SAN FRANCISCO-Those who follow @GlobeStcom on Twitter and @GlobeStLIVE may have seen a post teasing the announcement yesterday, but GlobeSt.com has learned that Kilroy Realty Corp. has signed a long-term lease with cloud-computing giant salesforce.com for 100% of the real estate investment trust’s 27-story, LEED-platinum-designed office tower now under construction at 350 Mission St. KRC acquired the 350 Mission Street land site in October for $52 million, as GlobeSt.com previously posted.
The building, which has an estimated total development cost of approximately $250 million, and could increase by approximately $25 million if the additional entitlements are obtained, is in the heart of San Francisco’s South of Market financial district. Salesforce.com has agreed to lease up to approximately 445,000 square feet which includes approximately 50,000 square feet of space that is subject to KRC obtaining entitlements to add three stories to the building.
Allen Matkins partneras Tony Natsis and Mike McFadden served as legal counsel for Kilroy. Natsis tells GlobeSt.com that “The Salesforce lease was an extremely complex transaction given that we had to document how the building is going to be constructed to the tenants satisfaction while outlining how their premises will be built out in phases to coordinate with their move-in schedule.” All those specific details were required, he says, along with all the usual terms and conditions of a major 445,000-square-foot lease of a new landmark building. “We had to cram nine months of work into 30 days. Both parties rallied and worked cooperatively to make it happen.”
Christopher T. Roeder, international director of Jones Lang LaSalle represented Kilroy in the transaction. Dan Harvey, EVP of Cushman & Wakefield, represented the tenant. Legal counsel for Salesforce.com was completed by Paul Hastings‘ Stephen Berkman and Michael Kovaleski.
According to Kilroy, there has been “tremendous interest in the property from multiple companies in a variety of technology and non-technology-related industries.” Upon completion of the building, the company will own 2.6 million square feet of office space in SOMA that is currently 94% leased or committed.
“This is a remarkable outcome for a remarkable development in what is unquestionably one of our nation’s most important centers of innovation,” says John Kilroy Jr., president and chief executive officer of KRC, in a prepared statement. “Salesforce.com understood immediately what we were creating at 350 Mission St. and they didn’t waste any time securing the property for their dynamic workforce. We’re delighted to be partnering with them.”
Mayor Edwin M. Lee explained in a prepared statement that this is the largest San Francisco lease transaction of 2012 to date. “Salesforce.com’s major expansion downtown proves once again that investor confidence is driving San Francisco’s economic recovery,” he said.
Kilroy has been in the news lately. As GlobeSt.com just recently reported, the company ditched its industrial portfolio and two office projects for $355 million as part of the company’s capital-recycling strategy.