8 ms·

Value of one of S.F.'s biggest buildings plunges by 80% after Uber, Block leave

116 points by TMWNN 3y ago

TMWNN 3y ago
Headline modified to fit. Original: "One of S.F.'s biggest office buildings sees value plunge by 80% after departure of Uber, Block"
gnabgib 3y ago
Related (one of the buildings in the article) [0] (18 points, yesterday, 23 comments) [0]: https://news.ycombinator.com/item?id=40242303 https://news.ycombinator.com/item?id=40242303
yazzku 3y ago
Many stores seem to be closing in the bay area in general. Not uncommon to see shops you used to know boarded up and for lease.
- duskwuff 3y ago
  This was an office building, not a shop.
  - dylan604 3y ago
    So? The comment just expands the state of default in the area in broader terms that follows this article. If all of the workers from buildings like this disappear, it follows that the customers would also disappear for the shops in the area. That is proven by comments like this to show the theory has merit.
    - celdon25 3y ago
      Yeah I sensed a bit of emotion in the previous comment.
austin-cheney 3y ago
Curiously, how is Uber still in business? After losing tens of billions every single year they finally had their first year of profit at a whopping 1.83 million. https://qz.com/uber-first-annual-profit-ipo-public-1851234204 https://qz.com/uber-first-annual-profit-ipo-public-185123420... How can they possibly recover the near 100 billion they sunk on growth?
- nextworddev 3y ago
  Many people in large cities spend $300+ per month on Uber instead of owning a car etc
  - oivey 3y ago
    They have to make money on those rides for that to be a plus.
  - fragmede 3y ago
    which, between get payments, insurance, and registration, that isn't that bad a trade off.
- ilrwbwrkhv 3y ago
  Why do they need to recover anything? The whole market runs on foogazi. Marc Anderson's favorite founder is Adam Neumann.
  - blackeyeblitzar 3y ago
    To be fair Adam Neumann is impressive. I recommend watching interviews with him to get a better sense of him. WeWork may not be a great business but I also doubt whether most people are capable of getting it to where it is.
- bcherny 3y ago
  My understanding is that PnL doesn't tell the whole story for a capital-intensive business like Uber. Instead, you want to break it down by city -- for a mature market like SF, I'd expect a healthy profit margin; but for a new city that Uber entered recently, I'd expect it to be a loss for a few years as upfront investments in marketing, ground team, recruiting, etc. take time to pay off. What would be a bad sign is if Uber continues to lose money, even in its most mature markets.
smgit 3y ago
Once upon a time we were nomadic. Then we became sedentary - https://en.wikipedia.org/wiki/Sedentism https://en.wikipedia.org/wiki/Sedentism Now back to nomadic.
gpapilion 3y ago
This all has to do with how commercial real estate is valued; rent determines the valuation. If companies are unwilling to pay the rent the space sits empty waiting for a tenant willing to. The reason for this is if you take lower rent than previously your building value changes and your lenders make you cough up the difference to cover additional principal. Since the loans come due every 5ish years we’re now seeing buildings unable to justify their previous value, and having to walk away or get valued at their current rent. It’s going to be ugly for a while.
- VHRanger 3y ago
  Understanding this structure clarifies commercial rent negotiations for business owners: The landlord can't negotiate on rent, but he can negotiate on a ton of other things that are financially equivalent.
  - wrs 3y ago
    Indeed, it’s even common to negotiate for some months of discounted (or zero) rent, as long as you don’t change the official rent!
    - blackeyeblitzar 3y ago
      Isn’t this deceptive? If a buyer thinks they’re getting a priority with one kind of rent potential but the truth is that there’s a lot of these negotiations that distort things, couldn’t they be fraudulent? Also how does property tax get affected by all this?
      - lotsofpulp 3y ago
        Free rent doesn’t fool a lender or commercial property buyer. It’s elementary to take annual income and divide by 12 to get actual monthly rents. Appraisals for property tax are similarly unaffected. “Free” months are to prevent advertised rents from being lower to prospective and current tenants. It helps set a higher price anchor so that future negotiations are based off of that.
kdamica 3y ago
I worked on the 4th and 5th floor of this building for a few years, and there’s no reason why would want this building at a time when there is plenty of space on the market. The bottom floors were designed to be a 1970s data center, and so the city block sized floors only have windows on only one side. So during the winter months when it gets dark early, you might not see sunlight on weekdays except during your morning commute. The plus side of this building is that it is one of, if not the most, seismically safe building in the city. So if you’re optimizing for that, you can probably get a great deal right now.
