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September 13, 2017  

JP Morgan Selling SF Complex to Spanish Firm

Spanish investment shop Ponte Gadea has struck a deal to buy the landmark Pacific Place complex in San Francisco from J.P. Morgan Asset Management for about $475 million.

The 436,000-square-foot property, at 12 & 22 Fourth Street in the Union Square neighborhood, encompasses a 192-room hotel, 202,000 sf of office space and 129,000 sf of retail space. Eastdil Secured is brokering the sale.

The deal will mark Ponte Gadea’s second major purchase in San Francisco within a year. In December, the company acquired a 97,000-sf retail property — the Tiffany Building, at 360 Post Street — for $135 million, or almost $1,400/sf. Cushman & Wakefield advised the seller, a Greenstone Realty partnership.

Pacific Place, which is fully leased, encompasses two buildings between Mission and Market Streets in the tony South of Market area. A nine-story building at 12 Fourth Street consists of the 192-unit Hotel Zelos — leased to Pebblebrook Hotel of Bethesda, Md., until 2097 — and 100,000 sf of retail space. A 16-story building at 22 Fourth Street has 202,000 sf of office space and 29,000 sf of retail space.

Software company Intuit has a lease on all of the office space until 2025. The retail tenants include Old Navy (59,000 sf at 12 Fourth Street until 2023) and Container Store (the 29,000 sf of retail space at 22 Fourth Street). The office and retail space have a weighted average remaining lease term of about seven years.

J.P. Morgan acquired the property in 2014 for $415 million and then pumped $20 million into upgrades.

San Francisco continues to produce big-ticket sales even though many pros believe the current real estate cycle is near the peak. For example, Blackstone acquired a 49% stake in the 596,000-sf office building at 45 Fremont Street from MetLife in June for $203.4 million, or $696/sf.