Oct. 11 (Bloomberg) -- Blackstone Group LP, the second-biggest U.S. office landlord, agreed to buy a 25-story building in downtown San Francisco for $165 million in a bet it can improve occupancy as rents rise, according to two people with knowledge of the transaction.
Blackstone is buying the office tower at 100 Montgomery St. from a joint venture of Houston-based Hines and Sterling American Property Inc., based in Great Neck, New York, said the people, who asked not to be identified because the information is private.
The purchase price works out to $393 a square foot, based on the building’s roughly 420,000 square feet (39,000 square meters), less than what similar properties have sold for recently, according to the people. Comparable office properties have sold for about $350 to $800 a square foot this year, the people said.
About 72 percent of the building’s space is either vacant or will become available as leases expire over the next five years, giving New York-based Blackstone the chance to increase rents, the people said. San Francisco led the U.S. in office rent growth in the 12 months through Sept. 30, with rates paid by tenants after any landlord discounts rising 5 percent, according to Reis Inc., a New York-based property research firm.
Peter Rose, a spokesman for Blackstone, and Kim Jagger, a spokeswoman for Hines, declined to comment. Todd Katz, who oversees investor relations for Sterling, didn’t immediately return a phone call.
The tower is currently 84 percent occupied, with the U.S. General Services Administration as its largest tenant, according to the people.
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