- flomo 3y ago
  Also, SF MTA and CTA have/had offices there, so it could be convenient to negotiate with local officials. But yeah, it was originally a BoFA IT bunker, never intended to be a nice building.
- phendrenad2 3y ago
  > 1970s data center Off-topic but: That's something I'd really, really like to see.
  - fragmede 3y ago
    check out the computer history museum in mountain view, they have one
- lchengify 3y ago
  I used to use the WeWork on the bottom floor (technically partial basement). This is definitely the vibe: Huge open floor, no windows. WeWork did an OK job trying to light it but, I could never shake the feeling that it felt like a scene from Fallout. My two cents: If this building ever becomes popular again, it'll be because of the location and not because of the building itself. It's reasonably close both to "Van Mission" (the rebranding of that part of Market Street for high rise residential), a BART stop, and Hayes Valley. It's probably one good Twitter-esque city tax subsidy away from being fully occupied in 5 years.
donor20 3y ago
https://archive.is/2024.05.03-225107/https://www.sfchronicle.com/sf/article/s-f-office-building-value-19438429.php https://archive.is/2024.05.03-225107/https://www.sfchronicle...
lmeyerov 3y ago
I spent some time there. The Uber and Block offices are beautiful, as is Twitter's up the street. Unfortunately, the street is meth hell even before night hits. The city granted nice discounts for the CEOs to take the spots when rents were up, but now that COVID cratered the commercial real estate market and it still hasn't recovered, there is little office space demand for such a scary stretch.
- echelon 3y ago
  > The Uber and Block offices are beautiful, Square put a lot of work into this building. They installed a massive stadium staircase between three floors. They've also shuttered one of their multi-floor offices in Atlanta before engineers even got the chance to use the new spaces.
deleted 3y ago
[deleted]
xyst 3y ago
Single zoned commercial is on its way out. Mixed use is in. Unfortunately the common person today won’t take advantage. Only the rich will be able to reap the benefits. At least future generations will have a place to live if this trend continues. Hopefully something that is affordable on UBI if the “AI revolution” really takes off
- Grimburger 3y ago
  > Unfortunately the common person today won’t take advantage. Only the rich will be able to reap the benefits. All supply helps the common person whether they can afford it or not, people pull out this trope all the time and it's completely wrong. https://www.strongtowns.org/journal/2018/7/25/why-are-developers-only-building-luxury-housing https://www.strongtowns.org/journal/2018/7/25/why-are-develo...
  - kube-system 3y ago
    If only developers could figure out how to build old buildings instead of new ones! /s
    - throwaway173738 3y ago
      All you need to make more old buildings is a bunch of new ones and some time
SeanAnderson 3y ago
HPP (Hudson Pacific Properties, mentioned in the article) is the largest commercial real estate owner in the bay area. Check out their YoY finances: https://i.imgur.com/qEmTBMd.png https://i.imgur.com/qEmTBMd.png It's pretty staggering.
junon 3y ago
Anyone have an archive link that works? SF chronicle refuses to let you use the site with an ad blocker.
- chrisjj 3y ago
  And falsely claims this vanilla Android Chrome has an adblocker. Odd.
fblp 3y ago
A subtext of this is how much the Canadian pension fun lost out. Hudson Pacific bought the property in 2010 for $93.0 million [1]. The Canadian pension fund bought a 45% stake for $219 million, and Hudson Pacific kept the remaining 55% [2]. So that equivalent $486 million ($474/sqft) valuation was a 5.2x return in 5 years... Hudson buys that 45% stake back for $43.5 million in 2024, an equivalent valuation of ~$96million or a 1/5th of the prior valuation. The article states that it's because the pension fund "weren’t willing to put any more capital in”. The SF city is paying $40/sqft for 157,000 sqft, yet 1,025,833sqft the building was valued at building [1] at the equivalent of $94/sqft in that transaction. Meanwhile, the other building mentioned in that article sold for $72/sqft... so I guess the pension fund didn't do too bad... [1] https://www.sec.gov/Archives/edgar/data/1482512/000119312510284807/dex991.htm https://www.sec.gov/Archives/edgar/data/1482512/000119312510... [2] https://realassets.ipe.com/cppib-kicks-off-hudson-pacific-joint-venture-with-san-francisco-deal/10006135.article https://realassets.ipe.com/cppib-kicks-off-hudson-pacific-jo...
- naijaboiler 3y ago
  Hudson Pacific just fleeced the pension fund. Paid 93m, got 219 + 43.5, and now own the building outright and clear.
  - ryanwaggoner 3y ago
    219 - 43.5

