Vilified San Francisco Venture Capitalist Puts SoMa Office Asset up for Sale

By Meghan Hall

San Francisco’s South of Market neighborhood is scheduled to see a continued wave of development in the coming years as investors and companies eager for space expand beyond the city’s more competitive financial and central business districts. One property — a 12,000 square foot office building located at 1062 Folsom St. — has been put up for sale by property owner Rothenberg Ventures LLC, an entity associated with Mike Rothenberg. News of the property hitting the market comes just a week after the City of San Francisco assessor-recorder’s office issued a notice of default on behalf Chico, Calif.-based Mid Valley Title and Escrow Company. According to public documents, Rothenberg Ventures owes nearly $114,000 on the property as of February 8, 2019, a number which will increase until the account becomes current.

Rothenberg purchased the property in October 2015 for $5 million, according to public documents. The San Francisco-based investor was banned from participating in the venture capital industry after settling a fraud case with the U.S. Securities and Exchange Commission, which alleged Rothenberg had misappropriated millions of dollars from investment funds to support personal business ventures.

Built in 1911, the building is roughly 30 percent leased, with the ground floor currently occupied by a fast casual food establishment, Extreme Pizza. According to a flyer issued by Newmark Knight Frank, the brokerage firm marketing the building, Extreme Pizza is currently leasing the building for “significantly below market rent.” The top two floors of the building, an estimated 8,0000 square feet, are vacant and available for rent.

Newmark Knight Frank Executive Managing Director Mark Geisreiter and Senior Managing Director Seth McKinnon were unable to comment on the exact rate that Extreme Pizza is paying for its space or on the guidance pricing for the property. The pair also declined to comment on the default notice issued for the property.

However, both Geisreiter and McKinnon emphasized that 1062 Folsom St. is an ideal value-add or owner-use opportunity in the South of Market neighborhood, given current market fundamentals and the property’s central location. The property is within walking distance to the Civic Center BART station and MUNI light rail; other eateries and cafes such as Cellarmaker Brewing Co., Sightglass Coffee and Basil are all located nearby.

“The bones of the building are exceptional; it has got high ceilings, exposed brick. It’s the same look that many tenants are looking for,” said Geisreiter. “The location is great. You have a ton of residents, shops and new residential. Folsom St. is going to be undergoing an upgrade down the road with the City as well.”

The Central SoMa office market is currently strong, with the direct vacancy rate hovering around three percent and the average asking rent coming in at around $79.70 full service gross. The neighborhood has the second lowest vacancy rate in San Francisco, with only the South Financial District averaging lower, at 2.3 percent. According to Geisreiter and McKinnon, potential buyers can expect the property to increase in value as Central SoMa continues to transform under the newly approved Central SoMa plan. The plan, which is expected to bring $2 billion of public benefits to the district, a 200 percent increase in residential units and a 350 percent increase in the number of jobs, will likely have a positive impact on the property’s value. Approximately 1,300 residential units alone are planned for just the four-block radius surrounding the property.

“I think that the property is going to see a ton of benefits from [the] Central SoMa [Plan],” said Geisreiter. “The neighborhood is going to continue to be one of the focal points of the city, with the upzoning that has taken place to drive jobs and transit along there. It will be the new center of San Francisco for the next 20 years in terms of jobs, housing and the amenities that will follow. The property should see a continued increase in value because of its [location].”

Geisreiter and McKinnon did say the property has garnered plenty of interest from potential value-add investors looking to make their mark on the area, and that the property is expected to sell quickly.

West Coast Commercial Real Estate News