FRANCISCO EXECUTIVE SUMMARY Holliday Fenoglio Fowler, L.P. acting by and through Holliday GP Corp. a California licensed real estate broker, California License Number 01385740 ( HFF )
FRANCISCO INVESTMENT HIGHLIGHTS Exceptional Class A Creative Office Opportunity Large, efficient side core floor plates with dramatic 15 slab-to-slab appeals to modern tenants seeking creative/open work environments THE OFFERING HFF has been engaged as the Exclusive Advisor to extend to qualified investors the opportunity to acquire the fee-simple interest in 55 FRANCISCO (the Property ), a Class A office building located along the waterfront in San Francisco s North Waterfront District. The Property consists of an eight-story office building encompassing approximately 145,172 rentable square feet and an adjacent four-level, 274-stall parking garage situated on 1.12 acres. 55 FRANCISCO is located at the corner of Francisco and Montgomery in San Francisco s North Waterfront District, just off The Embarcadero which spans from Fisherman s Wharf to China Basin. 55 FRANCISCO is served by several public transit services including MUNI s Market Street F trolley line, as well as ferry service to Marin, the East Bay, and Peninsula just 4 blocks away at Pier 41, and provides superior access to Marin County via the Embarcadero. Strong In-place Diversified Cash Flow 100% leased to a diverse tenant base featuring medical, technology, media, and legal users with no more than 34% of total RSF accounted for by a single industry Rare Structured Parking Garage Four level, 274-stall (1.9 per 1,000 RSF) parking garage provides substantial income with diverse demand drivers Irreplaceable and Protected Views Waterfront location coupled with superior height offers spectacular unobstructed views Significant Mark-to-Market Upside In-place rents are 33% below market with 37% of the building expiring in the first three years Amenity-Rich Location Within short walking distance to San Francisco s most popular tourist destinations including Pier 39, Fisherman s Wharf, and Ghirardelli Square Discount to Replacement Cost Substantial discount to replacement cost, estimated to be approaching $800 PSF
EXECUTIVE SUMMARY THE OPPORTUNITY 55 FRANCISCO represents a rare opportunity for an investor to purchase an institutionally-owned and maintained, Class A office property in an irreplaceable location along San Francisco s highly coveted waterfront on a fee-simple basis. The Property features large, efficient floor plates ideal for today s creative users. The Property s diverse in-place cash flow, significant upside potential, and protected sweeping views of the San Francisco Bay make it one of the most desirable office buildings in San Francisco. 55 FRANCISCO represents an exceptional opportunity to acquire a leading, stabilized San Francisco asset in one of the strongest office markets in the country at well below replacement cost. PROPERTY SUMMARY Address: 55 Francisco Street, San Francisco, CA 94133 Size: 145,172 Square Feet Year Built / Renovated: 1916 / 1969, 1999, 2013 % Occupancy: 100% Parking: 274 Garage Spaces (1.9 / 1,000 RSF) Stories: 8 Typical Floor Plate: 18,000-22,000 Square Feet Slab to Slab: 15 Feet 3
Exceptional Class A Creative Office Opportunity 55 FRANCISCO is an institutionally owned, steel-frame constructed office building meeting the needs of today s sophisticated San Francisco user. The Property s attractive glass line and accessible balconies provide irreplaceable and protected panoramic Bay views, from the iconic Golden Gate Bridge in the west to the Bay Bridge in the east. Building amenities include secured bike parking, men s and women s showers, and a common area conference room. APPROXIMATELY 50% OF THE NET RENTABLE AREA IS CREATIVE/ OPEN FINISHES Creative / Open Plan: 55 FRANCISCO is well-positioned to be transformed into a destination for creative/open platform users with approximately 50% of the Property s office square footage built-out with creative/open finishes and exposed ceilings, taking full advantage of the Property s 15 foot slab-to-slab construction. Highly Efficient Floor Plates: The Property s side-core construction results in highly-efficient floor plates. The large 18,000-22,000 square foot floor plates can accommodate full floor and multi-tenant configurations attractive to traditional, medical, and creative users with half of the floors currently leased to full-floor tenants.
