“An undisclosed U.S. private-equity firm bought the $40.8 million note on 250 Montgomery St. for about half its face value, according to industry sources. The sale was about 60 percent below the cost of the building, considering the previous price plus improvements.”
UPDATE: Details from J.K. Dineen:
A private equity fund controlled by an unidentified “domestic billionaire” has paid $19.9 million [$172 a square foot] for 250 Montgomery St., a 116,000-square-foot building on the corner of Pine Street that Lincoln Property Co. bought for $46 million in 2006. Technically, the buyer bought the note on the building, rather than the property itself. Under the sales agreement the lender on the property, Finance Realty Corp., will deed 250 Montgomery St. to the buyer in lieu of foreclosure. Lincoln Property was in default on the property.
The sale, at a price that represents about 25 percent of replacement cost, represents the first San Francisco office building sale in a year. It is also the first “round trip” transaction where a property went from being sold at the peak of the market to deed in lieu of foreclosure to a new owner. Colliers International Executive Vice President Tony Crossley said the price “gives the market a data point it has been lacking.”
“This gives a benchmark that other owners and lenders can point to as saying this is what real estate is now worth in San Francisco and can adjust to accordingly. People can now look at their own building and say with more certainty what it is worth. It takes the nonsense out of it,” he said.
Kind of like one of our apples. Apparently there were “a dozen offers with some well below $100 a square foot.” (That’s right, “Multiple Offers!”). All that being said, however, and as noted by a plugged-in reader yesterday:
The low sale price was partly driven by the building’s high vacancy rate — it is less than 50 percent occupied — as well as some deferred maintenance. Crossley estimated that it could cost an additional $70 a square foot — about $8 million — to make the building attractive to tenants.
∙ S.F. has recession’s 1st distressed office sale [SFGate]
∙ Sale shows San Francisco property values in free fall [San Francisco Business Times]
As we’ve talked about before, costs for a high rise building are a pretty slippery slope and a lot of the figures you hear thrown about have a lot of profit and holding costs included in them (think dealers cost on a car lot). Regardless, this is far from a perfect comp for the downtown market – it had a lot of vacancy that is going to take a long time to fill in this market. Good comp for vacant office buildings, not so good for mostly occupied buildings with decent tenants that should take them through the toughest part of the recession.
So the shoe is dropping on the Commercial RE ?
fun fun fun !
UPDATE: Additional details by J.K. Dineen have been added above.
This was Frank Lembi’s building. He sold it in late 2006 to Lincoln:
http://www.bizjournals.com/sanfrancisco/stories/2006/12/25/story11.html
Frank is still up and about but “The Lembi Group” has been sawed in half by the credit collapse.
Luke Brugnara’s 351 California property was foreclosed on 6/25/09. The holder of the 2nd deed of trust took it back.
Not True about Luke Brugnara. He still owns 351 Californai Street.
“A private equity fund controlled by an unidentified “domestic billionaire” ” that invests in real estate– that sounds like Michael Dell’s fund to me.
Sold today at the steps for $21,600,000.
I guess the “domestic billionaire” owns it now.