SAN FRANCISCO, CALIFORNIA · Convenient access to transportation via 4th Street (home of the...

S A N F R A N C I S C O , C A L I F O R N I A

OFFERING MEMORANDUM

Table of Contents

Contact Information

The information contained in the following Marketing Brochure is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Kidder Mathews and should not be made available to any other person or entity without the written consent of Kidder Mathews.

This Marketing Brochure has been prepared to provide summary, unverified information to prospective purchasers, and to establish only a preliminary level of interest in the subject property. The information contained herein is not a substitute for a thorough due diligence investigation. Kidder Mathews has not made any investigation, and makes no warranty or representation, with respect to the income or expenses for the subject property, the future projected financial performance of the property, the size and square footage of the property and improvements, the presence or absence of contaminating substances, PCB’s or asbestos, the compliance with State and Federal regulations, current or past tax payments, the physical condition of the improvements thereon, or the financial condition or business prospects of any tenant, or any tenant’s plans or intentions to continue its occupancy of the subject property. The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable; however, Kidder Mathews has not verified, and will not verify, any of the information contained herein, nor has Kidder Mathews conducted any investigation regarding these matters and makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. All potential buyers must take appropriate measures to verify all of the information set forth herein.

This information has been secured from sources we believe to be reliable. We make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Recipient of this report must verify the information and bears all risk for any inaccuracies.

Michael Gschwend [email protected] | LIC #01406626

Cameron [email protected] | LIC #01945141

kiddermathews.com

The OpportunityExecutive Summary

Investment Highlights

Property Overview

Financial AnalysisExisting Lease

Expenses

Net Operating Income

Market OverviewSan Francisco Market

SOMA Submarket Overview

ComparablesLease Comparables

Sale Comparables

Transaction Guidelines/Seclection Process

01

02

03

04

05

The Opportunity

01

Executive Summary

Investment Summary

Property Overview

Floor Plans

OFFERING MEMORANDUM | 528-530 BRYANT STREET, SAN FRANCISCO4

The OpportunityKidder Mathews, as exclusive advisor, is pleased to present an extraordinary opportunity to acquire a 100% fee simple interest in 528-530 Bryant Street, San Francisco (the “Property”).

528-530 Bryant Street is a ±5,000 square foot creative boutique building located in SOMA – San Francisco’s most sought after submarket. The two story building is fully leased to Microsoft Corporation and has been recently renovated with an upgraded façade, above-standard finishes, and state of the art building systems. These extensive improvements will greatly minimize future capital and re-leasing costs as well as reduce future landlord responsibilities. The asset boasts easy access to Caltrain, BART, South Park, and numerous neighborhood amenities that have transformed SOMA into San Francisco’s premier technology hub.

Investment Highlights

100% leased to Microsoft

New high-end renovations

Ideal 1031 Exchange property

Fantastic SOMA location

OFFERING PRICE: INQUIRE WITH BROKER


INVESTMENT SUMMARY

One of the finest commercial, stand-alone buildings to be offered to the market. Presently 100% leased with approximately two (2) years left on the term, the Property presents investors with a rare combination of solid in place income and future upside potential.

The Property, having recently been fully renovated, possesses creative aesthetics including polished concrete floors, concrete columns, high exposed ceilings, and six large skylights providing great natural light.

With an attractive net operating income (NOI) in place, the Property is an ideal 1031 Exchange opportunity for buyers looking to own in San Francisco

Located within the Central SOMA Plan, the Property will most likely be up-zoned to Central Mixed Use Office (CMUO), which allows for a variety of uses.

Convenient access to transportation via 4th Street (home of the Central Subway) connecting the Muni T-Line to the Caltrain, BART and nearby freeways.

SOMA submarket continues to serve as the premier technology hub for the San Francisco office market – sustained demand from tech sector, declining vacancies, and a lack of new supply will continue to drive demand.

528-530 Bryant represents the rare opportunity to acquire a 100% leased, fully modernized “jewel box” commercial building within one of San Francisco’s hottest and fastest growing neighborhoods. The Property is positioned to benefit from tremendous on-going and future development taking place throughout the greater SOMA submarket.


