(For more retail coverage, click GlobeSt.com/RETAIL.)
SAN FRANCISCO-Locally headquartered TMG Partners has acquired two adjacent buildings on Howard Street from a fund of ING Clarion Partners for $46 million. Located at 875 Howard and 899 Howard, the low-rise buildings known as Soma Square were built in the first half of the 20th Century and renovated in 2000.
The 153,140-sf four-story building at 875 Howard is leased to the California Academy of Science. The three-story, 147,571-sf building 899 Howard houses a Burlington Coat Factory store. The retailer is on a flat, long-term lease that runs through 2013, not including two five-year options.
The selling broker, Ed Suharski of Grubb & Ellis tells GlobeSt.com that the Academy of Science will vacate the premises in approximately two years, shortly after its new home in Golden Gate Park is completed. That is good news for TMG, he says, because the Academy of Science signed its lease in 2003, which was "the absolute bottom of the market."
As a result, what appears to be a sub-4% cap rate based on in-place income should spike by year five, when a new tenant is expected to be up and running in the space at a much higher rental rate. At that point, TMG would likely put the building back on the market in order to capture the increased value, according to local brokers.
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