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Flynn Properties and Gem Realty Close On Largest San Francisco Office Transaction Since 2012

GEM and SEB Divest Interest to Chinese Developer Kylli for $350 Million; Flynn to Stay on as Investor
May 23, 2014
A joint venture comprised of San Francisco-based Flynn Properties and Gem Realty Capital out of Chicago closed on the largest office sale in San Francisco since 2012, selling their majority stake in the historic 225 Bush St. building in San Francisco's central business district to Chinese development firm Kylli Inc. for $350 million.

Originally known as the Standard Oil Building, 225 Bush St. was constructed in 1922 immediately north of Market St. on the corner of Bush and Sansome and was at one point the tallest building in San Francisco. The 583,000-square-foot, Class A high-rise offers 26,000-square-foot floor plates with high ceilings and is currently 99% leased to a tenant roster that includes Lithium Technologies, Blue Shield of California, San Francisco Examiner, Zillow and BeneFit Cosmetics, according to CoStar information.

Flynn and GEM Realty acquired the property in partnership with Whitehall-Goldman Sachs in 2000. German investment firm SEB Immolnvest stepped in as the third partner in the venture after acquiring Whitehall's stake in 2012. As part of the most recent transaction, GEM Realty and SEB liquidated their stakes in the property.

With the transaction, Genzon Group-backed Kylli becomes the majority joint venture partner, while Flynn maintains an ownership position and retains its role as property manager and leasing contact.

"We’ve seen increasing interest from Chinese buyers in trophy office buildings in global gateway cities for several years, with a focus on London and New York to date. This large, off-market transaction shows that Chinese investors are also aggressively pursuing Class A office buildings on the West Coast of the United States" said Rob Hielscher, managing director of the JLL capital markets team.

Steven Caravelli of Coldwell Banker Commercial NRT coordinated the acquisition on behalf of the buyer.

Please see CoStar Comp #3031363 for more information on the transaction.

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