PROPERTY OVERVIEW

Address 528-530 Bryant Street, San Francisco CA94107

APN 3762-014

Parcel Area ±3,837 Square Feet

Rentable Square Feet ±5,000 RSF

Number of Stories Two (2), all above grade

Year Built 1923

Years Renovated 2013, 2017 & 2018

ZoningSOMA Service - Light Industrial (SLI) – Probable up- zoning to Central Mixed Use Office (CMUO) per Cen-tral SOMA Plan.

Construction TypeConcrete building with timber framing. Various struc-tural upgrades over the years have been completed to accommodate new HVAC and other systems.

Exterior Facade Stucco covered concrete

Exterior DoorsHollow metal doors and one large automatic roll-up door

WindowsAluminum framed storefronts that were replaced in 2018

RoofBuilt Up Roof single ply APP modified bitumen roof - Dibiten poly 4 over 28 lb FRP by Johns Manville. Newly installed 2014 and re-coated in May 2018.

HVACFirst floor: 10 Ton package unit, installed in 2017Second floor: 3 Ton package unit

Electrical

The building’s electrical service was upgraded in 2018 to an overhead 400 Amp, 120/208 Volt, 3-Phase, 4-Wire system. The primary electrical panel is locat-ed in the first floor lobby which leads to the upstairs space. PG&E is the service provider.

Building Summary

Floors Full Building

Square Feet ±5,000 RSF

Expiration July 31, 2020

Options Two (2) Three-year options to extend at Fair Market Value

Rent Current Base Rent: $70.48 PSF IG

Tenant Overview


Plat Map

PROPERTY OVERVIEW


FLOOR PLANS

BRYANT STREET

Ground Floor

Ram

p

Restroom

Restroom

Storage

Breakroom


FLOOR PLANS

BRYANT STREET

Second Floor

Skylights

Restroom

Wet B

ar

SECOND FLOOR

ROOF

Financial Analysis

02

Existing Lease

Expenses


Proforma Lease

Expenses



Financial Analysis

$352,400

$344,541

$7,859

NET OPERATING INCOME

Gross Income


Expenses

EXISTING LEASE

Total Rental Income

APPROX SFRENTAL RATE AS OF

August 1, 2018ANNUAL RENT

Ground & 2nd Floors ±5,000 SF $67.21 $336,050

Building Upgrades

Electrical ±5,000 SF $1.72 $8,600

HVAC ±5,000 SF $1.55 $7,750

TOTAL $70.48 $352,400

EXPENSES

Property Taxes* $2,410.46

Insurance $2,596.00

Repairs/Maintenance $2,102.55

Miscellaneous $750.00

TOTAL $7,859.01

*2017 Base Year Property Taxes

**Current ownership self-manages the Property, please take this into consideration when underwriting


$425,000

$348,271

$76,729

NET OPERATING INCOME

Gross Income


Expenses

PROFORMA LEASE

Total Rental Income

APPROX SFRENTAL RATE AS OF

August 1, 2020ANNUAL RENT

Ground & 2nd Floors ±5,000 SF $85.00 $425,000

TOTAL $425,000

EXPENSES

Property Taxes* $71,280.00

Insurance $2,596.00

Repairs/Maintenance $2,102.55

Miscellaneous $750.00

TOTAL $76,728.55

*Property Taxes based on estimated purchase price of $6,000,000

**Current ownership self-manages the Property, please take this into consideration when underwriting

Market Overview

03

San Francisco Market Overview

SOMA Submarket Overview


Market OverviewSAN FRANCISCO MARKET OVERVIEW

The next wave of construction deliveries is poised to bring substantial positive absorption to the San Francisco market in 2018, as large technology tenants that signed leases in a record-breaking 2017 move into their new spaces.