116 points by TMWNN 3y ago

Headline modified to fit. Original: "One of S.F.'s biggest office buildings sees value plunge by 80% after departure of Uber, Block"

gnabgib 3y ago

Related (one of the buildings in the article) [0] (18 points, yesterday, 23 comments) [0]: https://news.ycombinator.com/item?id=40242303 https://news.ycombinator.com/item?id=40242303

yazzku 3y ago

Many stores seem to be closing in the bay area in general. Not uncommon to see shops you used to know boarded up and for lease.

duskwuff 3y ago
This was an office building, not a shop.
- dylan604 3y ago
  So? The comment just expands the state of default in the area in broader terms that follows this article. If all of the workers from buildings like this disappear, it follows that the customers would also disappear for the shops in the area. That is proven by comments like this to show the theory has merit.
  - celdon25 3y ago
    Yeah I sensed a bit of emotion in the previous comment.

austin-cheney 3y ago

Curiously, how is Uber still in business? After losing tens of billions every single year they finally had their first year of profit at a whopping 1.83 million. https://qz.com/uber-first-annual-profit-ipo-public-1851234204 https://qz.com/uber-first-annual-profit-ipo-public-185123420... How can they possibly recover the near 100 billion they sunk on growth?

nextworddev 3y ago
Many people in large cities spend $300+ per month on Uber instead of owning a car etc
- oivey 3y ago
  They have to make money on those rides for that to be a plus.
- fragmede 3y ago
  which, between get payments, insurance, and registration, that isn't that bad a trade off.
ilrwbwrkhv 3y ago
Why do they need to recover anything? The whole market runs on foogazi. Marc Anderson's favorite founder is Adam Neumann.
- blackeyeblitzar 3y ago
  To be fair Adam Neumann is impressive. I recommend watching interviews with him to get a better sense of him. WeWork may not be a great business but I also doubt whether most people are capable of getting it to where it is.
bcherny 3y ago
My understanding is that PnL doesn't tell the whole story for a capital-intensive business like Uber. Instead, you want to break it down by city -- for a mature market like SF, I'd expect a healthy profit margin; but for a new city that Uber entered recently, I'd expect it to be a loss for a few years as upfront investments in marketing, ground team, recruiting, etc. take time to pay off. What would be a bad sign is if Uber continues to lose money, even in its most mature markets.

smgit 3y ago

Once upon a time we were nomadic. Then we became sedentary - https://en.wikipedia.org/wiki/Sedentism https://en.wikipedia.org/wiki/Sedentism Now back to nomadic.

gpapilion 3y ago

This all has to do with how commercial real estate is valued; rent determines the valuation. If companies are unwilling to pay the rent the space sits empty waiting for a tenant willing to. The reason for this is if you take lower rent than previously your building value changes and your lenders make you cough up the difference to cover additional principal. Since the loans come due every 5ish years we’re now seeing buildings unable to justify their previous value, and having to walk away or get valued at their current rent. It’s going to be ugly for a while.

