The 282,733-sf waterfront office building was completed in 2002 at 550 Terry Francois Blvd. The 12-year lease to Gap commences next year and runs through Oct. 2017, with fixed rental growth of 9.7% in 2007 and 8.8% in 2012.
The property is expected to deliver an initial yield of 6.8% (pre costs). The purchase is being funded with debt and the institutional placement of approximately 35 million common units, which was completed yesterday for total proceeds of $54 million. The offering was underwritten by Deutsche Bank AG.
Mission Bay is a 303-acre, master-planned mixed-use development that upon completion will include 6,000 units of housing; five million sf of office, research and development, and biotech/laboratory space; a 500-room hotel; landscaped parks; and retail amenities.
A significant portion of Mission Bay will be developed by the University of California at San Francisco, which is in the early stages of developing a $1.5-billion biomedical research and teaching center with 2.65 million sf of facilities. An additional 1.4 million sf is being developed by publicly traded life sciences REIT Alexandria Real Estate Equities. In August, locally headquartered fund sponsor Shorenstein Properties LLC closed on a 3.8-acre Mission Bay parcel entitled for 450,000 sf of commercial office and retail or laboratory space. Local brokers tell GlobeSt.com that entitled land in Mission Bay is going for upwards of $60 per sf of space that can be built.
Tishman Speyer Office Fund went public in December. Its other San Francisco assets include 595 Market Street, One Bush Street, 400 Castro and Bayside Towers.
On a per-sf basis, the deal for 550 Terry Francois Blvd. tops last month's deal for the 1.8-million-sf Bank of America Center on San Francisco's Nob Hill for $1.05 billion, or $583.33 per sf. New York-based Hudson Waterfront Associates is buying the building from a New York investment group that includes David Werner and Mark Karasick.
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