SAN FRANCISCO-A 140,000-sf office building at 250 Brannan St. is under contract to be acquired by real estate mogul R. Donahue Peebles, who plans to convert the well-located South of Market property to condominiums. Peebles tells his all-in cost will be about $50 million, and the expected gross sell-out could hit $100 million.

The property consists of the fully renovated 1907 brick and timber Gallo Building and, added in 2001, 40,000-sf of new construction and a 100-slip parking garage. The three-story office building has been vacant for the past couple of years, ever since its dot-com tenant went under. The first two floors are fully built out. The third floor is in shell condition. The seller is Zapolski + Rudd LLC, an investment and development company with offices in Durham, NC and Napa, CA. It acquired the property vacant in October 2004 for $14 million.

The building sits directly across the street from a luxury condo project called Brannan, where re-sales are reportedly closing at $1,400- to $1,500 per sf. Peebles plan for 250 Brannan calls for dividing the building into 45 “ultra-luxury, Soho-style” lofts and multilevel townhouses ranging in size from 1,000- to 3,000 sf, which would provide a sellable area of between 75,000 sf and 85,000 sf. Given the strong demand, Peebles says he won’t be doing any presales; he expects units to sell for “well above $1,000 per sf.” Amenities include full access touchpad systems; wireless Internet; custom millwork; European-style kitchens with commercial grade gas ranges; a wine cellar; oversized whirlpool bathtubs; and private media rooms in the townhouse units. Other perks include full-time couture concierge services, 24-hour security, valet, and doorman. The renovation is expected to start this fall, with the first units being ready for occupancy 12 months later. Capital out of Chicago is providing equity for the deal and Fremont Investment & Loan is providing debt.

The conversion will be the inaugural project of Peebles newest subsidiary, Peebles Urban, which will focus on infill projects where it can add its ultra-luxury stamp to the market. Peebles says he plans to open an office in San Francisco later this year. He plans to staff it with six people and build from there, “picking up project executives as we pick up projects.”Peebles has preserved other national landmarks including the Royal Palm Hotel, one of South Beach’s largest hotels, and the Residences at The Bath Club, which opened this month in Miami Beach. This fall, Peebles will begin a $40-million renovation and conversion of downtown Detroit’s historic 1920′s Lafayette Building into luxury condominiums. In the Bay Area, although not a conversion, the company is in the pre-development stage for an 87-acre development fronting the Pacific Ocean in Pacifica, CA.

The Bath Club is the reason Peebles will be waiting as long as possible to begin selling his units. Pre-sales were a lender requirement there, he says, and it cost him tens of millions of dollars. “Save for the two penthouse units we held back, we sold out, and there have already been 30 re-sales for an average profit exceeding $1 million,” he says. “We left $30 million on the table.”

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