SAN FRANCISCO-GlobeSt.com has exclusively learned that 255 California St., an office building at the corner of California and Battery streets in downtown San Francisco has changed hands. While sources close to the deal could not divulge pricing information, an unidentified source not involved in the deal tells us that a fund advised by Prudential Real Estate Investors paid $76 million for the 183,000-square-foot asset.
The seller, Highridge Partners and Montgomery Advisors, sold the class A mid-rise office at a time when the level of interest was high, according to Sean Sullivan, and EVP with CBRE, who represented the seller along with vice chairman Russell Ingrum, senior vice president Ken White, vice chairman Kevin Shannon, and director Tyler Meyerdirk.
“We weren’t surprised to see a high level of investor interest for 255 California Street,” says Sullivan. “Highridge Partners and Montgomery Advisors did a great job of renovating and repositioning the asset, and in subsequently increasing occupancy to 82%, really validating the overall strategy they had envisioned.”
Fortunately, he continues, “there is still plenty of room for growth due to the remaining lease-up and lease rollover opportunity within the country’s hottest leasing market.” According to CBRE research, the San Francisco office market has experienced nearly 3.2 million square feet of positive net absorption in the last 18 months. “Class A CBD rents have increased 36.7% since the beginning of 2011, and are forecast to grow another 33% by 2017.”
According to Sullivan, “The market for low and mid-rise space has been the beneficiary of the strongest tenant demand and rental rate growth. This has been led by the surging requirements of technology tenants who prefer efficient space close to public transit.”
255 California St. was built in 1959, designed by Skidmore, Owings and Merrill, and significantly renovated in 2011 and 2012. Approximately $7.9 million was invested in a redesigned entryway and main building lobby, seismic retrofit, renovated 2nd level garden terrace and other common area upgrades.