Rare Structured Parking Garage The Property contains 274 stalls located in an adjacent four-level structured parking garage for an above-market parking ratio of 1.9 stalls per 1,000 square feet. The parking garage enjoys seven days a week of occupancy from tenants, businesses, tourism, and entertainment, providing a stable source of significant diversified income in one of the tightest parking markets in the United States. The nearby cruise terminal at Pier 27 provides robust demand from cruise ship parking, which is currently valeted at the Property. View to the Northwest There exists the opportunity to substantially enhance net parking income through payroll reduction from full automation of the parking facility, renegotiation of the management fee structure, restriping for an additional 12 stalls, increased marketing, and pushing below market rates as the surrounding supply continues to diminish with the redevelopment of existing lots. View to the Southeast Significant Mark-to-Market Upside The Property provides investors attractive yield with a staggered rollover schedule with no single year experiencing more than 17% of RSF expiring. In-place rents are currently 33% below market and approximately 37% of the rentable area is slated to expire in the first three years, allowing an investor the opportunity to capitalize on the robust San Francisco North Waterfront office market experiencing sub-4% vacancy and increase cash flow through marking existing leases to market. Rent PSF/Year $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 In-Place vs. Market Rent Graph $80.10 $67.08 $69.10 $71.17 $73.31 $75.50 $63.99 $60.70 $60.95 $73.85 $64.02 $66.53 $66.10 $58.87 $55.21 $49.40 $45.64 $43.48 Current 2017 2018 2019 2020 2021 2022 2023 2024 2025 % RSF Expiring Weighted Average In-Place Rent Weighted Average Market Rent 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 5
FRANCISCO Strong In-Place Diversified Cash Flow 55 FRANCISCO is 100% leased to a highly diversified mix of tenants with no single industry making up more than 34% of the Property s square footage. The rent roll is comprised of users from the medical, technology, legal, and business services sectors. This diverse tenancy provides investors with an income stream that is insulated against sector and tenant specific economic declines and exemplifies the ability of 55 FRANCISCO to attract and meet the varying needs of a wide array of users. Tenant Diversity at 55 Francisco 34% 3% 3% 5% 7% 13% Entertainment Marketing Industrial Legal Software E-Commerce 18% 17% Media Medical
Unique Mix of Creative and Medical Tenants Large, well-funded technology and established medical practices are drawn to 55 FRANCISCO for its: State-of-the-art creative/medical facilities Sweeping bay views Proximity to well-educated workforce Soaring ceilings and unique work environment Convenient access to executive housing in Marin County Abundant parking Tenant The RealReal Industry E-Commerce RSF 23,388 Ownership Private Website www.therealreal.com Founded in 2011; 315 employees Headquartered at 55 FRANCISCO Has expanded once prior to taking occupancy Has raised $123 million in funding including $40 million in 2016; generated over $100 million in sales in 2014 Leader in online authenticated luxury good consignment EXECUTIVE SUMMARY Tenant San Francisco Fertility Centers Industry Medical RSF 23,285 Ownership Private Website www.pacificfertilitycenter.com Main location at 55 FRANCISCO; on-site laboratory Tenant since 1999; has expanded 5 times State-of-the-art lab facility has repeatedly received coveted perfect score certification World-renowned fertility clinic offering infertility diagnosis and treatment Tenant Endpoint Clinical Industry Software RSF 18,212 Ownership