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9/10/14
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In news of a large office investment buy in San Francisco, Columbia Property Trust has acquired 650 California Street, a 33-story, 478.4k sf Class A office tower in the city’s Financial District. The high-rise was purchased from Tishman Speyer and Prudential Real Estate Investors for $309 mil ($645/sf).
The LEED Gold-certified property underwent a $14.2 mil renovation over the past two years that included the addition of an onsite parking garage and a comprehensive lobby renovation, to accompany the building’s large, highly-efficient floor plates and amenities such as fitness and conference centers and bicycle parking. The property boasts desirable panoramic bay views.
The purchase price includes the company’s assumption of a $130 mil loan bearing interest at 3.60% and maturing July 2019. The $179 mil cash portion of the purchase price was funded with a combination of borrowings under our unsecured credit facility and cash on hand. The acquisition is expected to increase Columbia’s leverage (based on debt to gross real estate assets) from 31% at the end of the second quarter to approximately 32%. Currently 88% leased, 650 California Street is expected to have first-year in-place net operating income (NOI) of approximately $11 mil.
Asset management and leasing of the property will be overseen by Columbia’s Western Region team, which is led by David Dowdney, Senior Vice President – Western Region. To support its growing presence in the region, the firm recently expanded its San Francisco-based team with the addition of Michael Schmidt, who brings over 13 years of portfolio and asset management experience in major West Coast markets and will have oversight of this and Columbia’s other West Coast assets.
“We have established a significant presence in downtown San Francisco — a market that continues to be one of the best in the U.S., and we continue to achieve strong leasing results at our nearby asset, 221 Main Street,” said Nelson Mills, President and CEO of Columbia Property Trust. “650 California Street is a compelling opportunity to acquire one of the premier assets in this market at a discount to replacement cost. With more than half the current tenancy rolling in the next three years and in-place rents significantly below current market levels, we expect to employ the expertise of our expanded local team to increase net operating income at this property over the next three years.
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