December 21, 2005 - A San Francisco-based landlord known for owning some of the city's most prestigious financial-district addresses, with tenants such as UBS and Barclays Global Investors, is expanding its reach into the suburban stretches of San Mateo County as it seeks better deals.
Shorenstein Properties LLC, one of San Francisco's largest landlords, recently bought two buildings that serve as headquarters to Walmart.com in Brisbane, Calif. Local landlord Foster Enterprises sold the buildings with waterfront views for $79 million, or about $490 a square foot.
Chairman Douglas Shorenstein has sold five of the company's major San Francisco properties since 2004, partly because of concerns about San Francisco's high prices. Shorenstein executives have been shopping in other markets such as Boston and suburban San Francisco for deals. They said they chose these two office properties because Walmart.com had leased the entire two buildings for the next six years -- at rents negotiated at the height of the tech boom. Shorenstein Managing Director Andrew Friedman also noted that vacancies in the area had dropped to less than 20% from 25% in December 2004, and that surrounding areas also are picking up.
"It's in an improving submarket," says Mr. Friedman. "We like what's going on to the north and to the south."
The deal also shows that the tide may be turning for some real-estate buyers who are highly leveraged. While buyers have been borrowing as much as 80% to 90% for properties in recent months, several other bidders had trouble financing such large loans for the properties, according to Mr. Friedman.
"Our leverage is in the 60% to 70% range," says Mr. Friedman.
