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SAN FRANCISCO-KPMG has leased 90,000-sf here at 55 Second St., a 26-story, 379,000-sf office building in the city’s Financial District that is owned by a partnership of Cousins Properties Inc. and Myers Development Co, which developed the property. The audit and tax firm will relocate to the building late next year from Boston Properties’ Embarcadero Three office building, backfilling more than half of the space vacated by Cable & Wireless Internet Services Inc., which in February agreed to a $20-million lease termination fee.

The lease brings 55 Second St. to 78% leased and will change its name to the KPMG Building. The parties involved did not release the negotiated rental rate, but local brokers tell GlobeSt.com that Cousins is quoting lease rates in the low- to mid-$30s per sf per year. CB Richard Ellis broker Philip Tippett, who represented Cousins and Myers in the transaction, tells GlobeSt.com there is now 67,000 sf available in the building, all of which is former Cable & Wireless space. Erich Sengelmann of Jones Lang LaSalle led the lease negotiations for KPMG.

Cousins Properties office division president Craig Jones says the KPMG lease backfills a large portion of the Cable & Wireless space “more quickly than anticipated.” Myers EVP Todd Saunders says 55 Second is benefiting from “the fact that the traditional lines between the north and south financial districts are gone and that there continues to be a steady flight to quality in the marketplace.”

In its November quarterly filing, Cousins Properties reported that rental revenues from 55 Second St., decreased by $1.9 million in the third quarter of 2003 but remained $17.2 million in the black through the first nine months of the year thanks to the Cable & Wireless termination fee in February. “The San Francisco market continues to be a difficult leasing market, and there is no guarantee that the (Cable & Wireless space at 55 Second St.) will be re-leased in the near future,” states Cousins in the report.

Additionally, the company reported that rental revenues at its other San Francisco property, 101 Second St., decreased approximately $1.1 million and $3.8 million during the three and nine month 2003 periods, respectively, as its average economic occupancy for the nine month periods decreased from 89% in 2002 to 83% in 2003.

In afternoon trading Monday, shares of Cousins Properties stock were trading at $29.82, up $0.13 on the day. The share price is $0.68 off its 52-week high of $30.50, set on Dec. 2, 2003.

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