SKS, Swig Co. close purchase of Union Bank’s longtime S.F. home in deal that shows downtown’s fallen building values

SKS, Swig Co. close purchase of Union Bank’s longtime S.F. home in deal that shows downtown’s fallen building values

By Laura Waxmann – Staff Reporter, San Francisco Business Times

A bid to purchase a 22-story glass and stone tower in the Financial District, viewed as a harbinger of the San Francisco office market’s reset, has made it over the finish line.

Multiple sources have confirmed that SKS Real Estate Partners paid $61 million, or just over $200 per square foot for 350 California St., a 300,000-square-foot office tower that served as the longtime home of the Union Bank but today sits largely vacant. The developer has been working to close the deal since being selected in May, and did so officially on Thursday — the seller was Mitsubishi UFJ Financial Group (MUFG), which was represented in the transaction by Kyle Kovac, Mike Taquino and Giancarlo Sangiacomo of real estate services firm CBRE.

“The California Street corridor has always outperformed the market from an experience, tenant and investment perspective and will continue to do so,” said Kovac when contacted on Thursday.

Still, the pricing represents close to a 75% drop from the some $250 million that MUFG initially sought for it more than three years ago. The building’s value has tumbled significantly amid steadily rising office vacancy in San Francisco, and the negotiations appeared to be in jeopardy at least once in recent months when SKS Partners’ original equity partner, a Korean investor, reportedly pulled out of the bid.

However, SKS Partners persevered, subsequently partnering with privately owned real estate investor the Swig Co. to close the deal.

“We viewed this as a generational opportunity to acquire an immaculately maintained and very well-located Financial District building at below replacement cost, and to do so with a skilled and trusted partner,” said Connor Kidd, Swig’s CEO. “The Swig Co. believes in building strong and lasting partnerships and we believe in San Francisco. This opportunity came about as a result of our retiring CEO Jim Carbone’s 40-year relationship with Paul Stein and we want to thank them both for making this opportunity a reality.”

Stein, who is a managing partner at SKS Partners, said that the acquisition of 350 California “reflects the certainty that The Swig Company and SKS Partners have in San Francisco’s continued role as a center of business and innovation. We are confident in our city’s future and look forward to the tenancy of 350 California Street contributing to the vibrancy of Downtown.”

Union Bank has agreed to a “minimal short term leaseback” of some of the office space at 350 California, according to my sources. Union Bank was owned by MUFG when the building first hit the market in 2020, but in December was sold to U.S. Bancorp.

Coupled with another recently completed deal, the 350 California tower’s sale points to a gradual resetting of the city’s ailing office market. Earlier this month, Presidio Bay Ventures purchased an 11-story office tower at 60 Spear St. that was listed for sale by Clarion Partners this year. The 157,000-square-foot property, which is also largely unoccupied, traded for roughly one-third of its 2014 price tag: the local firm paid about $41 million, or $260 per square foot, for it.

The sale also reveals a pattern in regard to the type of investors that are currently taking a chance on office properties in San Francisco: local groups rather than the large, institutional players that bought into the market pre-pandemic.

“This is an example of local, established ownership groups with proven track records taking advantage of unprecedented opportunity provided in today’s office market,” said Derek Daniels, who is the research director for real estate services firm Colliers International in San Francisco.

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