fflint
05-04-2007, 02:00 AM
Pacific Telephone Building gets heavy interest from developers
1925 structure generates bidding war -- thanks to location, design and potential
http://sfgate.com/c/pictures/2007/05/03/bu_pactelbldg024ra.jpg
The Pacific Telephone Building has generated plenty of interest and is likely to have a winning bidder chosen this month
San Francisco's Pacific Telephone Building, an Art Moderne architectural gem built in 1925, has provoked a spirited bidding war among real estate developers with dozens of offers for the landmark skyscraper, according to sources familiar with the transaction.
Owner AT&T confirmed that it is selling the 26-story building at 140 New Montgomery St., which has been vacant for 18 months.
"We were assessing the market and waiting for improved conditions," said AT&T spokesman John Britton. "We think the time became right with the opening of the St. Regis a stone's throw away. That indicated this is a hot spot and a great location."
Britton said AT&T did not name an asking price. It is common in commercial real-estate sales to let the market set the price.
Real estate experts said the property might go for $400 to $500 a square foot, which would give the 26-story, 342,000-square-foot building a price tag of $136.8 million to $171 million.
The deal includes a 441-space, eight-level parking garage on Natoma Street behind the Pacific Telephone Building. Experts said it might fetch $20 million. The San Francisco Museum of Modern Art now uses the parking structure, which is directly behind the museum. SFMOMA will continue with its plans to build a sculpture garden atop the garage, and that will be part of the deal for whoever buys the buildings, Britton said.
Potential uses for the Pacific Telephone Building include offices, luxury condominiums, a high-end hotel or a combination of hotel and condos.
The St. Regis, which Britton pointed to as a comparable, combines a 260-room hotel with 102 luxury condos. It also encompasses the Museum of the African Diaspora, offices and two restaurants.
Real estate experts said the intense interest in the property underscores how overheated San Francisco's commercial market has become.
"That number of offers indicates that there is a lot of money out there and (developers) are looking for opportunities to add value," said George Eckard, senior director of Cushman & Wakefield. "It is a wonderful statement about the vitality, interest and money out there."
San Francisco office properties are selling for an average of $560 per square foot this year, according to Colin Yasukochi, director of research and advisory services at Grubb & Ellis. That's up 65 percent from the average office sales price of $340 in 2006 and close to the price of a new building, which would pencil out to about $600 or $650 per square foot.
"About half the total square footage (of San Francisco office space) has turned over in the past three years," Yasukochi said. "San Francisco is a market on the rise in terms of growth potential in rents. There is continued improvement in market fundamentals, such as the amount of occupancies."
Sources said the offers were whittled to 14 on Wednesday for a second round of bidding. A third round of bidding also is likely to take place.
"We hope to wrap this up by the end of next week," AT&T's Britton said.
The soaring white Jazz-Age building was the tallest on the West Coast when it opened as the headquarters of Pacific Telephone and Telegraph. Critics at the time called it "daringly original," raving about its magnificent lobby with black marble walls, elaborately stenciled ceiling and bronze elevator doors.
The Pacific Telephone Building is considered the first masterpiece by architect Timothy Pflueger, who worked on it with architects A.A. Cantin and J.R. Miller. Pflueger also designed Oakland's Paramount Theatre, 450 Sutter Street, the Pacific Coast Stock Exchange and the I. Magnin building.
The phone company has occupied the building continuously as its only tenant. Various incarnations of Ma Bell can still be seen on the skyscraper's facade, such as a bas relief of the old Bell System trademark -- a bell, naturally -- and the letters "SBC" emblazoned on both sides of the front door. Terra-cotta ornamentation on the building includes images of trumpets, bells and torches. Four giant eagles perch on its central tower.
Whoever buys the building will face some serious challenges, real estate experts said. While its historic status gives it cachet, it also limits what modifications can be made.
David Klein, a senior vice president and partner with NAI BT Commercial in San Francisco, said he had two clients who considered bidding on the property. One would have turned it into a hotel and one was considering condos. Neither submitted an offer.
"They looked at it and it was too much brain damage with the historic preservation aspect coupled with ambiguities in the code for upgrading -- there are easier deals to do," he said.
The building also faces some limitations if it is used for offices. At 13,000 square feet, its floors are considered small by modern standards, and it needs upgrading, experts said. Tenants who need a big footprint are unlikely to want to rent out several floors.
Jacque Ducharme, vice chairman of Studley, a real estate firm that represents commercial tenants, said he thinks the building is best suited for condos. He said the developers can get a 60 percent return on their investment assuming they buy the building for around $400 a square foot, spend $300 a square foot on renovations and sell units for $1,100 a square foot.
"It's going to be a very tricky calculus to make the price work with the mind-boggling number of details in dealing with the historic issue. It's either a career-maker or a career-breaker for somebody," Klein said. "It's an all-or-nothing deal."
