I
n the heart of San Francisco's Financial District, there's a buzz about the potential sale of a 140,000-square-foot, 16-story office building at 351 California Street. This building is co-owned by Tidewater Capital and Goldman Sachs, who acquired it through their merchant banking operations in 2019 for $108 million, or $771 per square foot.

    The New York-based financial giant has hired JLL to market the property, according to recent reports from the San Francisco Business Times. However, no price has been officially attached to the listing yet.

    The commercial centers of San Francisco are still recovering from the post-pandemic work-from-home trends, which have significantly reduced foot traffic in the city's commercial areas. Many social media companies, which were major drivers of rents and sale prices, have adopted work-from-home policies, leading to a sharp decline in demand. As a result, the city's office vacancy rate stands at a record high of 37 percent, according to CBRE.

    The building's current occupancy rate is only 53 percent, which suggests that a prospective landlord would need a lower cost basis and a patient outlook to consider purchasing it. A source familiar with the sale told the Business Times that an asking price in the "upper $200 per square foot range" is expected — significantly less than the current owners' purchase price.

    Neither Tidewater, Goldman Sachs, nor JLL has commented on the sale at this time. However, potential buyers will be able to draw comparisons from recent sales of nearby office buildings on a two-block stretch of California Street from Montgomery to Battery. These separate deals for buildings at 255, 300, and 350 California Street ranged from $205 to $300 per square foot.

    There could be intense competition for the next sale in the area, as a court-appointed receiver is currently considering a distress sale of 600 California Street. Tidewater and Goldman secured an $84 million loan from Bank of America when they bought the building in 2019, according to property records. It remains unclear whether Bank of America is pushing for a distress sale of 351 California Street.

    Interestingly, Tidewater is working both sides of the current market downturn. The investor recently handed back an 83,000-square-foot office building in downtown Oakland to a lender but later raised a $200 million fund to seek opportunities in the Bay Area real estate market.