Local real estate and restaurant magnate Greg Flynn is acquiring Market Center, a 770,000-square-foot office property at 555-575 Market St.
The two skyscrapers, once known as the Standard Oil Buildings or Chevron Towers, will trade hands in a “deed in lieu of foreclosure,” in which Flynn will purchase what’s left of the existing $416 million loan on the property from lender ING.
Sources say Flynn’s group is paying around $177 million, or $238 per square foot, for the buildings, the highest sale price for a San Francisco office property since 2022, when DivcoWest purchased 550 Terry A. Francois Blvd. (now the offices of OpenAI) from Gap.
Market Center was last sold to New York-based Paramount Group in 2019 for $722 million. Flynn and his primary investment partner on the deal, DRA Advisors, got a 76% discount on the last purchase price.
Paramount Group stopped making loan payments last August, citing insufficient “property cash flows,” and defaulted on the mortgage in January. Market Center was less than half leased at the time, according to Paramount’s latest 8-K portfolio summary. The real estate investor made a series of bold bets at the peak of San Francisco’s office market that failed to pay off.
One of the major tenants at Market Center is Waymo, which leases 78,000 square feet at 555 Market St. Other tenants include Mindspace, Bank of Communications, Crowe LLP, and Mayer Brown.
“We’re going to bring a level of hospitality to the office market never before seen in San Francisco,” Flynn told The Standard.
His group plans to transform unused meeting space on the ground floor of 555 Market St. into an activity center called The Break Room, featuring a giant electronic video display, basketball court, rock climbing wall, and outdoor sports bar, all visible from Market Street.
Above that, an open floor previously used by Uber for its global training center will be replaced by two or three pickleball courts and meeting space. These amenities will be primarily for office tenants but could be opened up to the paying public on weekends, Flynn said.
The Bay Area native’s wealth comes from his dual real estate businesses. Flynn Group is the largest franchise operator in the world, managing more than 2,900 locations of Applebee’s, Panera, Pizza Hut, and other brands. Flynn Properties oversees hundreds of select-service hotel brands, six luxury resorts, and multiple office buildings.
Flynn purchased the historic Huntington Hotel in 2023 and a Class B office building at 631 Howard St. last year. Both properties are undergoing renovations.
Coincidentally, Market Center will be the third office building built by Standard Oil to be purchased by Flynn. His company previously owned and sold office towers at 115 Sansome St. and 225 Bush St.
Since Flynn Properties is taking over Market Center at a lower cost basis than Paramount, his group intends to compete in the city’s crowded office market by offering “generous” improvement allowances, covering the cost of upgrades and renovations for new tenants.
Moreover, the available office suites average 13,000 square feet, a size that aligns with tenant demand for new offices. “The great thing about this is that those tenants can stay on the property and grow with us as well,” Flynn said.
This is not the first time the sale of Market Center has marked a turning point in the real estate market. After Chevron decamped and left the property more than 80% empty, the skyscrapers were purchased for a mere $79.5 million by DivcoWest and RREEF Property Trust in 2001.
Eventually, as leasing and economic conditions improved, the property appreciated with each sale, from $267 million in 2010 to $510 million in 2016 to $722 million in 2019.
Flynn said this was his first time working with real estate investment firm DRA Advisors, which is based in New York. The property was marketed for sale by Eastdil Secured in January.
Out-of-state investors like DRA have been slow to return to San Francisco’s office market since the pandemic. In order to finance his purchases of the Huntington Hotel and 631 Howard, Flynn turned to high net-worth individuals with local ties, such as Nancy and Paul Pelosi, who were willing to bet on the city during uncertain times.
“No one wanted to step up before six months ago,” Flynn said. “Now the city and the market are in a much better place.”