SAN FRANCISCO-Vornado Realty Trust has completed a $600-million refinancing of 555 California St. The proceeds of the new loan and $45 million of existing cash were used to repay the existing loan and closing costs.
The three-building office complex aggregating 1.8 million square feet in San Francisco’s financial district, is known as the Bank of America Center. Vornado owns a 70% controlling interest.
The 10-year loan bears interest at 5.10%. The loan amortizes based on a 30-year schedule beginning in the 4th year.
As GlobeSt.com previously reported, Vornado purchased the 70% interest in 2007 as part of a portfolio of office building buys on both the East and West coasts for $1.8 billion. At the time, the building was 94% occupied. At the time, the purchase price consisted of $1.01 billion in cash and $797 million in existing debt. Vornado executives estimated a price of $575 per square foot for 555 California St., and at that rate, the San Francisco building price was $1.035 billion, putting Vornado’s 70% share at $724.5 million.
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According to Vornado’s website, approximately 106,754 square feet is available in total on six different floors of the building, designed by Pietro Belluschi and Skidmore, Owings & Merrill and Wurster, Bernardi & Emmons. Current tenants include: Bank of America; Dodge & Cox; Goldman Sachs; Fenwick & West; Kirkland & Ellis; McKinsey and Co.; Morgan Stanley; Sidley Austin LLP; UBS; and Cox, Castle & Nicholson. On the retail side, tenants include: Starbucks Coffee; Bank of America; FedEx; Bay Club; Dress Barn; and Knoll.
According to a Q2 report from Grubb & Ellis, the San Francisco office market posted a strong first half in 2011, resulting in almost one million square feet of net positive absorption. Technology companies dominated market activity as rapidly expanding tech tenants competed for creative space and pushed rents higher, says the report. Employment growth in San Francisco continues to outpace the rest of the US. “San Francisco’s unemployment rate dropped sharply to 8.4 percent, the lowest rate since April 2010,” says the report. “Although tech companies have fueled job growth and the resulting commercial real estate activity, market optimism has begun to spread to financial services and business sectors.”
According to the report, overall market fundamentals are strong. “Vacancy dropped 40 basis points to 16.1%, the lowest level in five quarters. Tenants have snatched up sublease space, pushing available sublease space down to pre-2001 levels. San Francisco experienced rent growth of almost 5% with average asking rents rising to $36.89 and $30.25 for class A and class B, respectively. Tenants have lost some negotiating leverage and must act quickly, particularly in the South of Market area. The market has begun a shift towards a landlord favored market as rents go up, but landlords continue to offer concessions in the sensitive economic environment.”
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
