By: Jeanine DeFoe - Bloomberg (radio transcript)

New York, - September 15, 2000 - (Bloomberg) – Shorenstein Co., owner of trophy office properties including San Francisco's Bank of America Center, is turning to smaller markets such as New Orleans to find real estate bargains.

Shorenstein, the largest office landlord in San Francisco, earlier this year bought the Energy Centre, a 750,000 square foot office building in New Orleans. Overall, the closely held company owns more than 20 million square feet of space in the U.S.

"Our strategy has been and continues to be more asset- focused than geographic," Chairman and Chief Executive Doug Shorenstein told the Bloomberg Forum. "We'll buy in any market where we can find top quality, if not the top quality building." Beyond its stronghold in the San Francisco Bay Area, Shorenstein owns properties in Miami, Kansas City, Mo., and other cities.

To fund purchases, Shorenstein uses capital from the investment fund it runs. Also, the firm monitors its portfolio for buildings it may want to sell, including those in its home base of San Francisco, he said.

"We may be selling assets in certain markets, or buying and developing in different markets," he said. "We're looking at all our assets constantly."

Shorenstein owns no buildings in Manhattan. Though more than $5 billion worth of New York trophy properties are on the block, including Rockefeller Center and the Seagram Building, Shorenstein said his company sees few opportunities to buy a Manhattan building and then increase its returns through higher rents.

Tough Bet

"Manhattan right now is definitely fully priced on the ownership side," said Shorenstein. "It's a tough bet for us because you have to assume that rents will continue to rise in order to make the pricing on these deals work."

With San Francisco's vacancy rate below 2 percent, demand for Bay Area office space has spilled over to Oakland and other nearby cities. In Oakland, Shorenstein is building City Center, the first new office building in a decade. Shorenstein acquired the site in 1996 when it was in foreclosure and has the right to eventually develop 2 million square feet. The first part of the development, nearly 500,000 square feet, is one-third leased.

"What's happened in Oakland and other parts of the Bay area is the market has really grown together into one market. We're really looking at one Bay Area market and Oakland is certainly a beneficiary."

Because of discipline on the part of lenders and builders, Shorenstein sees the U.S. office market, which is experiencing record occupancy and rental rates in many cities, remaining strong.

"There's no overbuilding for the most part on the supply side," he said. "The capital side of the equation has enforced this on us."

###