Manulife Enters San Francisco with $265M Purchase of 770,000-SF Market Center

October 1, 2010
By Barbra Murray, Contributing Editor

Downtown San Francisco’s Market Center, a 770,000-square-foot two-building office property, has become the latest addition to Manulife Financial’s real estate portfolio. The company picked up the premier asset for from real estate investment manger RREEF for a reported sum of approximately $265 million.

Market Center comprises the 21-story tower at 555 Market Street, and the 40-story high-rise at 575 Market Street. Consisting of 283,000 square feet and 487,000 square feet, respectively. The buildings were developed by Chevron Corp. 10 years apart beginning in 1965. Both structures feature ground-level retail space and sit just across from a Bay Area Rapid Transit system station.

Over the last decade, Market Center has changed hands more than a few times. Late in 1999, Chevron sold the complex to Tishman Speyer and Travelers Real Estate Ventures in a transaction valued at $189.1 million. But the next trade, just four years later, was more of a steal-of-a-deal than a transaction, with DivcoWest Properties and RREEF partnering to buy the buildings for a shockingly low $79.5 million in 2003. And in 2006, Divco sold its ownership stake in the property to RREEF.

For Manulife, which has had a foothold in California for nearly 40 years, the Market Center purchase marks the company’s entrée into the San Francisco office market. Manulife investment division chief operating officer Kevin Adolphe noted that the company identified San Francisco as one of several potential growth areas for its real estate business and is optimistic about the possibilities in the city and other key markets while continuing to look for core office and industrial investment opportunities.

With Manulife’s new San Francisco asset, the company’s California real estate portfolio, which includes office and industrial properties, now spans nearly five million square feet valued at an estimated $800 million. All told, Manulife’s real estate holdings–located in prime markets in the U.S., Canada and Asia–total 29 million square feet with an aggregate carrying value of approximately $5.7 billion as of the close of the second quarter.