Situated at the base of Market Street overlooking the San Francisco Bay, One Market Plaza consists of the 42-story Spear Tower, the 27-story Steuart Tower and the 75 Howard St. parking garage. Morgan Stanley acquired the structures in April as part of a $2.4-billion, seven-property acquisition from Equity Office Properties, which has been selling off much of its portfolio market-by-market since being acquired by Blackstone Group earlier in the year.
One Market is 98% occupied. Tenants include Morgan Lewis & Bockius, Salesforce.com and Capital Group Cos. Several tenants have signed long term leases in the last 24 months. In September 2006, Ironwood Capital Management has signed a long-term lease for the 25th floor of Steuart Tower. In February 2006, Standard & Poor's renewed its lease for the 15th floor. In April 2005, the law firm of Sedgwick, Detert, Moran & Arnold signed a long-term lease for most of the fifth through eighth floors in the building.
Paramount Group president Albert Behler says in a prepared statement that the fund is investing in the asset because it is "among the most coveted corporate addresses in Northern California." Improvements will be made to the lobby and the retail areas and then rents will be brought inline with said improvements, a company representative tells GlobeSt.com.
Since 1991, Morgan Stanley Real Estate has acquired $121.5 billion of real estate assets worldwide and currently manages $55.6 billion in real estate assets on behalf of its clients. New York City based Paramount Group owns approximately 12 million sf of class A office buildings in Midtown and Downtown Manhattan as well as in Washington, DC, Rosslyn, VA and San Francisco.
Paramount represented itself in the transaction. Its legal counsel was Willkie Farr & Gallagher LLP in New York City and Mayer, Brown, Rowe & Maw LLP in Los Angeles. Eastdil Secured represented Morgan Stanley Real Estate as its sales broker and King & Spalding LLP provided legal counsel.
Along with One Market Plaza, Morgan Stanley acquired One Maritime Plaza (534,000 sf), 150 California St. (201,000 sf), 201 California St. (250,000 sf), 60 Spear St. (133,000 sf), 188 Embarcadero (aka Bayside Plaza, 88,000 sf), and Foundry Square I, a $145-million redevelopment that when complete will be the new headquarters of Barclays Global Investors. It also acquire One Post (421,000 sf) in partnership with McKesson, which keeps its headquarters in the building.
EOPs other assets in San Francisco's CBD include 201 Mission (489,000 sf), 580 California St. (318,000 sf) and the Ferry Building, a 240,000-sf development for which a $100-million rehab was completed in 2003. EOP is apparently holding onto the Ferry Building. The 201 Mission and 580 California assets are reportedly being sold to Prudential UK.
At the time of the initial acquisition, Morgan Stanley managing director Michael Franco described the deal as a "rare opportunity to acquire a significant portfolio of well-located assets in San Francisco's central business district, one of the most supply constrained office markets in the country. We believe that the occupancy characteristics of these high-quality office buildings coupled with our expectation for one of the fastest net operating income growth rates of any city in the nation position the portfolio for outperformance."
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