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NORTHERN CALIFORNIA NEWS
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Chinese Development Entity Pays $350 Mil for San Francisco Office Property

5/23/14

In what we’re told is the largest office buy in San Francisco since 2012, Chinese developer Kylli Inc has purchased 225 Bush St, an historic office building located in the city’s Central Business District. The 583k sf building, originally the headquarters of Standard Oil, was sold by Flynn Properties and GEM Realty Capital for $350 mil, or around $600/sf.

Kylli Inc, a Chinese development firm backed by Genzon Group and its principal, became the majority joint venture partner in the transaction. Flynn Properties will remain an investor in the new joint venture as well as the property manager and leasing agent for 225 Bush Street.

Flynn Properties and GEM Realty have a long history with 225 Bush, having owned it from 2000 to 2005 in partnership with Whitehall-Goldman Sachs. Then, from 2012 until the present, Flynn and GEM Realty owned the property with SEB ImmoInvest. GEM Realty and SEB sold their entire stakes as part of the sale transaction.

Built in 1922, 225 Bush Street is a 22-story, Class A Historic office building in San Francisco’s financial district, just north of Market Street. 225 Bush was 68 percent occupied at the time of the Flynn Properties and GEM Realty acquisition in 2012, and is currently 99 percent occupied, having been stabilized with numerous long-term leases.

“225 Bush Street has the basic real estate characteristics to effectively capture today’s burgeoning creative tenant demand base. The business plan we executed in our most recent ownership period included refreshing the amenity set while repositioning the property to showcase its high ceilings, natural architectural elements, and large floor plates of 26k sf, which uniquely support the open plan configurations of today’s higher density users,” Greg Flynn, President and CEO of Flynn Properties, said of the property.

Since their acquisition, Flynn Properties has secured more than 250k sf of new tenancy at the building, including companies such as Lithium Technologies, Groupon, Zillow, Twitch.tv, Meltwater, and RocketSpace, among others. Flynn added, “While the property has been stabilized, there remains significant value creation opportunities in the years ahead through further property enhancement and management of lease expiration, and we are excited to shepherd 225 Bush Street through its next phase while maintaining an ownership position.”

JLL identified Kylli Inc. as Flynn Properties’ new joint venture partner and provided support on this cross-border transaction. “We’ve seen increasing interest from Chinese buyers in trophy office buildings in global gateway cities for several years, with a focus on London and New York to date. This large, off-market transaction shows that Chinese investors are also aggressively pursuing Class A office buildings on the West Coast of the United States,” said Rob Hielscher, Managing Director leading the JLL Capital Markets team.





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