Private Website www.endpointclinical.com Founded in 2009; 200 employees Headquartered at 55 FRANCISCO Has renewed once and expanded twice Leader in the interactive response technology (IRT) industry used for clinical trials in the life sciences industry Solutions have been implemented in over 40 countries and 30 languages Tenant DG Fast Channel Industry Media RSF 9,003 Ownership Private Website www.extremereach.com Founded in 1992 Acquired by Extreme Reach in 2013 for $485 million; now operates as a subsidiary Provider of digital media services and television advertising Tenant Isolation Network Inc. Industry Media RSF 8,433 Ownership Private Website www.isolationnetwork.com Founded in 2002 Headquartered at 55 FRANCISCO Innovative media & technology services company providing global distribution and marketing services to independent labels and established artists Selected by Universal Music Group to digitally distribute all of their music in North America Tenant EandM Industry Industrial RSF 7,322 Ownership Private Website www.eandm.com Founded in 1955 Tenant since 2004 Headquartered in Healdsburg in Sonoma County Provider of industrial automation software and hardware 7
FRANCISCO Vibrant North Waterfront District Office Submarket Situated in San Francisco s North Waterfront district along The Embarcadero, which runs from Fisherman s Wharf to China Basin, 55 FRANCISCO enjoys a high profile location in one of the city s most desirable neighborhoods. Renowned for its breathtaking waterfront views and close proximity to San Francisco s most popular tourist destinations including Fisherman s Wharf, Pier 39, and Ghirardelli Square, the North Waterfront offers tenants unparalleled access to world-class shopping and dining amenities in a beautiful setting. The North Waterfront/Jackson Square submarket is experiencing surging momentum as a result of robust market fundamentals. With approximately 5.3 million square feet of office space, the North Waterfront/Jackson Square submarket is home to several world renowned firms such as Levi s, Esurance, Williams Sonoma, Pottery Barn, and Intel who are attracted by the waterfront views and high-quality office space in close proximity to the Financial District, without the congestion associated with the Financial District. As of Q1 2016, vacancy rates for the overall North Waterfront/Jackson Square submarket was reported at 4.1%, the lowest mark among all San Francisco submarkets. Class A buildings in the North Waterfront/ Jackson Square outperformed the greater San Francisco market, experiencing even tighter vacancy at just 3.8%. TRANSAMERICA PYRAMID BROADWAY ST ST COLUMBUS AVE THE EMBARCADERO Average asking rates have benefited from the diminishing availability as Class A rental rates increased 8.7% year-over-year through Q1 2016 to $66.48 PSF. This represents the highest rate since 2000, and a 122% increase over the most recent trough in Q1 2010. Despite this growth, rental rates remain at a 13.4% discount to the Financial District. MUNI LIGHT RAIL
COIT TOWER THE EXPLORATORIUM PIER 39 FRANCISCO JAMES R. HERMAN CRUISE TERMINAL AT PIER 277 North Waterfront/Jackson Square: Asking Rate vs. Vacancy 25% 20% 15% Rents +122% since 2010 Vacancy -78% since 2010 $70.00 $60.00 $50.00 $40.00 10% 5% $30.00 $20.00 $10.00 0% $- Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Rental Rate Vacancy Vacancy % MUNI LIGHT RAIL
FRANCISCO Discount to Replacement Cost Demand by capital for Class A office buildings in gateway markets has pushed pricing for high-quality office buildings through replacement costs. 55 FRANCISCO provides investors the opportunity to acquire a Class A office building at a significant discount to replacement costs, estimated to be nearly $800 per square foot.
