JLL’s Capital Markets has secured $150 million in refinancing for 345 California Center in San Francisco’s financial district, JLL announced Wednesday. Cornerstone Advisers on behalf of MassMutual provided the loan to an affiliate of Chicago’s Metropolis Investment Holdings Inc., which could not be reached for comment.
The 48-story, 600,000-square-foot building, the third-tallest in San Francisco, was completed in 1986 and is unusual in that its top 11 floors, which are at 45-degree angles to the rest of the building, were originally intended as residential condominiums. That space is currently occupied by a luxury hotel, the Mandarin Oriental San Francisco.
“Growing rental rates resulting from the rising technology sector and a strong, diversified employer base have increased investor interest in San Francisco’s office market to an all-time high,” according to the JLL release.
Managing directors Keith Largay and John Manning, senior vice president Alex Witt and vice president Fiorentina Malko led the JLL team on the transaction.
“Many lenders were drawn to a trophy office tower in San Francisco’s competitive market,” Largay said in the release. “Premiere sponsorship, a strong tenant roster and an extensive amenity base position the property to perform well.”
“The sponsor was able to capitalize on the debt capital market’s low interest rates, while San Francisco’s steadily climbing office rents and low vacancy rates were huge draws for the lending community,” added Manning.
The office market in San Francisco is indeed an exceptionally strong one, according to a third-quarter report from Marcus & Millichap, which notes a 3.4 percent increase in office-using jobs this year. And while millions of square feet of office space is under construction currently, only about 850,000 is expected to come onto the market this year.
The report predicts that strong demand, especially from tech firms, will drive overall office vacancy down to 10.3 percent at year’s end, helping to boost rents “aggressively” according to M&M. The company forecasts that full-service rents will reach $48.52 per square foot in the fourth quarter, up 8.1 percent from last year.
Metropolis owns a 6-million-square-foot portfolio of high-rise office buildings; its current or recent holdings include the NBC Tower in Chicago, Pennzoil Place in Houston and the Bank of America Tower in Dallas, and the company reportedly also manages real estate for the family of the late German billionaire Hugo Mann.
In August, then president of Metropolis Thomas Prescott left to join Piedmont Office Realty Trust, of Johns Creek, Ga., as its executive vice president for the Midwest.