New York Life’s Real Estate Investors and Dallas-based Lincoln Property Co. have purchased a distressed loan tied to the 23-story office tower at 353 Sacramento St., reflecting the reentry of large institutional investors to the San Francisco market.
The $101.6 million loan was marketed for sale by Aareal Bank of Germany last year, when the building’s previous owner, Pacific Oak Strategic Opportunity REIT of Los Angeles, said it expected to give up the property to foreclosure.
According to sources familiar with the deal, New York Life and Lincoln Property will pay $62.2 million, or about $218 per square foot, to assume the remainder of Pacific Oak’s debt, a 63% discount from the building’s purchase price nine years ago. The building was never foreclosed on, according to city and county records.
The 284,751-square-foot office tower, built in 1983, is two-thirds vacant, sources say. Available floor plans for lease or sublease average 12,000 square feet, the general size most office tenants in the market are seeking.
“This was a rare opportunity to acquire a loan secured by a revitalized office tower in one of the most recognizable business corridors on the West Coast,” said Steve Golubchik of Newmark, whose team represented the lender in the sale.
Pacific Oak bought the property in 2016 for $169.5 million and invested more than $40 million in improvements.
New York Life and Lincoln are reportedly in talks to also acquire 600 Townsend West. The San Francisco Business Times was the first to report that the pair were finalists for both properties.
Once the transactions close, New York Life will have purchased three San Francisco office buildings since the pandemic. Last April, the real estate arm of the Manhattan-based insurance company purchased a distressed property at 410 Townsend St. in SoMa for $22 million, or roughly $282 per square foot.
After the city’s office market cratered because of pandemic shutdowns, the vast majority of discounted property sales were transacted by a handful of local buyers with the cash and motivation to close deals. Institutional investors from out of town who had fueled the city’s previous real estate boom largely opted to sit out.
But the ice is starting to thaw. Last month, New York-based DRA Advisors partnered with local businessman Greg Flynn to purchase the Market Center towers for $177 million, and in April, Blackstone Real Estate teamed up with San Francisco developer DivcoWest to buy an empty office tower at 300 Howard St. for $111.3 million.