REET EXECUTIVE SUMMARY Amenity-Rich Location Unparalleled amenities surrounding 55 FRANCISCO include The Bay Club (San Francisco s premier sports club), the Exploratorium, and a collection of high end restaurants, such as Hillstone, Piperade, and Park Tavern. Additionally, the Property is conveniently located within walking distance to Pier 39, Fisherman s Wharf, Ghirardelli Square, The Ferry Building, and an abundance of other shops and entertainment venues in the Jackson Square and North Beach neighborhoods. JEFFERSON BEACH STREET Pier 41 Ferry Terminal PIER 39 Biscoff Coffee Corner Bubba Gump Shrimp Co Cup of Love Eagle Café Pier 39 Fog Harbor Fish House Crab House at Pier 39 Wipeout Bar & Grill Swiss Louis Pier Market Seafood Hard Rock Café Boudin Bakery & Café Johnny Rockets Chowders Players Sports Bar and Grill F Rainforest Café Subway IHOP Forbes Island Hana Zen Sushi & Yakitori Beach Street Grill Hot Spud The Crepe Café Luigi's Pizzeria The Wharf Inn Hotel Zephyr 39 Butterfly Restaurant Sheraton Fisherman s Wharf Hotel Holiday Inn Express Interstate Hotels & Resorts Sammy s Aloha Hollywood Café 47 Alcatraz Landing Café Best Western Plus 24-Hour Fitness Hillstone 47 Hyatt Fisherman s Wharf Accelerate Sports Performance FRANCISCO Miyabi Sushi Freddie s Sandwiches P-Fits F Starbucks Café Francisco Tan s Café Trader Joe s Fior d Italia Cruise Terminal at Pier 27 Albona Restaurant Café Capriccio Bay Club Pat s Café 39 39 RJ s Market Fog City Pier 23 Café II Fornaio Curry Leaf Parlor 1255 Beacon Coffee & Pantry Coit Tower Seaglass Restaurant Starbucks La Trappa Café Levi Plaza Café Liguria Bakery Sushi on North Beach Exploratorium Café Destiji Da Flora Park Tavern 30 Don Pisto s Piperade NORTH POINT STREET 30 Cable Car FRANCISCO STREET GREENWICH STREET FILBERT STREET UNION STREET LOMBARD STREET 41 BAY STREET 45 Cable Car 8BX 8BX 8X STOCKTON STREET COLUMBUS AVENUE 8BX 8X 8X Y STREET THE EMBARCADERO Tony s Pizza Napoletana Battery Street Coffee Roastery ANSOME STREET BATTERY STREET STREET F 11
FRANCISCO Investment Sales MICHAEL LEGGETT Senior Managing Director T 415.276.6924 mleggett@hfflp.com CA Lic. #01056334 GERRY ROHM Senior Managing Director T 415.276.6935 grohm@hfflp.com CA Lic. #01367742 DAVID DOKKO Associate Director T 415.276.6926 ddokko@hfflp.com CA Lic. #01960806 GARRETT CALBERT Real Estate Analyst T 415.276.6925 gcalbert@hfflp.com CA Lic. #01995186 Debt Financing PETER SMYSLOWSKI Managing Director T 415.276.6950 psmyslowski@hfflp.com CA Lic. #01301231 Market Leasing HFF and HFFS (HFF Securities L.P.) are owned by HFF, Inc. (NYSE: HF). HFF operates out of 23 offices nationwide and is a leading provider of commercial real estate and capital markets services to the U.S. commercial real estate industry. HFF together with its affiliate HFFS offer clients a fully integrated national capital markets platform including debt placement, investment sales, equity placement, advisory services, loan sales and commercial loan servicing. For more information please visit hfflp.com or follow HFF on Twitter @HFF. HFF has been engaged by the owner of the property to market it for sale. Information concerning the property [properties] described herein has been obtained from sources other than HFF and we make no representations or warranties, express or implied, as to the accuracy or completeness of such information. Any and all references to age, square footage, income, expenses and any other property specific information are approximate. Any opinions, assumptions, or estimates contained herein are projections only and used for illustrative purposes and may be based on assumptions or due diligence criteria different from that used by a buyer. Buyers should conduct their own independent investigation and rely on those results. The information contained herein is subject to change. BRUCE WILSON Senior Vice President T 415.291.1717 bruce.wilson@cbre.com CA Lic. #00975682 JOSH PETERSON Vice President T 415.291.1712 josh.peterson@cbre.com CA Lic. #01455490