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REA
June 07, 2017  

Blackstone Snags 49% Interest in SF Tower

Blackstone has agreed to buy MetLife Real Estate Investors’ 49% stake in the office tower at 45 Fremont Street in San Francisco.

The purchase price of about $233 million values the 596,000-square-foot property at roughly $475 million, or almost $800/sf. Eastdil Secured is brokering the sale for MetLife, whose partner, Shorenstein Properties of San Francisco, is retaining its 51% interest.

The 34-story building is 99.5% leased, according to CoStar. Wells Fargo occupies more than 250,000 sf. Other tenants include the California Department of Insurance (62,000 sf) and the California Coastal Commission (28,000 sf).

The aluminum-and-glass property is at Mission Street, just south of Market Street in the South Financial District. It used to be known as the Bechtel Building, because it absorbed tenant spillover from a building across the street, at 50 Beal Street, where engineering giant Bechtel has its headquarters.

The building was constructed in 1978 and has been upgraded regularly, including improvements to the lobby in recent years. It has a LEED gold designation. There is an adjacent landscaped plaza with a refurbished Bechtel train car.

San Francisco’s office market has been a favorite of investors since the recovery began in 2010. Job growth, especially at technology companies, continues to drive demand for office space — especially at newer buildings with attractive amenities.

The strong fundamentals are spurring development. Some 3.6 million sf of offices are slated to hit the market this year. Marcus & Millichap projects that the added supply will drive down the city’s average occupancy rate by 50 bp, to 89.5%.