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REA
October 23, 2019  

DWS Joining Pension as Partner in SF Tower

DWS Group has agreed to purchase a roughly 50% stake in a San Francisco office tower valued at about $1.2 billion.

The seller, New York State Teachers, is retaining the remaining interest in the 1.1 million-square-foot skyscraper, at 525 Market Street in the Financial District. DWS, formerly known as Deutsche Asset Management, would pay about $600 million for its half-share, valuing the space at $1,090/sf.

Eastdil Secured is brokering the transaction for New York State Teachers, which owns the building through a separate account managed by J.P. Morgan Asset Management. The pension fund took offers on both partial and full interests in the property.

The 38-story building is 97% leased. Amazon expanded its footprint to 319,000 sf last year. Other tenants include Sephora, Wells Fargo, Willis Insurance and Zurich Insurance, according to the property website.

When it put the building on the block in August, New York State Teachers said it was overweighted on West Coast properties and was looking to reduce its holdings in the region. The Registry of San Francisco, citing board meeting documents, reported that the pension fund’s Pacific region holdings made up 33.7% of its $9.8 billion portfolio of directly owned real estate, and it wanted to reduce that to 25%. It was also seeking to reduce the office concentration of its portfolio to 30% from 33.8%.

The building at 525 Market Street was developed in 1973 by Tishman Speyer of New York. Nomura took control of it in September 1997 by exercising a clause in a restructured mortgage. New York State Teachers bought the building the following year for $240 million. It completed renovations to the lobby and plaza in 2016.