Hines, Boston Properties Break Ground on 101 First St. in San Fran

By Gail Kalinoski, Contributing Editor

Boston Properties and Hines have closed on the $192 million purchase of 101 First Street in San Francisco, where they will erect the 60-story, 1.4 million-square-foot Transbay Transit Tower, the tallest building on the West Coast. The JV partners bought the 50, 0000-square-foot site from Transbay Joint Powers Authority, paying almost $4,000 a foot.

The TJPA will use the money for the Transbay Transit Center at First and Missions streets, a $4 billion transit hub under construction that will feature a bus and rail station and 5.4-acre park on top of it. Both Transbay Transit Tower and Transbay Transit Center are being designed by Pelli Clarke Pelli Architects.

The tower will be 1,070 feet, making it the tallest on the West Coast and beating out New York City’s Chrysler Building for the honor of seventh tallest in the United States. While a ceremonial groundbreaking was held this week to celebrate the sale of the property, actual construction is not expected to begin until summer. The project is slated for completion in 2016.

“This record transaction signifies the investor confidence that we all have in San Francisco’s future,” Mayor Edwin M. Lee said in a news release. “Soon to be the West Coast’s tallest building, the Transbay Tower benefits not only a world-class transit facility but also represents the strength of our city’s economic recovery, providing jobs to build a better, more sustainable future.”

Final planning approval for the tower was granted in October. Boston Properties and Hines finalized a joint venture to acquire the property and construct the tower in December. Each company has a 50 percent interest in the project.

Dan Fasulo, managing director of Real Capital Analytics, expressed some concern that the tower does not have tenants signed yet.

“A lot of the big tenants out there in San Francisco are the fast-growing tech firms. They want space today, not in five years,” Fasulo told Commercial Property Executive. “While you do see some spec construction going on, it’s for buildings a third of this size.”

But Hines Senior Managing Director Paul Paradis noted that tenant interest across the financial, professional and tech sectors had been “extremely high.”

“Now that we are closing on the land and moving full speed ahead with the design, I’m confident that discussions will progress into leasing quickly,” Paradis stated in the release. “Transbay will be a new icon for the city and state, but also a beacon for a progressive anchor tenant looking for the finest, sustainable office space.”

Both Hines and Boston Properties are active players on the San Francisco commercial real estate scene. Earlier this month, Hines and Invesco Real Estate said they were acquiring the Rialto Building at 116 Montgomery Street from Africa Israel USA. The amount wasn’t disclosed, but market specialists estimated the sale price for the historic, nine-story building to be about $57 million. The project contains 135,486 square feet of office and retail space and is 85 percent leased. Hines currently owns and manages 3.6 million square feet in San Francisco, including 101 California, 560 Mission, 580 California and 50 Fremont.

Last month, Boston Properties acquired 535 Mission St., a 27-story building development from Beacon Capital Partners for about $71 million. The office and retail building will be 378 feet tall and have 307,000 square feet of Class A office and retail space that is expected to be LEED Gold certified and aimed at tech tenants. In September, Boston Properties purchased 680 Folsom and 50 Hawthorne, abutting office buildings, for more than $62.2 million in cash and assumed a $170 million construction loan from TMG Partners and Rockwood Capital L.L.C. Once redevelopment is finished, the properties should have 521,000 square feet of Class A office space.

The office market is hot in San Francisco with “vacancy rates near pre-recession levels and asking rents reaching their highest point in over a decade,” according to the fourth quarter 2012 report on the San Francisco Office Market from Newmark Grubb Knight Frank. Most of the leasing is being driven by tech companies. Newmark Grubb Knight Frank reported that four of five leases signed in the fourth quarter of 2012 were for technology tenants, including Salesforce.com, which took 444,271 square feet at 350 Mission Street in the South Financial District.