San Francisco’s Tiffany Building Trades Hands

By Barbra Murray, Contributing Editor

The Tiffany Building

San Francisco—The Tiffany Building in San Francisco has come under new ownership, courtesy of a transaction orchestrated by Cushman & Wakefield. The commercial real estate services firm served as exclusive advisor to Greenstone Realty Advisors LLC and 360 Post LP on the sale of the approximately 97,000-square-foot premier retail and office building to a group based in Europe.

The Tiffany Building is high street retail at its best. Home to a Tiffany & Co. flagship store for nearly a quarter-century, the 44-year-old property features 75 feet of coveted retail frontage along the well-traveled Post Street on Union Square, an internationally known luxury retail shopping district. And then there’s the impressive office tenant roster, which includes the headquarters of Cathay Pacific.

“Looking at this transaction, the current ownership did very well on holding the property, and the buyer, I think, is going to do extremely well as well,” Seth Siegel, executive managing director with Cushman & Wakefield, told Commercial Property Executive. “People buy this kind of real estate not just because its iconic real estate but because when you see properties like this—these rare properties in areas like Union Square—they tend to have a history of outperforming the average type of investment.”

The Tiffany Building, which last traded in late 1995 for $22 million, according to San Francisco Planning Department records, attracted the attention of both domestic and international investors, including institutional capital, high net worth groups and the other usual suspects. While parties involved in the current transaction aren’t publicly revealing the sale price at this time, Bay Area real estate publication The Registry reports that the 11-story property traded for approximately $145 million.

Without sharing so much as a hint of the financial specifics of the deal, Siegel noted that the undisclosed price tag speaks volumes. “I think the proof is in the pudding in terms of pricing,” he said. It’s very unusual for this type of real estate to come to market, so when it does, you have countless trophy hunters that have what I would describe as a very voracious appetite. So it’s not cycle specific; it’s more about buying the best-of-the-best and putting your money to work in assets that will hold their value over time and continue to appreciate in the long run, and I think this asset certainly represents that.”

The magic extends beyond the Tiffany Building and Union Square; the San Francisco commercial real estate market in general is faring quite well. Per a Cushman & Wakefield report, the retail sector recorded an overall vacancy rate of just 1.7 percent in the second quarter, marking the lowest rate in at least a decade. Additionally, the average office vacancy rate is nothing to sneeze at either, coming in at 7.3 percent in the second quarter. Sales are strong as well, and replacement costs are through the roof, having risen from roughly $650 per square foot in the last cycle to north of 900 per square foot, noted Siegel. Rents are on the rise and demand remains strong. Will the party ever end in San Francisco? That’s not the right question to ask, he said.

“The question you have to ask about San Francisco is do you believe it’s going to be a healthy market in the long run,” Siegel explained. “If you need to be out of a deal within one or two years, then are you buying in San Francisco? Probably not. But if you’re buying for four, five years plus, then it’s an easy decision to make.” He pointed again to such indicators as replacement costs and demand, and the migration of tech companies. “And if you look at the transformation of the city just this last cycle, it’s more vibrant than it’s ever been,” he added. “And I think people believe that with the Transbay Transit Center and the construction you see going on today, especially from a residential side, it’s going to be a very, very viable and exciting place to be in five years. So I think that there’s no shortage of people who believe in San Francisco, especially over a sustained period of time.”

Image courtesy of Kenmark