Paramount Group, a Real Estate Investment Trust (REIT) has entered into an agreement to acquire One Front Street, a Class A office building located in San Francisco’s highly desired Market Street corridor.
Built in 1979, the purchase price for the building is $521 million, or approximately $800 per square foot. The transaction is expected to close by the end of the fourth quarter of 2016. In connection with the transaction, the Company is considering various strategic options, including bringing in a joint venture partner at the property or selling an asset within its portfolio in a tax-efficient manner.
One Front Street, which is currently 99.4% leased to a variety of tenants across various industries, consists of approximately 651,000 square feet and a 290-space parking garage. The LEED Gold, 38-story property offers the amenities and physical features that San Francisco office tenants demand. One Front Street is ideally located in the heart of San Francisco’s central business district in one of the most desired locations for professional services, financial services and technology tenants. Additionally, the property is within two blocks of the Transbay Transit Center, a $6 billion modern regional transportation hub deemed the “Grand Central Station of the West.” The Transbay Transit Center, expected to be complete in late 2017, will accommodate up to 45 million passengers per year.
“We are delighted at the opportunity to add another Class A office building in one of the strongest markets in the country to our trophy portfolio,” stated Albert Behler, Chairman, Chief Executive Officer and President. “We expect that our proven, pro-active management approach will meaningfully increase the net operating income from the property in the near to medium term as the existing leases, which are approximately 20% below market, expire. In addition, we are evaluating certain redevelopment opportunities, which could unlock additional value in the next three to five years.”