Posted on 06/06/2023 3:39:47 PM PDT by dynachrome
The burning question arose over the past two years what these largely empty older office towers in San Francisco are worth.
The market had frozen over. There were no transactions because no one knew what anything was worth as San Francisco’s office market has morphed in just a few years from being one of the hottest office markets in the US with a vacancy rate of 7% in 2019 and some of the highest rents in the US, to being put on ice by working-from-home. About 33% of all office space is now on the market for lease – worse even than Houston, which was for years the worst office market in the US.
So now there’s the second deal in about a month — though the sale hasn’t closed yet. Wells Fargo found a buyer for one of its office towers in San Francisco, the 13-story 355,000-square-foot 1960s-era tower at 550 California, across the street and around the corner from its headquarters tower on Montgomery.
Wells Fargo had purchased the tower in 2005 for $108 million. It is vacating the building. Last year, it listed it for $160 million, but then pulled the listing after receiving bids reportedly below $40 million. Earlier this year, it engaged real estate investment bank Eastdil Secured to relist the tower.
And it has now made a deal – the name of the buyer has not been disclosed – for about $42.6 million to $46 million ($120 to $130 per square foot), according to sources cited by the San Francisco Business Times. That would be 71% below the original asking price and nearly 60% below the purchase price in 2005.
(Excerpt) Read more at wolfstreet.com ...
Name of Buyer: CCP
In a market where there is a glut of office space, and a city in which companies prefer not to have office space, we will see what a free market determines such property is worth.
Plain English. The seller lost big time at the "casino," and is cashing out before it gets worse.
Serves ‘em right. You get what you vote for. A lot of folks are going to have to take one for the team before prices and rents level out at new “normal” levels.
When real price discovery comes to an artificial bubble.....it’s painful. There must be a way to shift the pain to the taxpayer /sarc
Soon to be filled with illegals and bums.
The bubble wasn’t artificial. In 2019 there were hordes of people commuting downtown. Companies were moving in and there were lots of new developments building in the area. I know, I was there, working there everyday, as I had done for over 30 years.
Circumstances changed, however, effectively overnight. And the prolonged lockdown sealed it. This was governance malpractice on an enormous scale.
Since I’ve been abroad, for the most part, since early 2020, I can compare only with other countries. There has been nothing like this anywhere else.
Why would anybody buy this even for pennies on the dollar? Will they be able to bilk the taxpayer enough by filling them full free housing for teens and illegals to fight over?
They can’t even sell hi rises in big cities without taking a massive hits.
And still the local and network news stooges always feature downtown areas as their backdrops. All those colored lights in those blown up images behind them looks so cool...Ohhhh shiny...pretty....Until ya get down on the ground and the place smells like urine with the violent homeless mental cases taking dumps on the sidewalks in broad daylight and no one is safe from the crime..
I find it very odd they still do this..
they should reach 3 cents on the dollar by next year
I think they want to move us off the farm and get us within a 15 minute radius of their control. Maybe these office building that would be the ideal spot for them to store us as long as we’re pliant and obedient. And if the pandemic comes, they can just seal us in. China going to buy at all I’m thinking
I used to work downtown in the shell building. 100 Bush and Battery. It was a cool building but in the 90s it cost $25 to park there. In the early 90s. I can’t imagine what it cost now. But even at that time, if you went out the front door, you had to step over drunks, sleeping on the front steps, and it was smelly even then. Pretty incredible that it’s lasted this long actually.
“… is this the commercial real estate market hitting the iceberg? ”
I have a couple of REIT funds through TIAA-CREF, and they just sent out a notice that they’re limiting total investments in these funds. They are mixed medium to small commercial and residential buildings. I still can’t figure out why or how they arrived at the amount.
By artificial I was referring to interest rates. Since interest rates are not set by the market, that makes them, as far as they affect the market, artificial.
Interest rates should reflect risk, but with the FED artificially, and to some degree arbitrarily, manipulating them they don’t reflect risk. And artificially low interest rates drive money into areas that it would not normally go.
I’m sure there’s more to it than that, as you said, but I’ve got to believe that was a factor.
On a side note; California property taxes are 1% of the selling price. So the state just had its revenue on this building cut in half. Also; everyone else in SF can claim a drop in property price and demand a reduction in tax as well.
Hmm, that could be interesting. I have to believe SF property appraiser's office will be very reluctant to reassess property values down. Property owners will likely have to fight like hell. Maybe even go to court.
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