Shorenstein shops SF, Phoenix complexes

Real Estate Alert, June 9, 2004

Fund-operator Shorenstein Co. is separately marketing two office complexes that have a combined value of about $330 million.

The properties--the 610,000-square-foot Hills Plaza in San Francisco and the 860,000-sf Phoenix Plaza in Phoenix--are long-time holdings for Shorenstein. The firm's first fund acquired them in 1994. Eastdil Realty has the San Francisco listing, while Secured Capital will show the Phoenix property.

Hills Plaza, which consists of adjoining buildings at 2 Harrison Street and 345 Spear Street, is valued at up to $200 million, or $325/sf the property includes a 90,000-sf block of retail space.

The office portion is more than 90% occupied, following the execution of a 10-year lease on 64,000 sf by Sharper Image. The Gap is the main tenant, with 210,000 sf, while architecture firm Gensler leases 60,000 sf. Asking rents are $30-$36/sf.

Shorenstein recently signed several retail leases, lifting the occupancy level on that space to about 95%. Asking rents are $24-$30/sf on a triple-net basis. The complex includes residential condominiums that are owned separately.

The 215,000-sf building at 2 Harrison was built in 1925 as the original Hills Brothers Coffee Factory and renovated in 1989--the same year the 395,000-sf building at 345 Spear was built. The buildings are joined by a landscaped public plaza and sit along the Embarcadero, across the street from San Francisco Bay.

Phoenix Plaza, at 2901-2929 North Central Avenue in Phoenix's Midtown business district, consists of two 20-story office towers, a three-story retail development and a 3,800-car garage. Its value is put at $130 million, or $150/s. The Class-A property, just north of Interstate 10, was developed in 1990.

The 830,000 sf of office space is 94% occupied, but leases on 17,000 sf, or 2%, expire in July and another 89,000 sf, or 11%, rolls in October. Asking rents are up to $22/sf. The main tenants are Microsoft, IBM, Deloitte & Touche and law firm Brown & Rain, which use a combined 260,000 sf under leases expiring from 2007 to 2010. The 30,000 sf of retail space is fully occupied.

Shorenstein acquired both properties in 1994 |rein U.S. West Real Estate, a subsidiary of telecommunications firm U.S. West, as part of a four-building, S280 million portfolio. The two other properties in that package were sold in 1998. Equity Office Properties paid $46 million for the 330,000-sf Millennium Plaza in Greenwood Village, Colo., while Glenborough Realty paid $20 million for the 128,000-sf One Pacific Place in Omaha, Neb.