San Francisco Foundry Square Buildings On the Block
Submitted January 19, 2012, 2:36 PM
Two Howard Street office buildings in the heart of San Francisco's South of Market have been put up for sale: the 335,000 square-foot Foundry Square I at 400 Howard St. and the 224,900 square-foot Foundry Square IV at 500 Howard St.
Both buildings are part of a four-building complex designed by Studios Architecture and are fully leased, according to financial and professional services firm Jones Lang LaSalle. Only three of the four proposed Foundry Square buildings have been built.
Foundry Square I is leased to BlackRock Inc., a New York City-based financial services company with $3.5 trillion in assets under management, according to the company's Web site. The company became the tenant in the property when it bought Barclay’s Global Investors in mid-2009. The current lease runs for another 10 years. The building was initially constructed in 2008 as a build-to-suit for Barclay's, and it has trading facilities on the ground floor.
Buyers are likely to be real estate managers backed by pension-fund capital, the kind of investors looking for core properties in prime markets such as San Francisco, said Colin Yasukochi, a vice president of research for Jones Lang in its San Francisco office. He expects buyers to accept capitalization rates on both properties in the 5.5 percent to 6.5 percent range, based on current rents.
He anticipates Foundry Square IV should fetch a handsome price. “I would expect something in the range of $800 per square foot, which would be a high price for a building in its area," he said. He cited the long-term income the property is expected to produce, a key appeal for buyers seeking low-risk, income-producing real estate. He is less familiar with Foundry Square I.
Both properties have rents set at the peak of the market. For Foundry Square I, this is in the mid-$40 a-square-foot range annually, excluding property expenses. At Foundry Square IV, rents are in the high $50 a-square-foot range annually, said Anton Qiu, a principal with TRI Commercial in its San Francisco office.
Foundry Square I is owned by New York City-based AREA Property Partners, according to brokerage Cassidy Turley. The owner did not respond to phone calls seeking comment. The property is listed with Eastdil Secured.
Foundry Square IV is controlled by Cottonwood Partners Management Ltd., a Salt Lake City real estate investment, management and development company. Cottonwood did not respond to phone calls. Palmer Capital Inc. in Sacramento is the listing agent on the sale. Palmer also declined comment.
