ASB Real Estate Investments has listed a 117,200-square-foot office building in San Francisco’s Mid-Market for a reported $12 million — or 80 percent less than it traded for a decade ago.
The Washington, D.C.-based investor has put the six-story headquarters for Zendesk up for sale at 989 Market Street, the San Francisco Business Times reported, citing a brochure from JLL.
ASB bought the building in 2014 for $61.3 million, or $523 per square foot.
While the JLL brochure doesn’t include an asking price, the firm seeks around $12 million, or $102 per square foot, an unidentified source familiar with San Francisco’s office market told the Business Times.
The property, built in 1907 and renovated in 1991, is 52 percent leased.
Tenants include Blick Art Materials, which occupies a storefront on the ground floor; and Zendesk, which has had its headquarters there since 2011, but is about to sublease 40,000 square feet at Meta’s former offices at 181 Fremont Street, according to the Business Times.
The building’s sale for a reported discount means ASB may be poised to take a double bath on pending real estate deals.
In February, the investor was poised to sell a 187,000-square-foot office building at 795 Folsom Street in South of Market for a reported $52.4 million, or $275 per square foot — less than half its 2013 price.
Mid-Market is “a location of choice” for tech companies such as Zendesk, ASB CEO Robert Bellinger said of the submarket in 2014.
But after the pandemic, Mid-Market has experienced soaring office vacancies, declining foot traffic and open-air drug use. With no recent trades in the neighborhood, a sale of 989 Market could set a baseline for pricing in the area.
Early this year, locally based TMG Partners was in talks to buy a 93,000-square-foot office building at 731 Market Street for between $160 and $180 per square foot, according to the Business Times. But the deal is held up by complications from owner Jamestown’s delinquent loan on the property.
Last month, Hudson Pacific Properties agreed to give the City of San Francisco a cut-rate deal for up to 1 million square feet of offices at a 22-story office building at 1455 Market Street in Mid-Market.
— Dana Bartholomew
The biggest office sale in Washington, D.C. in 18 months is also emblematic of how far the market has fallen since the pandemic.
PRP Real Estate Investment purchased Market Square for $323 million, the Commercial Observer reported. That’s roughly the loan amount on the office complex, a two-building property at 701 and 801 Pennsylvania Avenue NW.
The office portion of the 690,000-square-foot property is 84 percent leased, according to PRP CEO Paul Dougherty. Tenants include the government affairs offices of Visa, Pepsi, Cigna, Prudential and UnitedHealthcare.
The seller, a partnership between Blackstone and Columbia Property Trust — owned by PIMCO — is likely disappointed in its return. Columbia bought the property in 2011 for $611 million, or $905 per square foot, which was a record for the market at the time. This sale barely comes in at half that mark: $464 per square foot.
Even so, the deal is the largest in the market since the summer of 2022.
Last year’s largest sale was Kaiser Permanente’s $198 million acquisition of Station Place III. Prior to that, the market’s benchmark was Japanese investor Mori Trust Co.’s $531 million purchase of 601 Massachusetts Ave. NW in August 2022, according to Bisnow.
Read more
Blackstone purchased a 49 percent stake in the Market Square complex in 2015 at a $595 million valuation. The partners retired $325 million in debt from the Pacific Life Insurance Company; the lender provided a $247.5 million loan to PRP for its purchase, an acquisition made in partnership with an affiliate of Morning Calm Management.
Dougherty predicted the deal would “reset values” in the market. Meanwhile, for Blackstone, it’s another exit from the U.S. office market.
PRP will reposition the 40,000 square feet of retail space in the complex, which has mostly been vacant since the onset of the pandemic. It also plans to upgrade the complex’s lobbies and lease up the remaining vacant space.
Miami-Dade County Aviation Department landed a Park ‘N Fly and car rental facility near Miami International Airport.
The aviation department paid $45 million for the 198,500-square-foot, two-building facility spanning 11.5 acres at 2800 Northwest 39th Avenue in unincorporated Miami-Dade, east of the airport, according to records. An entity led by Michael and Ronald Simkins was the seller.
Alan Leon of Keller Williams and David Kreps brokered the off-market deal.
Although the county bought the property to accommodate potential future MIA growth, Miami-Dade will keep the Park ‘N Fly and car rental business on the site for now. According to a November staff memo, the county will continue to lease 172,000 square feet to Budget Rent a Car until May for $41,700 a month. The county has the option to renew the lease. Park ‘N Fly will continue managing its property under a five-year agreement with two one-year extension options. The county will pay Park ‘N Fly a $40,000 management fee and 5 percent of revenue.
The Miami-Dade Airport and Economic Development Committee approved the purchase in October. Commissioners blessed the deal in November.
In the long term, MIA needs the property to “accommodate the airport’s terminal support facility needs as part of” future growth, the memo says, although it doesn’t elaborate.
The property is separated from the airport by Le Jeune Road, meaning the county is more likely to use the buildings for ancillary purposes such as parking rather than expanding MIA terminals that are across the street.
Miami-Dade has been trying to beef up its real estate portfolio in recent months, but another planned purchase didn’t pan out. In December, Mayor Daniella Levine Cava deferred from a commission agenda a controversial proposal for the county to pay $365 million for office buildings where Miami-Dade departments can consolidate.
Levine-Cava said her administration will continue negotiations, following concerns that the price was $133 million more than market value. The county wants to buy the Flagler Corporate Center, a mostly vacant complex at 9250 West Flagler Street in Fontainebleau, as well as the Assurant Center at 11222 Quail Roost Drive in South Miami Heights.