Square Mile Lends $106M on Downtown San Fran Office Building
By Mack Burke March 11, 2019 1:04 pm
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Square Mile Capital Management has provided $106.2 million to a joint venture between Invesco Real Estate and TMG Partners to acquire a Class-A office building in downtown San Francisco, according to an alert from Square Mile.
The proceeds fund the JV’s purchase of the two-story, 118,000-square-foot office asset at 600 Battery Street and to cover future expenditures, including leasing and capital improvements. The purchase closed in January.
CBRE (CBRE)’s Michael Walker and Brad Zampa, out of the firm’s San Francisco office, arranged the financing.
“San Francisco continues to be a target market for our firm and this asset represents an attractive, institutional-quality addition to our growing Bay Area portfolio,” Square Mile Capital Principal Eric Cohen said in a statement.
Built in 1938 and last renovated in 2000, the asset is located just north of the city’s Financial District, in the Jackson Square neighborhood. The area is known for hosting a range of venture capital firms and tech startups such as SwiftKey and 01 Advisors, which is led by former Twitter CEO Dick Costolo.
The continued expansion of tech firms in San Francisco sparked heated leasing activity in 2018 and has the Bay Area office market brimming with tenants competing for space, according to a fourth quarter report from CBRE. Seven transactions, totaling around 1.3 million square feet on deals of 100,000 square feet or more, was completed in the fourth quarter, bringing the annual volume of large leases to 4.4 million square feet; that’s above the 2017 peak of 3.9 million. For the San Francisco peninsula, its market-wide vacancy rate tumbled 60 basis points in the fourth quarter to 6.5 percent, from 7.1 percent the previous quarter.
Earlier this month, CO reported a massive $755 million CMBS debt package from Goldman Sachs and J.P. Morgan Chase, to refinance $496.4 million in previous debt on Hines Interests’ 48-story office tower at 101 California Street in the Financial District, just a few blocks away from 600 Battery Street. Hines and its partners—GIC, a Singaporean sovereign wealth fund, and another Asian government kept anonymous—will be able to cash out $221 million of equity with the refinancing, showcasing how sharply San Francisco commercial property values have risen. Morgan Stanley, Deutsche Bank and Bank of America subsidiary Merrill Lynch are among the 67 tenants housed in 101 California Street.
In December, San Francisco-based TMG partnered with New York-based private equity firm KKR to purchase another Bay Area office property, the 24-story, 521,177-square-foot asset at 1221 Broadway in Oakland, Calif. for $255 million. It was the second Oakland property the JV picked up in 2018.
A representative for Invesco did not immediately respond to a request for comment, nor did a spokesman for TMG Partners.
