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San Francisco Ferry Building Purchase Expands Hudson's Historic Properties Strategy

Bay Area Icon's $291 Million Sale Sets Up Office Development
October 10, 2018
San Francisco's historic Ferry Building is expected to become a top-tier office and retail complex after being acquired by a Los Angeles developer this week.

Developer Hudson Pacific Properties’ $291 million acquisition of San Francisco’s historic Ferry Building, a well-known destination for generations of tourists from around the world, is part of the company's strategy to turn historic properties in major West Coast cities into top-ranked office and retail hubs that attract a new generation of technology and media companies.

The landmark 120-year-old, 262,500-square-foot Ferry Building, recognizable along the city's bayfront skyline for its 245-foot clock tower, attracts 9 million visitors a year to its ground-floor farmer's market and restaurants along the Embarcadero waterfront where Market Street runs into the San Francisco Bay.

Now, Hudson Pacific Properties, a prominent landlord for a number of tech and media companies including online entertainment provider Netflix and ridesharing company Uber, plans to transform it into a luxury office and retail center, and could open its historic clock tower to the public for the first time in years after purchasing the leasehold and building with a partner this week.

"The acquisition of the Ferry Building fits perfectly with our strategy of identifying creative ways to improve the performance of exceptional real estate within global centers of tech innovation," said Victor Coleman, chairman and chief executive of Hudson Pacific in a statement. "We are thrilled about the opportunity to further position the Ferry Building as a premier Class A office and retail destination through new amenities, activities and events."

Hudson Pacific Properties holds a 55 percent interest in the joint venture it formed with German insurance firm Allianz Real Estate to purchase the leasehold on the Ferry Building, which last sold more than a decade ago, from Blackstone Group's EQ Office. The Port of San Francisco owns the land.

Hudson plans to serve as the managing member of the Ferry Building, providing day-to-day operations going forward, according to a statement. Allianz, which maintains headquarters in Munich and Paris, owns the remaining 45 percent interest in the venture.

The Beaux-Arts style property once served as the city's main transportation hub, but after the construction of the Golden Gate Bridge and Bay Bridge, traffic to the property died down. Its upper floors were converted to office space in the 1950s and the ground floor remained largely unused.

The property reopened to the public 15 years ago after a significant renovation that featured the ground-floor Ferry Building Marketplace, a space for artisanal food vendors and restaurants and a farmer's market.

The property's recent sale reflects Hudson Pacific's larger strategy to renovate or redevelop historic and notable properties into upscale office and retail spaces across the West Coast.

The publicly traded real estate firm has built much of its business by renovating aging properties for burgeoning industries.

The company is well known for its renovation of former Warner Brothers headquarters Sunset Bronson Studios in Los Angeles. The business has restored and transformed the historic production studio into a hub of creative office and leased much of it to Netflix.

It is also underway on renovating the former Coca Cola factory in downtown Los Angeles as well as Los Angeles' Westside Pavilion mall into a 475,000-square-foot creative office complex. In Seattle, it plans to renovate the historic 95 S. Jackson property, a former mill and warehouse.

The Ferry Building adds to the company's growing portfolio of San Francisco buildings that include the 581,000-square-foot Rincon Center that houses offices of Google, and a 1 million square-foot office building at 1455 Market St., which houses the headquarters of Uber and Square.

Hudson and Allianz paid $1,108 per square foot for the iconic Ferry building in an all-cash transaction. A ground lease with the Port of San Francisco for the property has 49 years left on its term.

The historic property, which is 98 percent leased, includes 192,532 square feet of office space that houses companies such as SS&C Technologies, Meritage Group and Niantic. Its 75,486 square feet of retail space includes restaurant and retail tenants, and is home to The Ferry Building Marketplace, which attracts almost 9 million visitors annually.

Equity Office, an affiliate of the Blackstone Group, sold the Ferry Building, after buying it as part of a mammoth portfolio acquisition in 2007 that included 503 properties nationwide, according to CoStar data.

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