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Business Times
01-06-2025
- Business
- Business Times
San Francisco office towers sell in City's biggest deal since 2022
[SAN FRANCISCO] A pair of San Francisco towers was sold on Friday in the highest-priced deal for the city's battered office market in three years. The skyscrapers, known as Market Center, were acquired by restaurant franchise magnate Greg Flynn and investment firm DRA Advisors, who took over a distressed US$417 million mortgage at a discount. They paid about US$177 million, according to a person with knowledge of the matter, who asked not to be named discussing private figures. The transaction marks the second nine-figure office deal in San Francisco this year and the largest since 2022, according to brokerage CBRE Group. After being hit hard by vacancies following the pandemic, the city has started to see renewed interest from investors looking to score bargains and capitalise on the tech hub's artificial intelligence boom. Still, the sale represents a massive drop in value for Market Center, which Paramount Group and a partner purchased from Blackstone for US$722 million in 2019. Four years later, Paramount wrote its value down to zero, citing the 'tough leasing environment and upcoming debt maturities' in a 2024 earnings call. The company stopped making payments on the loan that summer and defaulted on the mortgage in January, according to its annual report. Flynn and DRA took the loan over in what's known as a deed in lieu of foreclosure. 'We are buying it at a price that allows us to invest heavily to take it from good to really great,' Flynn said in an interview. A NEWSLETTER FOR YOU Tuesday, 12 pm Property Insights Get an exclusive analysis of real estate and property news in Singapore and beyond. Sign Up Sign Up The two office towers, the 22-story 555 Market St and 40-story 575 Market St, were 44 per cent leased as of April. Flynn said he is planning an extensive build out to attract tenants, including an activity centre called 'The Breakroom.' The plans include a full-sized basketball court with a climbing wall on the first floor. On the second floor, he'll add a gym with changing room and studios for workout classes, along with multiple pickleball courts and a big golf suite. While many of San Francisco's recent office renovations, like the Transamerica Pyramid, focused on luxury amenities, Flynn wants to take the approach of making it the 'funnest and most activated building' in an appeal to tenants with younger workers. Tenants will also be given generous improvement allowances to customise their spaces, he said. 'San Francisco has never seen anything like this,' Flynn said. 'New York is way ahead of San Francisco in amenities.' Along with his restaurant franchise business, which operates more than 2,900 Pizza Huts, Panera Breads and other restaurants around the world, Flynn has expanded his real estate portfolio through his Flynn Group. He bought the 103-year-old Huntington Hotel in 2023 for about 70 per cent of its assessed value and last year purchased 631 Howard St, an office building in the tech-heavy South of Market area. While office vacancies remain near a record, San Francisco has seen a recent uptick in leasing activity in the amid demand from AI companies and tech giants recommitting to staying in San Francisco. CBRE forecasts that AI companies may take an additional 17 million to 21 million square feet of office space in San Francisco by 2030 – an expansion that would cut its office vacancy rate in half. BLOOMBERG
Bloomberg
30-05-2025
- Business
- Bloomberg
San Francisco Office Towers Sell in City's Biggest Deal Since 2022
A pair of San Francisco towers sold Friday in the highest-priced deal for the city's battered office market in three years. The skyscrapers, known as Market Center, were acquired by restaurant franchise magnate Greg Flynn and investment firm DRA Advisors, who took over a distressed $417 million mortgage at a discount. They paid about $177 million, according to a person with knowledge of the matter, who asked not to be named discussing private figures.
