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CMA
October 25, 2019  

DWS, Pension Seeking Loan for Recap in SF

A joint venture is looking to borrow up to $740 million in conjunction with the recapitalization of the office tower at 525 Market Street in San Francisco.

DWS Group has agreed to buy a roughly 50% equity stake in the 1.1 million-square-foot Financial District building from New York State Teachers, which is retaining the remaining interest. The transaction values the property at about $1.2 billion, or $1,090/sf.

The joint venture has circulated preliminary information to lenders indicating it will consider quotes at two proceeds levels — $600 million and about $740 million. That works out to leverage of roughly 50% and 60%. The partners prefer a fixed-rate mortgage that would run 7-10 years.

Eastdil Secured is pitching the assignment for the joint venture and also brokering the recap for New York State Teachers. The pension system is advised on its investment by J.P. Morgan Asset Management.

With the recap, New York State Teachers will retire a $175 million mortgage that it had lined up from Northwestern Mutual in 2010. That loan has a 10-year term.

The 38-story building was developed in 1973 by Tishman Speyer. That New York shop surrendered it to lender Nomura in 1997 after the property’s value fell below the $198 million balance of its mortgage.

New York State Teachers purchased it the following year for $240 million. The pension system completed a renovation of the steel and concrete building in 2016 that included substantial upgrades to the two-story lobby and plaza.

The occupancy rate is 97%. Amazon expanded its footprint to 319,000 sf last year. Other tenants include Sephora, Wells Fargo, Willis Insurance and Zurich Insurance, according to the property’s website.

New York State Teachers put the building on the block in August, indicating that it would consider offers for a partial interest or an outright purchase. The pension said it was overweighted on holdings on the West Coast and wanted to reduce its assets in the region.