HFF Arranges Loan for SF High-Rise Expansion

By Barbra Murray

633 Folsom St. in San Francisco

The Swig Co.’s expansion project at 633 Folsom in San Francisco’s SOMA submarket just got a big boost. With the assistance of commercial real estate and capital markets services provider HFF, Swig secured a $145 million construction loan to complete a building addition that will increase the size of the 171,000-square-foot office property to a total of 266,000 square feet. The owner is on track to present the transformed 633 Folsom in 2020.

HFF arranged the financing for the 94,400-square-foot expansion of 633 Folsom through an unnamed domestic bank. Swig brought quite a bit to the table in its bid for financing, including solid proof of a commitment to the asset; the real estate company developed 633 Folsom in 1966. Moreover, it’s the rare lender that can turn a blind eye to a property that has maintained 100 percent occupancy for the past two decades. And Swig has a good reason for planning a five-story addition to the seven-story structure: evolving user requirements.

“The planned repositioning and expansion of 633 Folsom coincides with a shift in leasing patterns from traditional tenants seeking 5,000 to 10,000 square feet to large users establishing new headquarters or satellite campus locations in the San Francisco CBD,” Bruce Ganong, senior managing director with HFF, said in a prepared statement.

633 Folsom, which also features 1,100 square feet of ground-level retail, was completely upgraded in 1994 and underwent cosmetic improvements in 1998. California Pacific Medical Center, the last of the remaining tenants, is scheduled to vacate the property this month. Swig will commence its renovation and expansion program in summer 2018, and reinvent the property as a modernized Class A office destination.

Big shortage of big space

The reinvigorated and augmented office accommodations at 633 Folsom will likely find a warm welcome on the market, given the dearth of options for users seeking sizeable segments of contiguous space. “Large block demand continues to outpace supply,” according to a first-quarter 2018 report by commercial real estate services firm Cushman & Wakefield. “There are eighteen space requirements of 100,000 square feet or more but only 10 options that can offer occupancy in 2018, therefore the large block sector of the market will remain tight in the near term, as quality space becomes increasingly scarce.”

Commercial real estate services firm CBRE is marketing the space. The overall average asking rent for premier office space in SOMA is $77.48 per square foot, according to the C&W report. That makes the neighborhood the second most expensive Class A submarket in San Francisco by just pennies.

Last September, two historic San Francisco office buildings owned by Swig were awarded LEED Platinum certification from the U.S. Green Building Council.

Rendering courtesy of The Swig Co.