The historic SF building has been sold for the second time during the pandemic

The historic SF building has been sold for the second time during the pandemic

The 2020 sale of a six-story brick-and-timber building a few blocks from Oracle Park was significant in light of the scarcity of commercial labor in San Francisco office buildings during the early months of the pandemic.

Moving forward to 2023, the 137,600-square-foot building leased by fintech company PayPal has been sold again. San Francisco-based Rubicon Point Partners confirmed Friday that it has closed a deal to buy the property for approximately $73 million.

A fund sponsored by CBRE Global investors acquired 123 Townsend for $134.6 million in July 2020. Real estate services firm Newmark arranged the deal with Rubicon, public records show.

And while 123 Townsend traded for just over half of what it was worth in 2020, the $535 per square foot price is still among the highest sales prices San Francisco has seen in recent years.

Ani Vartanian, Rubicon’s co-managing partner, called the deal “a commentary on San Francisco and the Bay Area.”

“We think the Bay Area and San Francisco are incredibly resilient,” Vartanian said. “We are going through difficult times now, but we will emerge from them in particular through activation and citizen engagement, from the local level to local politics as well.”

Another factor that prompted Rubicon to continue building the building was a mild but steady increase in demand from office tenants, Vartanian said.

“Last year, there was about 3.5 million square feet of tenant demand, and today there is 5.5 million square feet of tenant demand,” she said. “There are certain things that are moving positively, although tenant demand has not necessarily translated into leasing, but I think “The time has come.”

The deal is a bargain sale, and is in line with three other — and much larger — office building deals that have traded at deep discounts this year. In September, Palo Alto investor Roger Fields and his firm Peninsula Land & Capital bought the vacant 13-story building at 550 California Street from Wells Fargo Bank for just $40 million.

The 22-story former home of Union Bank at 350 California Street was sold earlier this year to SKS Real Estate Partners for $61 million, representing a roughly 75% decline from its pre-pandemic value.

The 11-story building at 60 Spear St. was purchased. in August through a partnership between local developer Presidio Bay Ventures and a local family office for $41 million, or less than half of what it was worth when it last traded in 2014.

The higher price per square foot in the 123 Townsend building is due, in part, to the fact that it is still 73% leased by PayPal, even as the San Jose-headquartered company shifts to a hybrid business model and abandons that. Some of its offices as a result.

Last summer, PayPal closed a roughly 53,000-square-foot office at 425 Market St. It served as the headquarters for Xoom, which was acquired by PayPal in 2015.

In 2020, PayPal also listed about 100,000 square feet at 123 Townsend for sublease. Vartanyan declined to comment on whether the space available for sublease has attracted others to the building, but said “there are people in the building.”

Aside from the location, the “big difference” between 123 Townsend and some other buildings that recently sold at deep discounts is that, because of the PayPal lease, 123 Townsend has long-term income, she said. PayPal’s lease expires in 2028. The building, which was constructed in 1903 and survived the Great San Francisco Earthquake of 1906, was completely renovated in 2000.

“There are a few other variables that contributed to justifying our higher purchase price,” Vartanyan said.

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