While Dropbox, Facebook, Salesforce, and others prepare to occupy The Exchange, 181 Fremont, Park Tower and the Salesforce Tower, respectively, other growing companies are increasingly facing stiff competition for the few large blocks of space available now and scheduled for delivery before 2020. With demand still outpacing supply, rental rates continue to trend upward, surpassing historical rental averages. Rents are up 2.6% year over year, on average, for Financial District offices, with freshly renovated creative spaces achieving 5% growth. While vacancies rose to 7.0% in the first quarter, the increase is a mirage attributable to the gradual occupancy of the newly delivered buildings. The citywide vacancy rate is likely to decline over the course of 2018 as companies move into their new spaces and secure subtenants to backfill their previous offices. Unemployment in San Francisco was at just 2.5% in February, and the strength and depth of the technology sector portends a strong year ahead.

SOMA SUBMARKET OVERVIEW

Office leasing activity in the SOMA submarket remains robust through the first quarter of 2018, carrying over the momentum from 2017. The renowned submarket caters to the specific needs of tech and creative users, as it possesses buildings with creative aesthetics such as brick and timber construction, exposed concrete pillars, large operable windows and high exposed ceilings, etc. When paired with its proximity to BART and CalTrain, other like-kind companies, and some of the city’s hippest restaurants, it has made SOMA one of the hottest office markets in the country. SOMA currently has vacancy rates falling below 4.5%.

On top of this, almost 5 million square feet of office space is being delivered in 2018, all of which is expected to be pre-leased or rumored to have leases pending. With Proposition M continuing to loom and restrict further development, SOMA should have continued low vacancy compared to the rest of the nation in the coming years.


Area Amenities

1 Saison

2 TRES

3 Bravado

4 Momo’s

5 Twenty Five Lusk

6 Litttle Skillet

7 District San Francisco

8 Umami Burger

RESTAURANTS

1 Starbucks

2 Philz

3 Blue Bottle Coffee

4 Peet’s Coffee

5 Steep

6 The Point

COFFEE/TEA

1 Whole Foods

2 Safeway

3 Small Foods

4 Orange Theory Fitness

5 Barry’s Bootcamp

6 24 Hour Fitness

7 Pete’s Tavern

8 Public House

9 Alchemist Bar & Lounge

10 21st Amendment Brewery

11 Lord George

12 Petit Marlowe

13 Coin Op Game Room

14 Lava Restaurant & Lounge

15 Bar Basic

16 Bluxome Street Winery

17 JAX Vineyards

18 Polo Grounds Pub & Grill

19 The Yard at Mission Rock

20 Steep Creamery & Tea

21 Lucky Strike

LIFESTYLE

1

2

1

Third Street

King Stre

etTownse

nd Stre

et

Second Street

Brannan S

treet

Bryant S

treet

Fourth Street

Fifth Street

Harriso

n Stre

et 3

4

5

6

5

4

2

1

1

2

3

7

4

5

6

7

8 8

9 Nama Sushi

10 Marlowe

11 Cockscomb Restaurant

12 Alexander’s Steakhouse

13 Brickhouse Cafe

14 Darwin Cafe

15 Garaje

16 Cafe Centro

9

9

10

11

12

13

14

15 16

17 The Butler & The Chef Bistro

18 The Ozone Thai Restaurant

19 Sajj Mediterranean SF

20 Slice House Tony Gemignani

21 Woodbury

22 Rooh

23 The Creamery

24 The Bimini Twist

17

18

19

20

21

22

23

24

1011

3

12

13

14

21

15

6

16

17

18

19

20

South Park

AT&T Park

San Francisco Tennis Club

530 BRYANT STREET



BROKER OPINION OF VALUE | RENTON LOGISTICS CENTER1

San Francisco Flower Mart

Tishman Speyer 2M,

Offi ce Campus

505 BrannanTMG/Alexandria

Pinterest5th & Brannan

TMG/Alexandria

490 BrannanStrada/Alexandria

AT&T Park

Financial District

Yerba Buena

SOMA

The Embarcadero

Fifth Street

Fourth Street

Third Street

King Street

Brannan Street

Bryant Stre

et

South Park

330 Townsend CIM

374 Units

655 4th StreetTishman Speyer

907 Units

636-648 4th StreetSolbach Property Group

427 Units

725-735 HarrisonBoston Properties

1.1M SF, Offi ce

Market Street

South Financial District

530 BRYANT STREET

Area Developments


Comparables

04Lease Comparables

Sale Comparables


70 SOUTH PARK

Date Signed February, 2017

Tenant Name GGV Management

Square Feet ±1,500 SF

Lease Term 36 Months

Lease Rate (Starting) $112 PSF.

