SAN FRANCISCO-KBS Real Estate Investment Trust of Newport Beach, CA is buying 625 Second St., a 134,847-sf (net rentable) historic building in the SoMa (South of Market St.) submarket of Downtown San Francisco. The purchase price is $51 million plus closing costs. The seller is Rosenberg SOMA Investments III LLC. Bob Gilley and Steve Hermann of CB Richard Ellis had the disposition assignment.

Built in 1906 and renovated in 1999, the four-story brick-and-timber building is fully leased through November 2009 to LookSmart Ltd., an online media and technology company that has subleased portions of the building to third parties. The average annual rental rate over the remaining lease term is $2.92 per sf per month, according to an SEC filing regarding the transaction. The online media and technology company has two five-year renewal options.

The building’s renovation in 1999 included a full seismic retrofit of the building and new building systems. KBS acquisition officer Peter Mette tells that SoMa is one of the most sought-after locations for San Francisco’s technology companies and Second Street is one of the best locations within the submarket. In addition, he says 625 Second St. is one of only a few brick-and-timber office buildings in the submarket, which is the preferred construction style for many tenants.

Mette expects LookSmart will remain in the building beyond its remaining lease term, though probably in less space than it currently leases. In the long run, given the smaller nature of many SoMa tenants, he expects to have multiple tenants in the building. LookSmart’s annualized average lease rate for the building is approximately $35 per sf per year. The average asking lease rate in SoMa is $36.11 for class A space and $29 for class B product. For the year, rental rates increased 14.2% for class A space and 19.2% for class B space.

“We like what we are seeing in the market,” he says. “The demand side is so healthy.”

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