UC Regents Plans to Buy 1111 Broadway in Oakland for Approximately $215MM

Posted on November 17, 2014 by publisher in CommercialFinanceINDUSTRY news

By Jon Peterson


The Office of the University of California Regents is planning to pay approximately $380 per square foot or $215.1 million to acquire the 566,168 square foot 1111 Broadway office building in downtown Oakland, according to sources familiar with the property.

A representative of the office of the chief investment officer for the UC Regents did respond in an e-mail that the university hopes to acquire the property and that the deal has not closed yet. The email stated that the buyer was not in a position to discuss any pricing details.

This sale would result in a big profit for San Francisco-based Ellis Partners. Ellis, with the help of a financial partner, had acquired the property for $158 million or $279 per square foot in November of 2013. Jim Ellis, managing principal with Ellis Partners, declined to comment in an email when contacted for this story.

The UC Regents sees 1111 Broadway as a core asset. The potential buyer stated in an e-mail that it considers the property to be a core asset due to its proximity to the core of downtown Oakland, giving it exceptional conveniences to restaurants, retail and hotel amenities, as well as outstanding accessibility to BART, multiple bus lines and highways 980 and 880. Over the years of various ownerships, the building has been maintained to the highest institutional standards and has historically commanded the highest rents in its submarket.

The UC Regents believes in the Oakland office building market. It stated in an e-mail that Oakland as a city is poised for significant near term rent growth and strong absorption if the city continues to thrive and drive economic expansion.

1111 Broadway, which was first developed in 1990, is now 96 percent leased. Major tenants in the property include Wendell, Rosen, Black & Dean, GT Nexus and FEMA. The University of California also occupies a floor in the building. The asset is a LEED certified gold office tower.

This property could become part of UC Regents existing real estate portfolio now valued at $3.5 billion, according to an e-mail from the investor. This portfolio includes a mixture of core, value-add and opportunistic private real estate it has invested in the United States and around the world.

These investments are placed into a mixture of commingled funds and separate account investment strategies. The UC Regents manages a total investment portfolio value at around $91 billion. This includes retirement, endowment, working capital and defined contribution pension plans.



Salesforce set to buy 50 Fremont skyscraper in S.F.'s south financial district

Nov 11, 2014, 11:29am PST UPDATED: Nov 11, 2014, 4:14pm PST

Cory Weinberg

Reporter-San Francisco Business Times


Salesforce is set to buy the 50 Fremont office tower from TIAA-CREF, sources close to the deal told the Business Times.

The deal would continue to grow the San Francisco-based software company's real estate footprint. The company is the largest technology employer in San Francisco, with 4,000 employees in the city. Salesforce already leased about a half-million square feet of 50 Fremont in 2012, more than half of the 817,000-square-foot building. That $339 million, 18-year lease gave Salesforce first dibs to purchase the building — if TIAA-CREF decided to sell — or the right to buy in 2017.

The 43-story 50 Fremont is the ninth-largest office tower in San Francisco, according to Business Times research. Mellon Capital Management and Drinker Biddle & Reath LLP are also tenants.

It's not clear just yet how much Salesforce would pay for the building, and representatives for its broker Cushman & Wakefield did not immediately return requests for comment.

UPDATE: Salesforce to join exclusive real estate club with SoMa tower purchase

Salesforce has leased more space in the city than any other company in recent years. The company inked a deal in April to become the anchor tenant of what will be the city's largest building – the Salesforce Tower. That 714,000-square-foot lease is valued at $560 million over 15 and a half years, starting in 2017.

In 2012, Salesforce also leased 444,273 square feet in 350 Mission St., which is being built by Kilroy Realty Corp., and 235,733 square feet in Rincon Center.

The 50 Fremont potential purchase comes in a near-record year for San Francisco office sales. It's expected to be the second-biggest year for office purchases in the city's history, after 2007. About $5 billion worth of sales have already closed, according to CBRE, with about $6.7 billion expected in total this year.

Salesforce refused to comment on the deal. John Cornuke, who runs TIAA-CREF's asset management team, said "it's premature" to comment.

Cushman & Wakefield is representing Salesforce and CBRE is representing TIAA-CREF in the deal. 



Demand for S.F. commercial property is through the roof

By Andrew S. Ross

Updated 11:17 am, Monday, September 29, 2014

This month New York’s Rockefeller Group that owned One Market Plaza, sold 50 Beale Street, a 660,000-square-foot skyscraper south of Market, to New York’s Paramount Group for $395 million.

In the same week, Columbia Property Trust of Atlanta, which owns 221 Main St., a 16-story high-rise near the Transbay Transit Center, closed on its $309 million acquisition of the Hanford Building, the 33-story, 480,000-square-foot office tower at 650 California Street in the Financial District.

“We have established a significant presence in downtown San Francisco — a market that continues to be one of the best in the U.S.,” Columbia Property CEO Nelson Mills said in a statement. Meanwhile, Boston’s Pembroke Real Estate bought 100 California St. for $182 million.

