🚨Hines and partners have brought 101 California Street—a 1.2M sf, 48-story trophy—out for sale just over $1B (~$900/sf), the first marquee SF office listing since the pandemic. Guidance sits ~10–15% below 2019’s >$1,000/sf, even as the asset remains ~88% leased following a $75M renovation. The sale runs against a bifurcated backdrop: citywide vacancy ~34.6% vs. 16.1% for SF’s “crown jewel” subset, where average asking rents are ~$115/sf, ~7% above pre-COVID. A print near guidance would signal repair in liquidity and underwriting marks for prime SF office; a weak outcome would caution that even trophies face a higher-cap regime.
Asking guidance: just over $1B (~$900/sf), late Sep 2025
Occupancy at 101 California: ~88%, late Sep 2025
SF trophy subset vacancy: 16.1% vs. citywide 34.6%, late Sep 2025
Trophy asking rent: ~$115/sf full-service, +7% vs 2019, late Sep 2025
Loan Performance. At ~$900/sf, implied cap on current NOI screens high-6s to high-7s depending on concessions and lease-up; DSCR is workable at 50–60% LTV but sensitive to roll on large finance/tech blocks. A post-sale tax reassessment (~1.2% of value) must be modeled into OPEX. Caps/floors: buyers should assume today’s higher exit yields vs pre-2020.
Demand Dynamics. Flight-to-quality persists: top floors in trophies command widening premiums while lower floors face longer downtime and higher TI/LC. Effective rents are buoyed in the best towers, but concessions remain elevated market-wide.
Asset Strategies. Protect DSCR via staggered renewals, TI/LC tranching tied to credit, and amenity programs that defend the rent premium. Consider curated spec suites on mid/low floors to compress downtime.
Capital Markets. Optional sale (not distress) suggests sponsors are testing price discovery. Life companies, banks, and SWFs could finance at conservative leverage; CMBS appetite improves for marquee credits but remains spread-sensitive.
Rates/yields: Expect mid-6s+ stabilized caps on SF trophy underwriting near-term.
Winners: best-in-class, amenitized towers; caution on lower-floor rent beta.
Financing stance: 50–60% LTV, structure for roll risk; assumption optionality if legacy debt exists.
Spreads caveat: Concessions and tax reset can erode going-in yield—model precisely.
🛠 Operator’s Lens
Refi. Lock flexible prepay; hedge through major 2027–2029 maturities; preserve cash sweep covenants tied to leasing milestones.
Value-Add. Sequence capex to view/amenity premiums first; 10–15% contingency on TI/LC given big-block roll.
Development. Underwrite pro formas to mid-teens IRR only with credible lease-up paths; time GC/FF&E to anchor renewals/expansions.
Lender POV. Price to sponsorship quality and rollover schedule; trophies get best terms, but structure for DSCR cushions and tax reassessment.
Watch the bid stack and tours; a print near ~$900/sf could re-open SF trophy deal flow into 2026.
Confirmation: CMBS/CRE CLO BBB– spreads and conduit term sheets for SF trophy names.
Risks: macro wobble, persistent remote work, or safety/cleanliness setbacks that impair demand for lower floors.
San Francisco Chronicle.
showing the share of B/C office properties with ≥10% cap rates declining from 74% in H2 2024 to 71% in H1 2025.
