A high-rise apartment tower in a waterfront neighborhood that’s come to symbolize the changing face of downtown San Francisco in recent years has quietly sold for $174 million, as investors vie to get a piece of the city’s rising rental market.
San Francisco-based Tidewater Capital and Dallas-based Canyon Partners bought the 320-unit Rincon Center apartment towers at 88 Howard St. in the Rincon Hill section of the city’s South of Market District from Carmel Partners in March for slightly under $544,000 per unit, according to CoStar.
The deal is the priciest apartment transaction to occur in San Francisco in nearly two years, according to CoStar data, when the 410-unit L Seven apartments, on the other side of the SoMa neighborhood, sold to Waterton for $177.5 million, marking a significant discount from its development cost eight years earlier.
At the time of that 2024 deal, investors were cautiously dipping a toe in San Francisco’s multifamily waters again after several years of declining rents, as the city’s population fell by tens of thousands of people in the wake of the COVID-19 pandemic. Downtown neighborhoods were especially hard hit, as empty office buildings and shuttered shops and restaurants gave way to a surge in crime and street disorder.
Today, big players are rushing back to San Francisco in the wake of the AI boom, as artificial intelligence startups have brought tech workers back to neighborhoods like Mission Bay and SoMa. The latest sale is for a complex in Rincon Hill, a small neighborhood sandwiched between the San Francisco Bay and the Financial District that became synonymous with high-rise condos and luxury apartment towers that were popular among tech workers starting around the early 2000s.
The sale also ranks among tops for all commercial property deals to occur in the city in the past year, adding to a flurry of apartment transactions in recent months.
Neither Tidewater Capital nor Canyon Partners responded to requests for comment from CoStar News.
Flurry of apartment deals
The Rincon Center Tenants Association informed residents in mid-March that the property had been sold to Tidewater Capital and that SRG Residential, the property management arm of the Sares‑Regis Group, was taking over management of the complex.
CoStar research shows the sale was an entity-level transaction, an under-the-radar structure whereby the buyers typically purchase the ownership interests in a limited liability corporation that holds title to the property rather than the asset itself, meaning no deed of sale appears in public records.
The Towers at Rincon, as the complex is now known, was built in 1989 as part of Rincon Center, a sprawling mixed-use project developed after the city rezoned the neighborhood from an industrial warehouse district to a high-density residential zone. With views of the waterfront and relatively sunny weather, the area once housed large homes belonging to the city’s elite during the mid-19th century. The neighborhood was leveled by the 1906 earthquake and fire.
The property is the latest in a growing list of apartment complexes to change hands recently in San Francisco, where arriving or returning tech workers are competing for a very limited supply of apartments, wrote CoStar Senior Director of Market Analytics Nigel Hughes. Rents have soared in the past year, reaching an average of $3,500 per month, nearly double the U.S. average, as competition has heated up, while annual rent growth accelerated to 7.4%, the fastest among major markets nationwide.
"Economic fundamentals and limited construction continue to favor landlords, while incoming supply is unlikely to meaningfully ease conditions in the near term," Hughes wrote.
San Francisco’s vacancy rate tightened to 4.5%, the lowest level in nearly a decade, as tech hiring, expansion of the artificial intelligence sector and high median household incomes bolstered demand despite job growth declines. Moreover, the supply of new apartments remains depressed. Only 2,900 units are under construction, well below historical norms, helping sustain rent pressures.
New York-based Capital Properties purchased the Rincon Center apartments back in 2007 for $143 million and spent $10 million on improvements, converting vacant units into long-term executive stay apartments. Three years later, multifamily investor Carmel Partners took control of the property after Capital defaulted on the loan but sought multiple times in court to block the foreclosure on the property.
The apartments later became the subject of a multi-year legal battle when its last landlord, Carmel Partners, tried to gain permission to convert 76 affordable apartments in the complex to market rate units, arguing that a 1985 agreement between the developer and the now-defunct city redevelopment agency had expired in 2021. In 2023, an arbitrator rejected the argument, ruling that the units must stay at below-market-rate rents for low- and moderate-income tenants through at least 2050.
Tidewater Capital has picked up a number of properties around the San Francisco Bay Area in recent years, including the Arc Light apartments, a 94-unit apartment complex near Oracle Park in Mission Bay, and a parking lot in Oakland on which it plans to build a nearly 400-unit apartment building.
For the record
The acquisition was financed with a $136.5 million loan from Invesco Commercial Real Estate Finance Investments.