1925 structure generates bidding war -- thanks to location, design and potential
http://sfgate.com/c/pictures/2007/05/03/bu_pactelbldg024ra.jpg
The Pacific Telephone Building has generated plenty of interest and is likely to have a winning bidder chosen this month
San Francisco's Pacific Telephone Building, an Art Moderne architectural gem built in 1925, has provoked a spirited bidding war among real estate developers with dozens of offers for the landmark skyscraper, according to sources familiar with the transaction.
Owner AT&T confirmed that it is selling the 26-story building at 140 New Montgomery St., which has been vacant for 18 months.
"We were assessing the market and waiting for improved conditions," said AT&T spokesman John Britton. "We think the time became right with the opening of the St. Regis a stone's throw away. That indicated this is a hot spot and a great location."
Britton said AT&T did not name an asking price. It is common in commercial real-estate sales to let the market set the price.
Real estate experts said the property might go for $400 to $500 a square foot, which would give the 26-story, 342,000-square-foot building a price tag of $136.8 million to $171 million.
The deal includes a 441-space, eight-level parking garage on Natoma Street behind the Pacific Telephone Building. Experts said it might fetch $20 million. The San Francisco Museum of Modern Art now uses the parking structure, which is directly behind the museum. SFMOMA will continue with its plans to build a sculpture garden atop the garage, and that will be part of the deal for whoever buys the buildings, Britton said.
Potential uses for the Pacific Telephone Building include offices, luxury condominiums, a high-end hotel or a combination of hotel and condos.
The St. Regis, which Britton pointed to as a comparable, combines a 260-room hotel with 102 luxury condos. It also encompasses the Museum of the African Diaspora, offices and two restaurants.
Real estate experts said the intense interest in the property underscores how overheated San Francisco's commercial market has become.
"That number of offers indicates that there is a lot of money out there and (developers) are looking for opportunities to add value," said George Eckard, senior director of Cushman & Wakefield. "It is a wonderful statement about the vitality, interest and money out there."
San Francisco office properties are selling for an average of $560 per square foot this year, according to Colin Yasukochi, director of research and advisory services at Grubb & Ellis. That's up 65 percent from the average office sales price of $340 in 2006 and close to the price of a new building, which would pencil out to about $600 or $650 per square foot.
"About half the total square footage (of San Francisco office space) has turned over in the past three years," Yasukochi said. "San Francisco is a market on the rise in terms of growth potential in rents. There is continued improvement in market fundamentals, such as the amount of occupancies."
Sources said the offers were whittled to 14 on Wednesday for a second round of bidding. A third round of bidding also is likely to take place.
"We hope to wrap this up by the end of next week," AT&T's Britton said.
The soaring white Jazz-Age building was the tallest on the West Coast when it opened as the headquarters of Pacific Telephone and Telegraph. Critics at the time called it "daringly original," raving about its magnificent lobby with black marble walls, elaborately stenciled ceiling and bronze elevator doors.
The Pacific Telephone Building is considered the first masterpiece by architect Timothy Pflueger, who worked on it with architects A.A. Cantin and J.R. Miller. Pflueger also designed Oakland's Paramount Theatre, 450 Sutter Street, the Pacific Coast Stock Exchange and the I. Magnin building.
The phone company has occupied the building continuously as its only tenant. Various incarnations of Ma Bell can still be seen on the skyscraper's facade, such as a bas relief of the old Bell System trademark -- a bell, naturally -- and the letters "SBC" emblazoned on both sides of the front door. Terra-cotta ornamentation on the building includes images of trumpets, bells and torches. Four giant eagles perch on its central tower.
Whoever buys the building will face some serious challenges, real estate experts said. While its historic status gives it cachet, it also limits what modifications can be made.
David Klein, a senior vice president and partner with NAI BT Commercial in San Francisco, said he had two clients who considered bidding on the property. One would have turned it into a hotel and one was considering condos. Neither submitted an offer.
"They looked at it and it was too much brain damage with the historic preservation aspect coupled with ambiguities in the code for upgrading -- there are easier deals to do," he said.
The building also faces some limitations if it is used for offices. At 13,000 square feet, its floors are considered small by modern standards, and it needs upgrading, experts said. Tenants who need a big footprint are unlikely to want to rent out several floors.
Jacque Ducharme, vice chairman of Studley, a real estate firm that represents commercial tenants, said he thinks the building is best suited for condos. He said the developers can get a 60 percent return on their investment assuming they buy the building for around $400 a square foot, spend $300 a square foot on renovations and sell units for $1,100 a square foot.
"It's going to be a very tricky calculus to make the price work with the mind-boggling number of details in dealing with the historic issue. It's either a career-maker or a career-breaker for somebody," Klein said. "It's an all-or-nothing deal."
