Mission Office Deal Reaps 68 Percent Gain
San Francisco Business Times:
Harvest Properties has sold the Pioneer building in the Mission District, reaping a 68 percent upside after repositioning the historic building for technology tenants.
About 20 months after buying the 3180 18th St. property for $5.6 million, Harvest and partner Kinship Capital sold it for $17.5 million to New York based Bridgeton Holdings.
The deal, at $472 a square foot, comes a week or so before TMG Partners is slated to sell another historic Mission property, the Hamm’s Brewery at 1550 Bryant St. That deal is rumored to be close to $500 a square foot.
While the return was strong, Harvest worked hard during its brief ownership to reposition the 37,000-square-foot Pioneer, a three-story wooden structure that was originally a trunk factory for Malm and Co. Harvest spent about $5 million on the turnaround, converting a dark warren of rooms, which had counted UCSF as a tenant, into a bright, open, collaborative environment with exposed beams and restored windows. It tore out sheetrock and small offices. It took a storage room — originally a garage — and turned it into bright office space with glass doors that open out to a landscaped courtyard.
The wooden 1908 Italianate building is now 70 percent occupied by online payment company Stripe. Recent comps are more than $50 a square foot in the building, which has traditionally been closer to a $30-a-square-foot market.
“We were very interested in making an investment in the Mission District,” said John Winther, managing partner of Harvest Properties. “There are not many opportunities because of the zoning. It was challenging finding good investment opportunities in this market.”
The Pioneer sale, coupled with the Hamm’s Building deal, “is going to raise a lot of eyebrows about investment out here,” Winther said.
“When we came out here, we felt that there was a great opportunity to attract high-quality technology companies into this location,” he added. “We knew if we were successful in executing on that plan, that we could have no trouble attracting capital and ultimately a buyer for the asset.”
Investment brokers involved in the transaction include David Terzolo, Josh Peterson and Charlie Withers of CBRE.
Nick Thomson, Director of Real Estate at Kinship Capital, said his group’s “flexible investment horizon and willingness to pursue projects in emerging submarkets and strategies led us into the Mission District with Harvest.”