Salesforce, flush with cash, to join exclusive real estate club with 50 Fremont purchase
November 11, 2014

Salesforce may have already bought the rights to emblazon its name on the city's largest ever office tower, but it hadn't yet made the rare San Francisco real estate play to purchase its own building.

The software company is now set to buy 50 Fremont from TIAA-CREF, likely exercising its right to first offer on one of the tallest office buildings in San Francisco, sources close to the deal told the Business Times. The company initially leased about half of the 817,000-square-foot building two years ago. The price of the deal was not immediately available, however Class A office buildings have sold for $650 per square foot on average this year, according to CBRE.

The potential purchase would give the publicly-owned Salesforce even more room to grow into its burgeoning urban campus in the long term. The company, which has 5,000 employees in the Bay Area, inked a deal for its namesake headquarters this year, taking 714,000 square feet in the Salesforce Tower. The 50 Fremont deal would put the company in an exclusive San Francisco class as a tenant that also owns its own tower.

"You have to have very, very deep pockets to do it. Even the signs you see on top of buildings – those companies just got the naming rights to the building because they did a big lease," said Kareem Barzegar, a vice president at the brokerage Cassidy Turley who isn't involved in the potential deal. "We're a very institutional city, meaning most folks that own the larger buildings are funds or big institutions."

The Salesforce purchase was not entirely unexpected considering the company had the option to buy the building in 2017 and 2018 and the "one-time right of first offer to purchase the building" through the lease, according to Securities and Exchange Commission filings. But it's still uncommon.

Colin Yasukochi, director of research and analysis at CBRE, said it's more typical for larger Silicon Valley firms to try to scoop up their own buildings.

Google, of course, is among the big names in San Francisco that have made a similar move. It bought 188 Embarcadero for $65 million in July. Uber also laid claim to 49 percent of the Mission Bay site it bought from Salesforce earlier this year. Salesforce declined to discuss the potential deal.

"Google and Salesforce are leading the charge. They're sitting on a lot of money, and they can spend it," said Colin Scanlon, research manager for brokerage Savills Studley. "It's just a good investment. Google and Salesforce are buying core assets in a city they obviously believe in. It's exciting news for San Francisco to see this level of commitment..."

Salesforce, flush with cash, to join exclusive real estate club with 50 Fremont purchase

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