https://www.bizjournals.com/sanfrancisco/news/2024/11/20/redco-400-montgomery-san-francisco.html
Redco acquired 400 Montgomery St., its latest bet on San Francisco’s postpandemic downtown.
The investor partnered with a San Francisco-based family office, Bridges Capital, to buy the 86,230-square-foot 400 Montgomery from sellers Intercontinental Real Estate Corp. and Harvest Properties, Redco Managing Partner Chris Freise confirmed.
Redco and Bridges paid $25.75 million, or $299 per square foot, for the 12-story, early 20th century office building, the Business Times has learned. The deal closed Wednesday.
Intercontinental declined to comment; Harvest could immediately be reached for comment. Intercontinental acquired the building in 2019 from Chicago-based asset manager Nuveen and Harvest for $77.5 million, or roughly $906 per square foot; Harvest stayed on as Intercontinental’s operations partner following the sale.
The transaction marks Redco’s third buy in downtown San Francisco in roughly the last calendar year. At the end of 2023, it partnered with an investor group and members of the Harrington family to acquire the beloved Financial District Irish Bar Harrington’s. In May, Redco partnered with San Francisco-based GCI Contractors to snap up 300 California St., a 120,000-square-foot office building roughly a block from 400 Montgomery, for $28.5 million, or $240 per square foot.
The Business Times first reported the firm was in talks to acquire 400 Montgomery in July of this year.
“We’re an active investor in San Francisco office,” Freise said. “We’re looking at new deals and writing offers, and trying to find more.”
Freise said in May the firm is taking the long view of downtown San Francisco’s prospects in the postpandemic era. At 400 Montgomery, Redco has already signed three letters of intent for a cumulative 16,000 square feet in lease deals expected to close down the line, Freise said, though he declined to identify the tenants involved. The firm implemented a similar leasing strategy at 300 California St., signing prospective tenants leading up to when its acquisition of that property officially closed.
Those pending deals should bring 400 Montgomery's occupancy rate to roughly 65%.
Floor plates at 400 Montgomery measure roughly 7,200 square feet; Redco plans to release the fifth and ninth floors of the building to the market as roughly 3,000-square-foot plug-and-play office suites, complete with furniture, Freise said. Rental rates for those suites, which will be available "immediately," will run in the low $50 per square foot range.
Freise said the plug-and-play space will represent something not otherwise available in San Francisco today: “half-floor, high-identity suites that fill a niche in the market,” he said, given the building's location and its price point. Tenants in the 3,000-square-foot range have historically ended up on pieces of larger floor plates, he said, or else coworking space.
Redco and Bridges also plan to reorient the lobby of the building south toward California Street down the line — something the pair may work with current ground-floor tenant Sterling Bank to accomplish.
Intercontinental and Harvest tapped real estate services firm JLL to list 400 Montgomery for sale this past spring. The property, also known as the Kohl Building, was built in 1901 and survived the 1906 earthquake. Nuveen and Harvest spent millions to upgrade the property, restoring the facade and upgrading the lobby, common areas and restrooms.