Two Tenants Chase Big Space at Landmark

  • San Francisco Business Times
  • June 18, 1999
  • Douglas Robson

The Landmark, a $100 million renovation project at the foot of Market Street, could soon be home to one of San Francisco's oldest companies, and one of its newest.

Del Monte Foods Co., the 108-year-old purveyor of canned fruits and vegetables, and E-Offering Inc., an Internet-based investment banking startup, are in deep negotiations to anchor the major rehab project at One Market St., just across from the Ferry Building.

Del Monte has signed a letter of intent to take the top three floors, or roughly 120,000 square feet, of the 400,000-square-foot building, according to sources familiar with the talks. The $1.5 billion company would relocate its corporate headquarters from its current home several yards away at One Market Plaza, which occupies the interior of the L-shaped building.

E-Offering, an investment bank formed four months ago by No. 2 online broker E-Trade Group of Palo Alto and investors such as Robertson & Stephens co-founder Sandy Robertson, is negotiating for one to two floors for its corporate headquarters, sources said. It would take anywhere from 45,000 square feet to 90,000 square feet, though its talks are less advanced.

Each floor can accommodate about 225 workers.

Both leases are in the $50-plus range, which is some of the priciest renovated space in recent memory, said people familiar with the negotiations.

None of the parties involved, including building owner the Martin Group, would confirm or deny that specific talks were taking place.

"We've had significant activity," said Tom Stubbs of the Martin Group, declining to say more.

Bill Spain, a Del Monte spokesman, acknowledged that the company was in the market for 100,000 square feet and had narrowed its choices down to a shortlist, but no deals had been signed.

The country's largest processor of canned fruits and vegetables has been aggressively searching for new headquarters space for several months because its lease at One Market Plaza, owned and managed by Equity Office Properties Trust Inc., expires in early 2001. Del Monte has called One Market Plaza home since 1976 and pays rents in the $20-per-square-foot range, sources said.

Though it could renew, executives have expressed a desire to relocate to new digs, reflecting management changes and a new direction at the company, insiders said.

After years of debt problems and changing investors, Del Monte went public in 1999 following a $750 million leveraged buyout by San Francisco-based Texas Pacific Group in April 1997. Texas Pacific Group owns about 47 percent of the company.

Like dozens of other e-commerce startups, E-Offering, which markets initial public stock offerings via the Internet, hopes to solve its own anticipated space needs by locating in the building. Currently, its offices are located in 10,000 square feet at 120 Montgomery St.

If both deals come to fruition, the Martin Group will have nearly half its building leased a year before its completion.

The San Francisco-based development company took a gamble when it purchased the historic waterfront property for about $50 million in 1998, and has since set about spending another $50 million gutting, reinforcing and upgrading it. Many local real estate professionals questioned whether the building, rechristened the Landmark, could command rents that would make the deal pencil out.

But continued downtown leasing strength from the legions of growing e-commerce and Internet firms, coupled with the almost unsatiable desire for exposed brick and high ceilings found mostly in renovation projects, have generated a rush of activity -- despite the pricey rents.

Others rumored to be taking a hard look at the building include law firm Foley & Lardner and U.K. banking giant Barclays PLC.

Once the headquarters of Southern Pacific Railroad, the historic 11-story property was recognized as the tallest building west of Chicago when it opened in 1917.