SAN FRANCISCO BUSINESS | By Blanca Torres
Brick & Timber strikes gold with historic rehabs
Developers transform older S.F. buildings into boutique office properties.
Inside what is considered San Francisco’s oldest warehouse, construction crews are busy adding new floors, walls, staircases and a basement speakeasy to transform the building into a modern office space.
With the right interior, the 16,000-square-foot building, at 855 Front St., could attract rents similar to high-end Class A office space in San Francisco, said Jesse Feldman, part of a two-person team that runs Brick & Timber Collective.
In San Francisco’s red-hot real estate market, where building sales and values have been breaking records lately, many investors are focused on blockbuster deals. Brick & Timber, founded by Glenn Gilmore, is carving out a niche by buying and restoring historic buildings in San Francisco’s north waterfront area near Jackson Square and Levi’s Plaza.
During the past six years, the company amassed a portfolio of about $115 million with five buildings in San Francisco and three in Pasadena. The company’s other San Francisco properties include 590 Pacific Ave., 353 Kearny St., 243 Vallejo St. and 55 Green St.
Brick & Timber’s renovations have lured tenants such as small tech companies, startups and venture capital firms. One tenant, Sight Machine, a manufacturing analytics company, leased up the 6,500-square-foot 243 Vallejo St. building at around $85 per square foot, which set a high bar for the neighborhood, Gilmore said. Average asking rents in the North Waterfront and Jackson Square hovered around $65 during the first quarter of this year compared with a city-wide average of $74 for Class A space, according to brokerage firm CBRE.
“I see us as the orchestrators of bringing in the best and brightest in architecture and design to revive these buildings,” Gilmore said. “Where we can make a difference is in seeing what tenants want and what they’re willing to spend money on.”
Office rents have climbed significantly in recent years, which is attracting new investors, said Chris Economou, vice president of real estate for Rudd Properties, who has handled leasing and building sales in Jackson Square for about 15 years.
“People like those smaller buildings and smaller buildings are going to get a higher price per square foot,” he said. “There’s opportunity, but it’s just not easy to find buildings to buy.”
Gilmore and Feldman aim to capitalize on the “creative space” trend in which tenants want features such as exposed brick walls, high ceilings and historic accents while adding state-of-the-art conference rooms and industrial-chic common areas and work areas.
“We take these historic buildings and keep the most interesting elements,” Feldman said.
The 855 Front building, registered as a San Francisco Landmark, is known as the Gibb-Sanborn Ware-house and once housed the Trinidad Bean and Elevator Co. Brick & Timber brought in Page & Turnbull, SOM and Kisbye Design to reimagine the interior. Contractor Source Planning and Construction plans to wrap up the project in July.
In April, Brick & Timber bought the 45,000-square-foot 55 Green St. building for $29 million or about $644 per square foot, according to property records. The investors plan to revamp the interior of the building, constructed in 1984, that features the red brick exterior common in the north waterfront.
“Is it expensive (to renovate)? Yes. Does it take time? Yes. But that’s why the design is so important. You have to create a product people are willing to pay for,” Gilmore said.
So far, the Brick & Timber has raised capital from private investors to fund its deals and is now looking at raising a fund, Gilmore said.
“There is opportunity” to buy up more historic and underutilized office buildings around San Francisco, he said. “A fund makes it easier to execute deals and grow the team.”