Roughly a year and several discounted pricing rounds later, another San Francisco office building has landed a buyer willing to invest in the city's economic recovery — and it comes at a relative bargain.
Ellis Partners, a San Francisco-based development firm, and equity partner Baupost Group are under contract to acquire the State Bar of California headquarters building at 180 Howard St. for $62 million, or roughly $250 per square foot, according to people with knowledge of the pending deal.
While the transaction has yet to close, meaning it can still fall through, the purchase agreement is a sign that landlords and investors have finally come to terms with San Francisco's declining valuations, and deal volume is poised to regain some momentum as owners accept the city's new economic reality. Neither Ellis nor Baupost immediately responded to CoStar News' requests to comment.
A spokesperson with the State Bar, which licenses and regulates attorneys through the California Supreme Court, said the bar's Board of Trustees greenlighted the decision to "proceed with the sale of the San Francisco headquarters building" at its meeting last month. The board directed staff to "refine pending offers and select a best offer, negotiate with the selected buyer over the sale and leaseback agreements, and return to the executive committee" for a final review.
The spokesperson, who confirmed the bar was pursuing a sale-leaseback arrangement, declined to comment on either the buyer's identity or the potential closing price.
After owning the nearly 243,500-square-foot building for more than 25 years, the organization listed the Howard Street building in May 2022 in response to its newly adopted hybrid-work policy and a dwindling population of in-office employees. While the original list price was never publicly disclosed, it was relisted for $85 million, or $400 per square foot, earlier this year after the bar briefly pulled it off the market.
New Pricing Reality
The deal for 180 Howard joins a growing handful of other pending office property sales across San Francisco that are set to close at discounts.
The sale also acknowledges San Francisco's new standing as a market in turmoil after years of pre-pandemic rent growth and seemingly infallible leasing activity. A troublesome combination of widespread layoffs across the tech industry, a flight to top-tier properties, and hybrid work arrangements, among other pandemic-related factors, have collided to push demand for office space in the city to levels not seen since the dot-com bust in the early 2000s.
The sales environment in the city has been especially pressured as investors, already contending with rising interest rates and a challenging financial climate, have been spooked by plummeting valuations and falling rental rates. No major acquisitions have closed since 2020 and less than $7.75 million of office deals have completed in the past year, according to CoStar data.
By comparison, more than $1.5 billion of office deals closed in all of 2019.
Elsewhere in the city, CBRE Global Investors is trying to offload 123 Townsend for $90 million, also for a price far lower than what the investment management company paid when it acquired the nearly 137,000-square-foot office property about three years ago. The firm, which has enlisted Newmark to help market the building, paid $140 million for it in mid-2020.
New York investment firm Clarion Partners is hunting for buyers interested in snapping up its 11-story 60 Spear St. property for $55 million, about half of what the global asset manager paid for the 157,500-square-foot building nearly a decade ago. The firm has enlisted JLL to market the downtown San Francisco property, which it acquired in late 2014 for $107 million, according to CoStar data.
Several blocks away from Clarion Partner's Spear Street tower is 350 California St., a fellow office building that is expected to trade for a deeply discounted price. Three years after the nearly 300,000-square-foot property hit the market, a San Francisco-based developer is expected to close on the building for about $70 million, a roughly 75% discount compared to the price Union Bank had hoped to command when it listed the downtown tower at the height of the pandemic in mid-2020.