SAN FRANCISCO—Canada Pension Plan Investment Board and Hudson Pacific Properties Inc. have formed a joint venture through which CPPIB will purchase a 45% interest in 1455 Market St. from Hudson for $219.15 million before closing adjustments. Hudson, which acquired the property in December 2010, retains a 55% ownership stake along with General Partner status, and will continue to oversee management and leasing.
1455 Market Street is a 1-million-square-foot 22-story class-A office building that fronts an entire block along 11th Street in the City's Mid-Market neighborhood.
Hudson intends to use joint-venture proceeds pursuant to a like-kind exchange under the Internal Revenue Code Section 1031, which could include assets to be purchased from Blackstone Real Estate Partners V and VI as part of the Equity Office Properties' San Francisco Peninsula and Silicon Valley portfolio, according to a prepared release.
“At 1455 Market St., we've completed a major renovation and employed Hudson's aggressive leasing philosophy to capitalize on the submarket's rapidly improving fundamentals,” says Victor Coleman, Hudson's chairman and CEO. “Our team leased up the property's considerable vacancy to top-tier technology companies, which signed long-term leases and built out incredible workspaces.”
According to Coleman, “a joint venture with CPPIB unlocks a significant portion of the value created for shareholders to date, and lays a strong foundation for our firms to explore additional investment opportunities together.”
Coleman tells GlobeSt.com that “Since Hudson purchased 1455 Market St., the Mid-Market submarket has experienced a steady influx of leading technology companies desiring a central location, but lower cost alternative to the South of Market and Downtown neighborhoods. 1455 Market St. remains one of the few properties in Mid-Market with the very large floorplates ideal for these types of users."
1455 Market Street “marks our first direct investment in San Francisco office real estate, one of the best-performing US office markets and a key strategic market for CPPIB in that country,” says Peter Ballon, managing director and head of real estate investments Americas at CPPIB. “Mid-Market's favorable supply-demand dynamics, combined with the property's unique scale, layout and high-quality tenant mix, make 1455 Market St. an attractive long-term investment and a solid entry into the region's office sector. We look forward to building our relationship with Hudson, a well-aligned partner with a strong operating platform, as we expand our office portfolio on the West Coast.”
The property, formerly a critical data center for Bank of America, is a singular 1976 concrete building with a nine-story podium topped by a 14-story tower. 1455 Market St. now serves as the global headquarters for Uber and Square, both of which utilize the podium's 90,000-square-foot floorplates, as well as the tower, which offers sweeping views of the surrounding areas. Tenants also benefit from the property's convenient public transit and freeway access and abundant onsite parking. A long-planned repositioning and expansion of the ground-floor retail to target high-end retail and restaurant users will commence in early 2015.
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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.
