension fund owns a 98.1 percent interest in the property and DivcoWest 1.1 percent. DivcoWest declined to comment when contacted for this story.
The sellers had put the property on the market over the summer. According to a pension fund document from Mass PRIM, the seller had engaged San Francisco-based Bard Consulting to offer a second opinion on the sale recommendation. The advisor had supported the sale of the property at $675 per square foot.
It was stated in a board meeting document that a sales price at that amount would result in 3.7 percent cap rate and a 5.8 percent IRR.
The sales price on the property was expected to produce an amount well beyond the asset’s value. According to a Mass PRIM document, the property’s value before the asset was put on the market was $311.9 million or $581 per square foot. The public tax documents for the year 2014-2015 listed the value of land and building at $227 million.
The current owners of 333 Bush had bought the property in August of 2013 for $275 million or $507 per square foot. Mass PRIM was represented in the transaction by its separate account real estate manager, Boston-based AEW Capital Management.
A part of the business plan on the property was to spend $3.5 million of additional capital to upgrade the lobby and elevator and to conduct deferred maintenance. The ownership was able to roll 36 percent of the rent roll to market rents. These rents were at a 24 percent discount at the time when the property was acquired.