SAN FRANCISCO-Leasing is strong at 71 Stevenson. The 323,276-sf South Financial District office building that traded hands this time last year lost half its tenants earlier this year, taking availability to approximately 180,000 sf. Now, after signed leases and offers tendered by prospective tenants, the building is on the verge of once again being more than 90% occupied.

The most recent deal was with Regus Group. The publicly traded executive suites company leased the 18,000-sf fourth floor of the building for 10 years. Prior to that, Bovis Lend lease took down close to a full floor. VMWare, which held a billion-dollar IPO earlier this month, expanded within the building; and Bare Escentuals Inc., the publicly held cosmetics company, also expanded, taking another floor-and-a-half.

Anton Qui, the leasing agent for the building, in large part attributed the strong leasing to the large portfolio deals that have transacted recently at top-of-market prices, forcing the new owners to jack up its asking rates on available space. “A lot of tenants are looking for other options and our strategy has been to undercut those rates by 10% to 20% in trade for credit tenants,” he tells

The strategy has paid off. Qui says not only is the lease-up ahead of schedule but also the lease rates at which deals are being signed are higher than the new owners’ initial expectation, which was for lease rates in the mid-$30s on a full service basis. “We are well ahead of expectations,” he says.

The building owner is Forward One, a Burlingame, CA-based LLC whose parent company is based in Taiwan. In September 2006, Forward One paid $105 million cash for the building in order to complete an IRS 1031 exchange that began with the sale of a property in Hawaii.

At the time of the sale, the building was 94% occupied. Earlier this year, federal government agencies occupying approximately half of the building vacated in order to occupy the new federal office building at Seventh and Mission streets. The federal agencies were paying about $29 per sf for the space.

Forward One acquired the building from Embarcadero Capital Partners, which acquired the building in late 2004 for approximately $62.5 million. The property was about 76% leased at that time. The seller was a partnership of Lehman Bros. and Michigan developer Michael Kojaian, which acquired the building in late 2000 for about $85 million, according to published reports at that time.

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