SAN FRANCISCO

Owner ready to put Embarcadero tower on market

Boston Properties is getting ready to put the Embarcadero Center West up for sale, a real estate industry newsletter has reported.

One of five Embarcadero Center highrises owned by Boston Properties, the property at 275 Battery St. could attract offers as high as $200 million, according to a report in Real Estate Alert. That would put it among the priciest properties to change hands recently.

Boston Properties sold a sixth, smaller Embarcadero building, the historic Old Federal Reserve, three months ago. Selling another would pare its San Francisco holdings to the Embarcadero complex's four original buildings, which total 3.3 million square feet.

Boston Properties, which declined comment on the possible sale of Embarcadero West, has so far sat on the sidelines during San Francisco's office trading frenzy.

Every other major commercial landlord, including Equity Office Properties, Hines and Shorenstein Co., has bought or sold multiple properties during this cycle. Some, like New York investors David Werner and Mark Karasick, are working both ends of the sales cycle. Werner and Karasick purchased the Bank of America building less than a year ago and are now selling it.

Last year $2.7 billion in commercial buildings traded hands in San Francisco -- a record that could be broken again this year. More than $2 billion has traded so far this year and fresh properties are hitting the market each week. Sales prices averaged $320 a square foot during the second quarter, according to real estate brokerage Colliers.

But some high-profile trophy sites have gone for far more. The Landmark at One Market Street sold for $495 per square foot, and One Montgomery Street sold for $467, leading some real estate sources to believe $420 a square foot would be an achievable price for Embarcadero West.

"The market is still red hot for that type of asset," said Christopher Aust, director of capital markets for Cushman & Wakefield. "That's what everyone's fighting over -- the core downtown stuff."

Grubb & Ellis researcher Colin Yasukochi said the strong sales momentum of the past 18 months is likely to continue given the improving market fundamentals.

Some investors, like DivcoWest, which purchased 555 Market St., and Kent Swig, who purchased 450 Sansome St., are actually ahead of the cash flow projections they made at the time of purchase, Yasukochi said.

"At the time people thought they were being aggressive, but they're doing even better than they expected," he said.

Embarcadero West is 475,000 square feet and is roughly 85 percent leased. Some of the largest tenants are Gordon & Rees, O'Melveny & Myers and Folger Levin. The San Francisco Business Times also is a tenant.

One of the reasons Boston is able to offer the property, according to Real Estate Alert, is it has an individual mortgage, as does two other buildings in the Embarcadero complex.

Secured Capital, which has the listing, also declined to comment.- by Lizette Wilson    BIZ JOURNAL    22 Aug 2005

803-Room Hyatt Regency : Sale

2007 Jan 9:   The 803-room Hyatt Regency within the Embarcadero Center development here has changed hands. A joint venture of Dune Capital Management of New York and DiNapoli Capital Partners of Los Angeles acquired the asset from SHC Embarcadero LLC.

The Hyatt Regency is a 17-story building that was built in 1972 on 1.6 acres at 5 Embarcadero Center. One local news source citing unnamed sources pegged the sale price at approximately $250,000 per key, or $200 million, but hotel industry experts tell GlobeSt.com that would be at the very bottom of the expected sale price range for the property, which last sold in 1998 for $180 million.

The lowest price for a comparable transaction in 2006 was $258,000 per key and the highest price was $368,000 per key, and prices have reportedly risen as much as 20% since that time, according to industry experts. “Unless it’s on a ground lease or there is something [different] with Hyatt’s management contract, [$250,000 per key] would be a low price,” says one industry expert.

SHC Embarcadero LLC, the seller, is an affiliate of Strategic Hotel Capital LLC, a private company whose principal shareholders are affiliates of Goldman, Sachs & Co. and investors advised by Prudential Real Estate Investors. DiNapoli is a Southern California-based real estate investment firm founded by F. Matthew DiNapoli, a founding principal of the Maritz-Wolff Hotel Equity Funds. Dune runs a hedge fund out of New York. Eastdil Secured brokered the transaction.

An executive with DiNapoli did not respond Monday to a request for comment. In a prepared statement, Dune chief executive Dan Neidich describes the hotel as “a landmark asset in an irreplaceable location” in a market where there has been steady improvement in lodging fundamentals and the local economy in general. No information was provided with regard to future upgrades to the property, but renovation of the street-level retail has been mentioned as a way to add value to the property.

The sale is the latest in a long list of San Francisco hotel sales in the past year and several others are on the works. In June 2006, the Chicago based REIT Strategic Hotels & Resorts Inc. acquired the 1,195-room Westin St. Francis hotel on Union Square for $440 million or $368,000 per key. The hotel features 45 luxury suites, 50,000 sf of meeting space, 39,000 sf of retail space, a 4,600-sf health club and spa and four food and beverage outlets.

In May, the 360-room Park Hyatt in the Financial District sold in early May for about $135 million, or $375,000 per key, and was re-branded a Le Merdien. In April, Ashford Hospitality Trust of Dallas acquired the 338-room Pan Pacific San Francisco Hotel for $95 million, or $281,065 per key, and re-branded the property a JW Marriott hotel. In March, the 690-room Argent hotel on Third Street between Market and Mission was sold for $178 million, or $258,000 per key.

Atlas Hospitality Group is still compiling a year-end report on the hospitality market, but president Alan Reay tells GlobeSt.com that that 2006 will go down as the biggest year the California hospitality market has experienced since his firm began tracking the state 15 years ago. The rough totals are 380 transactions with a combined value well in excess of $3 billion, he says.

While value and number of hotel sales both are expected to slow in 2007, in large part because the biggest and best hotels changed hands in 2006, the Hyatt Regency sale gets the year off to a big start and others are in the works. The 1,009-room Renaissance Parc 55 is expected to change hands in the very near future and Crowne Plaza and Palomar hotels recently went on the market, according to local brokers.   - CITY FEET.com    2007 Jan 7

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