By: Peter Grant - The Wall Street Journal

- October 3, 2000 - A venture of Bank of America Corp. and Shorenstein Co. is putting San Francisco's signature Bank of America Center on the block to take advantage of the high prices investors are paying for commercial property in the country's hottest office markets.

The three-building complex, which includes one of San Francisco's tallest and best-known towers, could fetch more than $900 million, real estate experts say. Prices in the city have been rising steadily as vacancy has shrunk and rents have hit record levels.

"I don't think you make money in real estate long term holding forever, " said Doug Shorenstein, chief executive of his family-owned business, who purchased the property in 1985 for $660 million. Bank of America, which occupies about one-third of the space in the 1.8 million square-foot complex, purchased its 50% interest about 10 years ago.

Mr. Shorenstein said that he and Bank of America will also consider selling a portion of the building or some other form of recapitalization, depending on the market's response.

The deal comes at a time when a large number of trophy assets are being put on the block in New York, Boston, the Bay Area and other places whose growing economies have outpaced the ability of developers to deliver new space. In Manhattan, for' example, Rockefeller Center, the Chrysler Building and the World Trade Center are all up for sale.

But that doesn't mean sellers are cashing out in anticipation of a sharp downturn, like the one that devastated the real estate industry in the early 1990s. Shorenstein, for example, is developing new buildings in the Bay Area and has been an active buyer of property in Chicago, New Orleans and other cities.

"Our strategy is to acquire or develop and add value," Mr. Shorensteill says. "When we feel the markets are ripe, We sell."

Bank of America Center is fully leased with most tenants paying rents below the current market rate, which is about $85 to $100 a square foot. The next big block of space in the complex doesn't become available for about three years, and prospective buyers will have to guess whether rents will stay at their current high levels or drop some between now and then.

Mr. Shorenstein noted that the San Francisco market remains strong thanks partly to the city's restrictions on new construction. "The market has a lot of strength left in it," he said.

Some real estate experts note, however, that demand has slackened slightly in recent months as the downturn in the Nasdaq Stock Market has put financial pressure on many New Economy tenants. "Space is becoming available again," says Jay Sholl, of CB Richard Ellis, a real estate firm. "The frenzy that was occurring three to four months ago seems to have tempered a bit."

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