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Pair of Chinese Firms Strike Deal to Trade 123 Mission for $255 Million

Building Would Sell At More Than 30% Premium to Previous Sale In December 2013
June 23, 2016
In another sign of the super-heated market for commercial property in San Francisco, one China-based company has agreed to sell 123 Mission Street to another Chinese investor for $255 million in cash, more than 30% higher than it paid for the 28-story office building in late 2013.

The 346,000-square-foot office building in San Francisco’s South Financial District, formerly the Pacific Gas & Electric Building, is a 407-foot-tall structure constructed in 1986. The building is currently 95% occupied with 14 tenants, according to financial documents.

The seller is an investment holding company and a wholly-owned subsidiary of Pacific Eagle Real Estate Fund, L.P., the vehicle for investment in U.S. real estate for Great Eagle Holdings Ltd., a Chinese real estate company listed on the Hong Kong Stock Exchange.

Great Eagle sold the multitenant building to a subsidiary of HNA Ecological Technology Group Co., Ltd., which invests mainly in the high-tech industry, with operations in China and the U.S., according to a Hong Kong exchange filing.

HNA made headlines earlier this year by paying $6 billion for Ingram Micro, a U.S. tech firm that distributes products for Apple and Microsoft.

Great Eagle Holdings bought the office building and land rights for $195 million in cash from Sumitomo Corp. of America in December 2013, so the sale agreement to HNA announced June 22 would be a markup of more than 30.7%. The transaction is expected to close Aug. 4.

"As the prices of office buildings in San Francisco have appreciated rapidly over the past year, especially in downtown San Francisco where the building is located, the general partner and asset manager believes that it is appropriate to dispose of the property," allowing the seller "to take advantage of the favourable market conditions," Great Eagle Holdings said in the filing.

The consideration reflected a 13% premium to the property’s appraised value as at Dec. 31, 2015 and provided Great Eagle's U.S. real estate fund with an attractive return, the company said.

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