 |
Shorenstein: We're ready to buy again in S.F.
By Steve Ginsberg - San Francisco Business Times
July 30, 2004 - Despite selling three buildings in San Francisco, the Shorenstein Co. is embarking on a round of possible acquisitions that includes San Francisco.
Shorenstein is pursuing three Bay Area buildings, including Cousins-Myers' two modern highrises in San Francisco's Second Street corridor, according to sources close to the company. Senior Shorenstein executives acknowledge it has made offers on three Bay Area sites as well as putting under contract 125 Park Ave. in New York in a $225 million potential deal.
"We want to increase our exposure to San Francisco and feel strongly about it because it's a market we know and want to be a dominant force in the Bay Area," said Bob Underhill, Shorenstein's managing director for capital transactions. "We will play with a broader strike zone and be more creative. We may do deals that we wouldn't have in the past and that might include a B building if it's good."
There are 20 other bidders for the Cousin s-Myers buildings, and the bidding ended this week (July 30). In the past Shorenstein has not paid top dollar for its acquisitions, but in the current heated seller's market, it may have to dig deep into its sizable war chest to make the deal.
As a privately held entity Shorenstein can close a deal in 30 days, which some sellers are currently looking for, but some would be surprised if Shorenstein buys one or both of Cousins-Myers buildings, located at 55 Second and 101 Second. Both are seen as high-priced, with little chance for a buyer to add value. Shorenstein's hallmark has been picking off good buildings that needed tenants or other remediation, with City Center in Oakland a prime example.
Shorenstein in February raised its seventh investment fund and is eager to unleash that $775 million acquisitions war chest. It has yet to close its sixth fund and has more than $230 million in it to also spend. Shorenstein has invested upwards of $75 million into the seventh fund.
Historically, San Francisco-based Shorenstein bought Class A buildings in the top markets; then it strayed buying buildings in secondary markets such as New Orleans and Phoenix. In its evolving portfolio it sold out of New Orleans and is now selling out of Phoenix. It is eager to do more in New York and the Bay Area.
John Grassi, a former Shorenstein acquisitions head now running his own acquisitions fund at Spear Street Capital, observed: "They (Shorenstein) are now sitting on a ton of dough and they want to put that money to work.
"People tend to read too much into things. Just because they are selling three buildings in San Francisco, it's not a conspiracy or a grand plan to get out of San Francisco," Grassi said. "They could veer off into unconventional areas and look at different buildings and do more suburban stuff. How wide a net they cast is to be seen."
'Reluctant sellers'
When the company put Hills Plaza, 333 Market and 425 Market St. on the sale block this May, it led real estate observers to surmise Shorenstein was bailing out of its hometown market.
Not so, according to Underhill. Those sales resulted partially because Shorenstein had partners in two of the buildings that predated its fund series and wanted to get out from partnerships formed when founder Walter Shorenstein was running the company. Hills Plaza was part of its first fund and the company wanted to close that fund that dates back to 1992. Morgan Stanley has the site under contract (see story on page 1) and is expected to pay nearly $200 million, while Walton Capital and Wells Fargo are buying 425 Market and 333 Market, respectively.
"We were reluctant sellers. Nobody woke up and got the sweats about San Francisco," Underhill said. "In the Hills situation we had a 200,000-square-foot vacancy when Gap left. We leased it up and there was little for us to do. We owned it 14 years and the sales market was robust and we wanted to shut that first fund," Underhill said.
The Bank of America building at 555 California St. will remain Shorenstein's flagship, Underhill said. The company has no plan to sell its 50 percent stake there, although the bank is selling its ownership to New York investors Mark Karasik and David Werner for around $400 a square foot.
Despite the sale of three buildings, San Francisco remains the company's biggest stake with six buildings. Chicago is next with three, and if the 125 Park Ave. deal closes, Shorenstein will have three buildings in the New York area.
|
