SKB Plans Repositioning of $95M Giftcenter

The San Francisco Giftcenter and Jewelrymart are housed in 888 Brannan St., a five-story building developed in 1918, and 850 Brannan St., a three-story building developed in 1987. Also included in the acquisition is 925 Bryant St., an adjacent one-story, 13,125-sf warehouse constructed in 1963 that will be used to create additional parking for tenants and their customers.

The Giftcenter and Jewelrymart buildings house nearly 300 tenants who use the facilities primarily to market their products directly to retailers and interior designers. The Jewelrymart portion is 99% leased and the Giftcenter portion is 69% leased.

Gooding observes that part of the upside in the Giftcenter lies in its "significant drop in daily traffic count" and "a stubborn vacancy rate, primarily because of facility decline and the lack of a strong marketing effort." He says that SKB believes that the property can be revitalized within a couple of years through a combination of taking care of deferred maintenance, completing significant structural and cosmetic upgrades and implementing an aggressive marketing plan.

Besides the rent from their showrooms, the Giftcenter buildings generate supplemental income from special events hosted at 888 Brannan St.'s five-story atrium, known as "the Pavilion" which will be completely renovated. The property also generates revenue from a billboard facing northbound traffic on US-101 and two rooftop cell phone towers, and SKB sees the prospect of additional supplemental income from the future parking contract at 925 Bryant St.

The Giftcenter complex is part of Showplace Square, a submarket of the SOMA that is the primary wholesale and interior design district servicing Northern California, Oregon and Northern Nevada. Showplace Square comprises more than 1.5 million sf of permanent showrooms, including 888 Brannan and 850 Brannan.

SKB's capital investment in the these two buildings is expected to not only spark renewed interest in the Giftcenter but also to increase Pavilion rental income and trade show revenue. Bob Scanlan, SKB's founder, chairman and CEO, points out that the showroom buildings have historically enjoyed long-term occupancy by their tenants due to the lack of competitive mart alternatives in the region and the critical synergy generated from housing the jewelry, gift and apparel wholesalers in one locale.

SKB acquired the Giftcenter and Jewelrymart from Pacific Union Development, which has owned and operated the buildings since 1976. Acquisition financing was provided by Wachovia Securities.