One Market Bagged for $50 Million

  • San Francisco Business Times
  • February 16, 1998
  • Steve Ginsberg

The Martin Group will pay around $50 million for One Market Street and invest another $50 million to renovate the historic San Francisco highrise.

The deal is expected to close April 1.

The San Francisco-based developer scooped up the 381,000-square-foot waterfront building from Union Pacific Railroad. Union Pacific chose Martin's bid over three others after its $55 million deal with Proteus, a Connecticut-based developer, fell apart in January. Proteus planned to convert the building to a Regent Hotel, but time-consuming conversion issues scuttled the deal. Union Pacific wanted to sell the property quickly and chose Martin's simpler office-use plan. The company is negotiating with several partners who will fund the deal, which was brokered by Tom Stubbs, Curtis Davies and Mike Son of Grubb & Ellis.

One Market is the former headquarters of Southern Pacific Railroad, which Union Pacific acquired in 1996. At 11 stories, it represented the tallest building west of Chicago when it opened in 1917. Despite its prime location, the building lacks basic amenities such as hot water and air conditioning. Still, it fetched a scalding price in San Francisco's sizzling real estate market.

Martin plans to gut the building, adding air conditioning, new elevators and technology upgrades such as T-1 lines to suit possible high-tech users. The building will also require a seismic upgrade before new tenants can take occupancy in fall 1999.

One Market has been under-used. Just 200 Union Pacific employees work there. During Southern Pacific's heyday, the building housed 2,500 railroad employees. But the railroad has been sold twice since 1989, and the building no longer serves as headquarters.

Its principal value is its location. It is one of just four highrise office buildings along the waterfront. The others are Embarcadero Four, Hills Plaza and the adjacent One Market Plaza, owned by Chicago real estate magnate Sam Zell.

The acquisition furthers the Martin Group's emergence as a prime time player in the Bay Area's commercial real estate market. The company made its mark under founder David Martin by rehabilitating retail and residential projects.

In the last two years, Martin has plowed into the office arena. In 1997, it scooped up Ampex's headquarters in Redwood City and acquired Bank of California's building on Battery Street. Martin's portfolio now consists of 8 million square feet of space, and the company is negotiating on four other deals.

Omaha-based Union Pacific is either selling or developing its other Bay Area property. It is turning nine acres along I-80 in Albany into an retail/entertainment center and is seeking to bring Oakland's produce market to its 25-acre site adjacent to Interstate 880 in West Oakland, according to Rick Gooch, director of special property at Union Pacific.