“We have been looking in San Francisco for our first deal for 18 months,” David Lucey, Pembroke’s senior vice president, toldThe Registry, an online trade publication that keeps track of Bay Area commercial real estate.

Norway’s sovereign wealth fund is already here. Having acquired a 47.5 percent stake in the 38-story, 1 million-square-foot building at Market and Fremont streets, for approximately $200 million in January. The fund, controlled by Norges Bank Investment Management, picked up its second San Francisco property last month — a 49 percent interest in the 500,000-square-foot Foundry Square II complex on Howard and First streets in a joint venture with TIAA-CREF. Total price: $309 million.

“I’ve never seen space get absorbed this fast, rents go up this fast and whole buildings being pre-leased,” said Michael Covarrubias, chairman and CEO of San Francisco’s TMG Partners, whose recent developments include a $20 million, 200,000-square-foot office building under construction at Brannan and Fourth streets South of Market. TMG also has a 2 million-square-foot, mixed-use office, hotel and residential complex on tap at First and Mission streets, in the heart of the nearby Transbay center, some of whose developers ran into some rough waters with the city last week.

However that turns out, much is at stake, literal fortunes in fact, for investors and developers vested in the hottest part of the hottest real estate market in the country.

“It’s a really interesting time for San Francisco, there’s a lot of attention on this market,” said Caroline Rooney, managing director for capital markets and Northern California research at global real estate broker Cushman & Wakefield.

And getting increasingly frantic.

Strong leasing

Leasing activity and building occupancy are at record levels. In its third-quarter San Francisco report last week, Cushman counted “a mere” 13 Class A “Big Block” (minimum 50,000 square feet) office buildings available, compared with 31 at this time last year. Rents per square foot for the upper floors of San Francisco office towers are the highest in the world, having increased by 60 percent since March, according to Knight Frank, a London real estate consultancy. The city’s office rents in general will continue to grow by more than a third over the next five years — again topping the world — in Knight Frank’s estimation based on a survey of 15 major cities (including London and New York).

No guesses as to the chief reason: It’s the the city, says the firm, “with the most tech exposure.” Which means interested parties better move fast, as Cushman & Wakefield, having squired attendees at TechCrunch Disrupt SF on a bus tour of local tech companies this month, well knows.

“The competition for buildings is incredibly strong,” said Rooney. “Well-capitalized investors — foreign buyers, REITs (real estate investment trusts) and pension fund advisers are looking to take advantage of the rising rents and the tightening market and are aggressively buying properties here.”

Among the pension funds looking to take advantage is the California State Teachers' Retirement System, which just invested $200 million with Jamestown Premier Property Fund, an Atlanta real estate investment and management firm, which will focus the system’s money, according to an e-mail it sent to the Registry, “on coastal regions that have strong vibrant job markets.”

Like San Francisco, where Jamestown Premier Property owns Ghirardelli Square, an office office building at 799 Market St., whose tech tenants include Akamai Technologies, Prism Skylabs and, and Waterfront Plaza, a 300,000-square-foot complex on the Embarcadero it acquired for a reported $88 million last month. Two months earlier it sold the Pacific Place mixed-use complex — in which Intuit takes up all 200,000 square feet of office space, and other tenants include Levi’s, Old Navy, the Container Store and the Palomar Hotel — for $415 million to JPMorgan Asset Management.

Paramount, which owns, at last count, 16 other properties in high-priced Manhattan and Washington, is reportedly looking at a $2.7 billion IPO, the biggest ever for a REIT.

With the Rockefeller Group having sold 50 Beale Street to Parmount for $90 million more than it paid for the building just two years ago, the San Francisco will probably look good during Paramount’s road show.

“San Francisco is the best, strongest office market in the country at the moment,” said Robert Gadsden, portfolio manager atAlpine Woods Capital Investors, commenting on the IPO on Bloomberg last month.

Any worries?

With such endorsements, what could possibly go wrong? “Unless there’s some sort of black swan event, we see nothing on the horizon right now — nothing in the stock market or the stock economy — that gives us concern,” said Rooney.

“This is the most intense recovery with sustainability that I’ve ever seen,” said Covarrubias. “That doesn’t mean there won’t be washouts,” he added, referring to previous dot-com crashes and their impact.

“But there’s more long-term leasing, with companies not taking more space than they need, better, more seasoned management, and they’re making money.”

Vladimir Bosanac, co-founder and publisher of The Registry, is more cautious. “The levels of activity seem unprecedented. The feedback we've heard is focusing more on how long this will last instead of how much higher the prices will go. The prices are near or at peak levels,” he said.

“A big test will be if a company of significant size decides to return the real estate it does not need to the market. Some companies will not make it or they will be acquired. So if the market suddenly has half a million square feet of space available, it may send shock waves throughout the community.

Andrew S. Ross is a San Francisco Chronicle staff writer. E-mail: Blog: Twitter: @andrewsross



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