Paramount Buys San Francisco Offices for $395 Million

Paramount Group Inc., which is planning a record U.S. initial public offering for a real estate investment trust, bought a 23-story office building in San Francisco for about $395 million.

Paramount, based in New York, purchased the property at 50 Beale St. from Rockefeller Group Investment Management Corp., the companies said in separate statements today. Rockefeller Group said it sold the 662,060-square-foot (61,507-square-meter) tower for $596 a square foot.

“This building, which is located in one of the most desirable neighborhoods in the heart of San Francisco undergoing immense redevelopment, is the type of iconic asset where we believe we can utilize our operational expertise to attract and retain a premium tenant base,” Paramount Chief Executive Officer Albert Behler said in a statement.

San Francisco is poised to surpass Manhattan as the most expensive U.S. office market next year as technology companies extend a surge in leasing, according to CBRE Group Inc. The Paramount deal follows recent office transactions including Columbia Property Trust Inc.’s $309 million purchase of the 33-story 650 California St. from Tishman Speyer and Prudential Real Estate Investors, announced yesterday, and the acquisition of Foundry Square II by TIAA-CREF and Norway’s sovereign-wealth fund, the world’s largest.

Paramount, which filed for an IPO last month, plans to raise more than $2.5 billion in the stock sale, people familiar with the matter said at the time. The largest U.S. REIT public offering was a $1.4 billion IPO by Douglas Emmett Inc. in 2006, according to data compiled by Bloomberg.

Bechtel Headquarters

Paramount has office buildings in New York, Washington and San Francisco, including One Market Plaza, the landlord’s only other property in the West Coast city. The building at 50 Beale St. is about 90 percent occupied. Tenants include Bechtel Corp., which has its headquarters at the tower, Paramount said.

Rockefeller Group Investment Management, which sold the building on behalf of a joint venture of Rockefeller Group U.S. Premier Office Fund LP and Mitsubishi Estate New York, bought the property two years ago. The sale “presented an opportunity to realize gains ahead of plan driven by the strength of the recovery in San Francisco,” the seller said.

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