REAL ESTATE NEWS

DWS Group has been seeking to sell its office property at 505 Montgomery St in San Francisco — but the process could get more complicated if its largest tenant at the building does not agree to an extension.

Eastdil Secured is marketing the 315,000-square-foot property in the financial district, according to a report from the San Francisco Business Times, citing sources. The German-based asset management firm was also looking to sell the asset for a period in 2024. Currently, Eastdil is aiming to get around $300 per square foot, which would value the property at roughly $95 million. That would represent a significant discount from the $118.5 million DWS paid for 505 Montgomery in 2005.

However, the price point could be "contingent" on whether the property's largest tenant, Latham & Watkins LLP, agrees to renew its lease, which is set to mature in 2028, according to the Business Times. In 2020, the law firm inked a renewal at 505 Montgomery for 117,000 square feet.

The expiration is considered near-term enough, and potentially losing Latham could tank the 24-story tower's market value. Sources told the Business Times that DWS and Latham are in negotiations for a potential extension of the lease, with the exact terms unclear.

The building may have more problems. Colliers, which handles the leasing at the office tower, was marketing 126,605 square feet of space in February, according to the Business Times. That would mean occupancy is only at roughly 60 percent, which, of course, includes Latham.

In 2024, San Francisco saw a significant increase in office investment activity. CBRE data showed that sales volume in the asset class encompassed $916 million, which included partial interest and loan note transactions. The figure is up more than double from the dozen office buildings that traded during 2022 and 2023 combined in the city, encompassing a total of $863 million. The average office deal was for $310 per square foot in 2024, up from $253 in the previous year.

Source: GlobeSt/ALM