Paramount Grabs Half-Billion-Dollar San Fran Office Tower

One Front Street last changed hands in January 1997 for $103 million.

By Barbra Murray, Contributing Editor

Albert Behler, Paramount Group
Albert Behler, president & CEO, Paramount Group

San FranciscoParamount Group Inc. will give its presence in San Francisco, one of its three target markets, a big boost with the acquisition of One Front Street, a 651,000-square-foot office building. Paramount has signed on to purchase the trophy office property for $521 million from Market Front Associates LP

A 20-year hold can certainly fatten the pocketbook. One Front Street last changed hands in January 1997 for $103 million, according to the San Francisco Planning Department.

Developed in 1979 at 444 Market St., the tower once known as Shaklee Terraces stands 38 stories above the streets of San Francisco’s central business district. The LEED Gold-certified property also features ground-level retail space and a 290-spot parking facility. However, the garage’s status as a transportation amenity will likely be eclipsed by the $6 billion Transbay Transit Center, which is on track to reach completion late next year. With an occupancy level of 99.4 percent, One Front Street barely has space for another name on its tenant roster, but Paramount still has a leasing strategy in mind.

“We expect that our proven, pro-active management approach will meaningfully increase the net operating income from the property in the near to medium term as the existing leases, which are approximately 20 percent below market, expire,” Albert Behler, president & CEO of Paramount Group Inc., said in a prepared statement. The average asking rent for Class A properties in San Francisco’s CBD was $75.39 per square-foot, according to a report by commercial real estate services firm JLL, which has been the exclusive office leasing agent at One Front Street since 2010. Paramount, however, isn’t limiting itself to any one plan for the building. “We are evaluating certain redevelopment opportunities, which could unlock additional value in the next three to five years,” Behler added. And then there’s the idea of bringing in a joint partner.

If all goes as planned, Paramount will officially be able to call One Front Street its own by the end of the fourth quarter this year.