San Francisco apartment owner Ballast is going into investment overdrive in its hometown as rents have exploded in the artificial intelligence boom.
In the latest example, Ballast Investments bought 1690 Broadway, an 80-unit 1970s-era building only blocks from the famed hilltop mansions of Pacific Heights. Ballast did not disclose the purchase price of the four-story property, known as Grosvenor Atrium, which was previously owned by Grosvenor Properties.
“It’s exceptionally uncommon to see a property of this scale and quality become available in Pacific Heights, especially one that has been held and cared for over such a long period of time,” Ballast Vice President of Acquisitions Mari Yamato said in a statement.
San Francisco’s rising rents have drawn a fleet of investors scooping up apartment buildings, particularly in districts that appeal to young tech workers.
Rents continued to rise in April, cementing the current price surge as the strongest of the past 20 years, CoStar Senior Director of Market Analytics Nigel Hughes wrote this week. Year over year, San Francisco’s asking rents are up 7.7%, reaching a monthly average of more than $3,500, a pace that exceeds that of any other major U.S. metro area and marks a clear acceleration from the modest growth seen in the early years of the decade.
Ballast CEO Greg MacDonald said in a statement that San Francisco’s “best residential neighborhoods are stronger than they’ve been in years,” citing extremely low vacancy rates, particularly in affluent areas.
Late last month, Ballast purchased a trio of historic apartment buildings a few blocks away known as the Three Sisters. The three Spanish Colonial-style buildings dating from the late 1920s on Van Ness Avenue sold for $48.5 million for a total of 110 units that, like 1690 Broadway, are 97% occupied, according to Ballast.
The seller was San Francisco-based Flynn Investments, a company formerly headed by the late investor Russell Flynn that in 2019 said it owned thousands of apartments in the city.
Competing for homes
Vacancy rates in the Marina/Pacific Heights/Presidio submarket are just over 3%, while the city's broader average of 3.8% is at a decade low and a far cry from the 9.2% average in 2020.
“Demand continues to rise, driven by the submarket's affluent demographics, proximity to recreation and high‑end retail, and a renter base increasingly influenced by San Francisco's rapidly expanding AI employment sector,” noted CoStar.
The intense competition for apartments is also being fed by the lack of new homes being built in San Francisco, despite efforts by local officials. Financing new housing of any kind has become notoriously difficult in San Francisco in an era of rising construction costs and high interest rates.
That's prompting a surge in investment demand among apartment buyers in the city. So far this year, San Francisco-based Tidewater Capital and Dallas-based Canyon Partners paid $174 million for the 320-unit Rincon Center apartment towers at 88 Howard St. in the Rincon Hill section of the city’s South of Market District.
Boston-based Berkshire Residential Investments paid $134 million for several “working loft” properties in and around the tech-forward SoMa and Potrero Hill neighborhoods.
As for Ballast, one of the city’s largest multifamily operators, it has acquired more than a half dozen apartment buildings in the city in the first quarter of the year, according to CoStar data and city property records.
As of February, Ballast owned and operated more than 7,400 residential units nationwide, according to the company, including approximately 6,000 apartments and 1,000 manufactured housing sites.
The firm partnered with Brookfield in late 2023 to acquire a portfolio of 2,149 San Francisco apartments in one of the first big bets on the city’s recovery, according to the San Francisco Business Times.
Late last year, the company partnered with the Carlyle Group, its Washington, D.C.-based capital partner, to buy several other “vintage” properties in Nob Hill and Pacific Heights. The latter has been home to famous residents including romance writer Danielle Steele, who owns the historic Spreckels Mansion, built in 1912, and former Speaker of the House Nancy Pelosi.
For the record
Engel & Völkers brokers Andrew Black, Michael Johnston, and Stephen Pugh represented the seller of 1690 Broadway.