400 Montgomery is at the Epicenter of Where Millennials Gather
The historic 85,580-square-foot office building constructed in 1901 at the corner of California and Montgomery streets in the North Financial District was recently purchased for $78.5 million.
SAN FRANCISCO—Intercontinental Real Estate Corporation and Harvest Properties recently acquired and recapitalized 400 Montgomery, a historic 85,580-square-foot office building at the corner of California and Montgomery streets in the North Financial District. The purchase price was reportedly $78.5 million.
With the acquisition of 400 Montgomery, Intercontinental continues to grow its Bay Area portfolio, which includes 12 assets totaling approximately 2.3 million square feet of office and industrial space, along with 1,400 multifamily units. This is the second joint venture with Harvest, which acquired 60 South Market, a 234,000-square-foot class-A office tower in downtown San Jose in 2016.
“The North Financial District has been a major beneficiary of San Francisco’s growing innovation-based economy,” says Allen Logue, Intercontinental director of acquisitions. “Recent commitments from large tech firms continue to validate the North Financial District as a target location for San Francisco’s fastest growing companies, and we believe that 400 Montgomery is well positioned to benefit from that robust demand.”
Moreover, the North Financial District is a submarket that appeals to the Millennial workforce driving many of the region’s most innovative companies, according to Jessica Levin, Intercontinental’s senior director of acquisitions.
“The Financial District’s immediate access to San Francisco’s best amenities and public transportation has created an attractive 24/7 live, work play urban environment,” she said.
Harvest Properties acquired the building in 2016 for $49.78 million in a joint venture with global investment manager Nuveen, which exits the investment. Harvest will continue as operating partner in the new joint venture with Intercontinental, according to Harvest Properties partner Griff King.
“After successfully improving the historically rich asset while preserving the character of the building to meet tenants’ current demands, Harvest Properties looks forward to staying involved and continuing the success of the project,” said King.
During the past three years, the building constructed in 1901 has benefited from a multi-million-dollar capital improvement program that included upgraded building systems and infrastructure, a new lobby, refreshed common areas and restrooms, as well as a complete facade restoration to preserve the character of the building’s renaissance/baroque architecture and ornamentation. More than half of the space has been redesigned as creative office space offering 13-foot open ceiling heights, polished concrete floors and operable windows.
The building is currently 91% occupied to a diverse mix of technology, media and banking tenants including Hexagone, Clearmetal, WE Communications, Lightsource Renewable Energy, Bank of Guam and Sterling Bank & Trust.
“Harvest was integral in stabilizing the property’s near-term expirations and reconfiguring the rent roll for maximum efficiency, allowing us to complete our fifth successful creative conversion project in San Francisco,” King tells GlobeSt.com.
JLL’s Rob Hielscher, Michel Seifer, Erik Hanson, Cheri Pierce, Kristina Wollan and Michael Manas acted as exclusive advisors on the transaction.
The San Francisco investment market experienced strong activity during the second quarter of 2019 with nine buildings transacting for an aggregate investment volume of more than $1.2 billion, according to a second quarter report by Colliers International. The largest sale transaction of the second quarter was 123 Mission St. purchased for $397 million or $1,149 per square foot by Main Mission LLC. Another notable transaction was the sale of 945 Bryant St., a class-B office building located in SOMA which closed for $41.95 million or $1,005 per square foot.
If the properties currently under contract and on the market close by year-end, the total 2019 total investment volume is expected to surpass $6 billion, nearly double the investment volume in 2017 and 2018 which experienced $3.6 billion and $3.7 billion respectively, says the Colliers report.