650 Townsend Street

Are you surprised that Zynga’s office building at 650 Townsend Street was recently estimated to be worth more than the company? You shouldn’t be, it has been that way for years. Or as we first reported in 2012: Zynga’s Business is Now Worth Less Than its Building.

Comments from “Plugged-In” Readers

  1. Posted by david m.

    so this building is worth over $500 million? i don’t really see that…

  2. Posted by DM

    Land and building.

  3. Posted by Frank C.

    Yahoo is another company with amazing real estate assets in silicon valley, although they don’t exceed the technical value of its business. In my opinion, the Yahoo business is worth only a few hundred million, but who am I, really, to make such judgments.

  4. Posted by confused renter

    700k sq ft building for only 2,000 employees?

    That place must feel like a ghost town.

    [Editor’s Note: Zynga has been leasing space in the building to other companies.]

    • Posted by Wai Yip Tung

      Practice Fusion is sharing the building. They too have had a round of layoffs recently.

    • Posted by thistimeisdifferent

      Just wait until Zynga flips the switch and starts monetizing those tens of millions of users.

  5. Posted by Notcom

    I guess this story has a certain novelty value, but ultimately it’s more like a “so what?” I’m sure there’s a mortgage on this, which means they don’t really own the building as much as they have a claim on some equity in it. (Is their equity in the building more than their “enterprise value”? THAT would be a story…but I doubt it’s true)

    And of course it’s more a story about the appreciation and absurd value of RE in SF than it is about how much Zynga is – or isn’t – worth.

    • Posted by Jake

      Zynga paid $228 million cash for the building. Their recent annual financials list property and equipment as ~$273 million, which most likely is the valuation of this building plus their misc equipment. I think this is the only RE they own. FWIW, they sublease nearly half the building.

      • Posted by Notcom

        Thanks Jake, so it IS a story…or it would be: the linked article was dated 4 days ago w/ a share price of $2.40ish and it closed today at $2.55. So if everyone has done their sums right, we have a market value of ~$2.1B, w/ $1.5 cash > enterprise value of $600M. The building was (allegedly) valued @ $540M, but it’s an estimate so let’s give SS and friends the benefit of the doubt and conclude they’re one in the same…so yes, ZNGA can apply for the symbol NADA (they’ll have to buy it from North American DataCom, but they might have $60M to spend).

      • Posted by SFRealist

        Interesting. So Zynga will eventually join the Chronicle as a real estate firm.

      • Posted by Offmylawn
        • Posted by SocketSite

          And two years later….Zynga agrees to buy SF headquarters for $228 million

          Let’s try to keep up.

          • Posted by Offmylawn

            Let’s try to be less condescending to your users who are just trying to be part of the conversation and may not have every detail about a failing tech company’s real estate strategy. Pretentious schmucks.

          • Posted by SocketSite

            To a certain degree you’re paying for the sins of others higher up in the thread. And perhaps we misinterpreted the tone of your comment. Regardless, we’ll own it and apologize; that was a perfectly fair response.

    • Posted by SocketSite

      As noted above, they paid cash for the building and don’t have a mortgage. And our comparison in 2012 was to Zynga’s enterprise value. So despite your doubts, THAT WAS A STORY, correct?

  6. Posted by jj

    What’s with plastering rudimentary high contrast logos all over office buildings in the city. This is purely a tech thing.

  7. Posted by anon2

    So I guess that means someone with deep pockets could buy up the the whole company, close it, sell off all the assets, and walk away with something like $50 million?

    Sounds extremely risky, since they would have to tie up a lot of loose ends, and find a buyer, and all for not a great rate of return, but it’s still fun to think about.

    • Posted by The Milkshake of Despair

      Or you could view this as Zynga being a strong buy target. Years ago a friend alerted me to the fact that US Steel had a market cap that was well below its book value. Though I don’t usually invest in old school blue chip stocks, I bought up some X and lo and behold it quadrupled in value in a couple of years and beat all of my tech stocks.

      • Posted by jack

        That’s interesting that your friend and you were more alert than the algo programs, traders, and analysts. Gets one to question about the efficiency and intelligence of the capital market.

        • Posted by The Milkshake of Despair

          Yeah, I doubt a couple of armchair investors were able to outwit Wall Street. My theory is that most of US Steel’s book value is in the form of industrial real estate. Much of that property is horribly contaminated. There could have been fear of a large environmental mitigation liability that could cancel out much of the property value. Glad it turned out well.

  8. Posted by Offmylawn

    But zynga doesn’t own this building, it’s a 20 year lease I thought?

  9. Posted by rainman

    I think you have your math wrong. As per their first quarter results there current market value is $2.2 billion and have about $700 million in net tangible assets before taking into account their property and equipment. Assuming the building is worth $500 million then the core business is still valued at $1 billion.

    Note that they have $700 million of intangible assets and goodwill that I excluded on their books and have repurchased $200 million of their own stock over the past 6 months.

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