Nearly everywhere else, the Pyramid would refer to an ancient tomb or temple. In San Francisco, it has another meaning.
Developer Michael Shvo still gets “goosebumps” when seeing Transamerica Pyramid peek out from the fog, its distinctive angles a contrast to the city’s array of high rises. He took his daughter to Marin this week to see the Pyramid from the other side of the Golden Gate and to re-create a photo that his family took in the late 1970s.
During a speech Tuesday morning outlining his vision for the property at 600 Montgomery St. he now owns, he showed a childhood drawing he made after visiting San Francisco for the first time, a stick figure next to a colorful rendition of the Pyramid.
“While I’m sure I was dreaming about something, for sure I know I was not dreaming that one day I would be the custodian of this great icon,” Shvo said in an interview before a launch event celebrating the building’s 50th birthday.
Designed by the architect Norman Foster, Shvo’s $400 million redevelopment project encompasses the central tower, adjacent structures at 505 Sansome St. and 545 Sansome St. as well as the Redwood grove that functions as a green oasis in the concrete jungle.
Among the planned improvements are expanding the ground-floor park to include the entire block, modernizing the Pyramid’s dated interiors, renovating the lobby and entrances and adding amenities like a private top-floor bar for tenants. Construction on the initial phase of the redevelopment is expected to span through 2023.
Trophy Properties
Shvo’s goal is to own and develop what he terms “trophy properties”—iconic structures that are permanent teeth in city skylines across the country. His bet with the Transamerica Pyramid is that luxe, high-quality office spaces will continue to increase in value in the post-pandemic world.
That flight to quality is borne out in data about commercial real estate demand and pricing. According to real estate sources and Shvo himself, the office rent tenants are paying for the Transamerica building are among the highest in the city. But the purchase of the structure, and Shvo’s vision for it, are symbolic of how a struggling downtown could get back on the right foot.
“We’re seeing the largest divergence we’ve ever seen,” Shvo said. “Our job as owners of trophy buildings is to create an office environment that makes you want to come to work as opposed to staying in your pajamas at home.”
As for the rest of the market? Shvo said the older stock of office space that “really shouldn’t exist, probably will be repurposed.”
In fact, in meetings with the mayor and others at City Hall, Shvo said he has pitched incentives to help right size the amount of office space in the city’s business district.
“Regardless of people coming back to work, there are buildings that are obsolete,” Shvo said. “They were obsolete before, but it’s like now when you have milk and it’s still in the refrigerator, but you just notice the expiration date.”
An Icon Is Born
There was little evidence of the very real troubles faced by the city’s commercial real estate market at the 50th birthday event on Tuesday, which included a string quartet, an array of political heavyweights and hand poured coffees from Sightglass baristas. In fact, many of the politicos in attendance painted Shvo’s vision as the leading edge of a changing Downtown that could be much more than an office hub.
“This renovation is really a testament not to what was, but what will be over the next 50 years in San Francisco, a new beginning to transform this into a neighborhood,” said Mayor London Breed. “It starts with investments like this.”
It’s a bit of San Francisco lore that the now-iconic pyramid was hated when it was first proposed and for many years afterward it was pointed to as evidence of the dreaded “Manhattanization” of the city. The building was even referred to colorfully as “Pereira’s Prick” after William Pereira, the building’s architect.
What is lesser known are the details on how the building came to pass. Shvo said the urban legend that Pereira left the pyramid design for last during his pitch meeting with Transamerica was untrue. The structure was actually chosen after ABC passed on the design for its New York headquarters and the model was spotted by a Transamerica executive.
Speakers shared their own memories tied to the city icon. District 3 Supervisor Aaron Peskin, for example, said one of his neighbors told him and his brother that the Pyramid under construction was a rocket ship awaiting takeoff.
Former Mayor Willie Brown was ribbed for being the only elected official alive and active when the structure was first opened in 1972, and said he remembers when he was the same height as the Redwood trees that dot the complex.
Asked about the ability of city leaders to deal with a hollowed-out Downtown, Brown said in an interview that he senses political winds shifting away from what he termed “nothing arguments.”
“Don’t make the decision on the basis of whether or not I get this constituency, I get that one. No! Make the decision on the basis of whether or not to build the building,” Brown said pointing at the Pyramid towering overhead.
Back to the Office?
All the gladhanding and slickly-produced video did not completely overshadow the pandemic’s impact on the city and efforts by Shvo, who has a measure of notoriety in the real estate world, to revitalize the city icon.
The brash luxury broker-turned-developer is no stranger to controversy, settling tax evasion accusations back in 2018. Shvo was also sued by a former associate who claimed he pushed out of a deal to purchase the building. That case was eventually settled.
Shvo won the right to acquire the property for $650 million after a sharp-elbowed process that included five months of phone calls and six rounds of bidding. He eventually came out as the sole winner of the bid, turning down an offer by two other bidders to partner.
One month after the deal was announced, the pandemic hit and his lender pulled out.
“We thought the world’s come to an end, but we didn’t quit,” Shvo said. “We didn’t quit because I knew that this building is bigger than anything else.”
Shvo said he thinks the market is going through a volatile period followed by stabilization, a period he tags at around 18 months. Ultimately, he believes that broader economic uncertainty will bring workers back to offices.
Salesforce, for example, has recently pushed some of its workers back to the office, following the lead of companies like Apple, Twitter and Goldman Sachs.
“People that are fearful of losing their job are coming back to work. Prior to that companies couldn’t bring them back, but the economy is bringing them back,” Shvo said. “Collaboration happens face-to-face. People need to be with other people to create greatness.”