Annual Increases 3%

TI Allowance/Free Rent None

Lease Type IG

Space Condition Fully Renovated Creative

LEASE COMPARABLES

449 BRYANT STREET, 2ND FLOOR

Date Signed January, 2017

Tenant Name GoodRx



Lease Rate (Starting) $105 PSF

Annual Increases 3%


Lease Type IG


436 BRYANT STREET, 3RD FLOOR

Date Signed March, 2017

Tenant Name Homebrew




Annual Increases 3%


Lease Type IG


110 SOUTH PARK

Date Signed August, 2017

Tenant Name Aplitude




Annual Increases 3%


Lease Type IG


436 BRYANT STREET, 2ND FLOOR


Tenant Name Theorem




Annual Increases 3%


Lease Type IG


436 BRYANT STREET, GROUND FLOOR


Tenant Name Onera




Annual Increases 3%


Lease Type IG


Comparables


401 WASHINGTON STREET

Submarket Jackson Square

Sale Date December, 2017

Sale Price / Price PSF $13,900,000 / $856 PSF


Cap Rate 4.66%

Seller PMI Properties

Buyer Century Urban

SALE COMPARABLES

944 FOLSOM STREET

Submarket South of Market

Sale Date June, 2018

Sale Price / Price PSF $11,150,000 / $1,037 PSF


Cap Rate Undisclosed

Seller Boyd Lighting

Buyer Undisclosed

426 BRANNAN STREET


Sale Date December, 2017




Seller Kirsch Family Trust

Buyer 426 Brannan Properties LLC

457 BRYANT STREET


Sale Date June, 2018



Cap Rate 5.8%

Seller 298 Alabama LLC

Buyer Undisclosed

744 MONTGOMERY STREET


Sale Date April, 2017



Cap Rate 4.70%

Seller Montgomery Lytton

Buyer 499 Jackson LLC

807 MONTGOMERY STREET


Sale Date November, 2016



Cap Rate 5.23%

Seller 9 Mile Investments

Buyer D. & J. Sabah

1072 BRYANT STREET


Sale Date February, 2018




Seller Dev Eighteen LLC

Buyer 1072 Bryant Street LLC

558 SACRAMENTO STREET

Submarket Financial District

Sale Date August, 2017



Cap Rate 5.02%

Seller MWC Sutter Street LLC

Buyer 330 Townsend, LLC

Transaction Guidelines/

Selection Process

05


Michael Gschwend Senior Vice President, [email protected] | LIC #01406626

Cameron ShaferVice [email protected] | LIC #01945141

Thank you for reviewing the offering memorandum. We believe this site to be one of a kind and represents a tremendous opportunity for an investor or future owner/user. We welcome questions and comments, and encourage visit(s) to the site and surrounding areas to truly capture the magnitude and possibilities for this unique Property.

If you would like more information about the property, please execute the nondisclosure agreement (“NDA”) to gain access to the due diligence documents. Prospective buyers are invited to submit their proposals at any time, which should include the following:

Proposal Terms

Purchase price

Source of acquisition capital

Earnest money deposit

Due diligence and closing time frame

All prospective buyers should assume the property will be delivered on an “As-Is”, “Where-Is” basis after conducting due diligence at their own expense.

Initial questions, comments and tour arrangements should be set up through Michael Gschwend or Cameron Shafer. We look forward to working with you on this transaction.

Transaction Guidelines/ Selection Process

kiddermathews.com

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