VHRanger 3y ago
Understanding this structure clarifies commercial rent negotiations for business owners: The landlord can't negotiate on rent, but he can negotiate on a ton of other things that are financially equivalent.
- wrs 3y ago
  Indeed, it’s even common to negotiate for some months of discounted (or zero) rent, as long as you don’t change the official rent!
  - blackeyeblitzar 3y ago
    Isn’t this deceptive? If a buyer thinks they’re getting a priority with one kind of rent potential but the truth is that there’s a lot of these negotiations that distort things, couldn’t they be fraudulent? Also how does property tax get affected by all this?
    - lotsofpulp 3y ago
      Free rent doesn’t fool a lender or commercial property buyer. It’s elementary to take annual income and divide by 12 to get actual monthly rents. Appraisals for property tax are similarly unaffected. “Free” months are to prevent advertised rents from being lower to prospective and current tenants. It helps set a higher price anchor so that future negotiations are based off of that.

kdamica 3y ago

I worked on the 4th and 5th floor of this building for a few years, and there’s no reason why would want this building at a time when there is plenty of space on the market. The bottom floors were designed to be a 1970s data center, and so the city block sized floors only have windows on only one side. So during the winter months when it gets dark early, you might not see sunlight on weekdays except during your morning commute. The plus side of this building is that it is one of, if not the most, seismically safe building in the city. So if you’re optimizing for that, you can probably get a great deal right now.

flomo 3y ago
Also, SF MTA and CTA have/had offices there, so it could be convenient to negotiate with local officials. But yeah, it was originally a BoFA IT bunker, never intended to be a nice building.
phendrenad2 3y ago
> 1970s data center Off-topic but: That's something I'd really, really like to see.
- fragmede 3y ago
  check out the computer history museum in mountain view, they have one
lchengify 3y ago
I used to use the WeWork on the bottom floor (technically partial basement). This is definitely the vibe: Huge open floor, no windows. WeWork did an OK job trying to light it but, I could never shake the feeling that it felt like a scene from Fallout. My two cents: If this building ever becomes popular again, it'll be because of the location and not because of the building itself. It's reasonably close both to "Van Mission" (the rebranding of that part of Market Street for high rise residential), a BART stop, and Hayes Valley. It's probably one good Twitter-esque city tax subsidy away from being fully occupied in 5 years.

donor20 3y ago

https://archive.is/2024.05.03-225107/https://www.sfchronicle.com/sf/article/s-f-office-building-value-19438429.php https://archive.is/2024.05.03-225107/https://www.sfchronicle...

lmeyerov 3y ago

I spent some time there. The Uber and Block offices are beautiful, as is Twitter's up the street. Unfortunately, the street is meth hell even before night hits. The city granted nice discounts for the CEOs to take the spots when rents were up, but now that COVID cratered the commercial real estate market and it still hasn't recovered, there is little office space demand for such a scary stretch.

echelon 3y ago
> The Uber and Block offices are beautiful, Square put a lot of work into this building. They installed a massive stadium staircase between three floors. They've also shuttered one of their multi-floor offices in Atlanta before engineers even got the chance to use the new spaces.

deleted 3y ago

[deleted]

xyst 3y ago

Single zoned commercial is on its way out. Mixed use is in. Unfortunately the common person today won’t take advantage. Only the rich will be able to reap the benefits. At least future generations will have a place to live if this trend continues. Hopefully something that is affordable on UBI if the “AI revolution” really takes off

Grimburger 3y ago
> Unfortunately the common person today won’t take advantage. Only the rich will be able to reap the benefits. All supply helps the common person whether they can afford it or not, people pull out this trope all the time and it's completely wrong. https://www.strongtowns.org/journal/2018/7/25/why-are-developers-only-building-luxury-housing https://www.strongtowns.org/journal/2018/7/25/why-are-develo...
- kube-system 3y ago
  If only developers could figure out how to build old buildings instead of new ones! /s
  - throwaway173738 3y ago
    All you need to make more old buildings is a bunch of new ones and some time

SeanAnderson 3y ago

HPP (Hudson Pacific Properties, mentioned in the article) is the largest commercial real estate owner in the bay area. Check out their YoY finances: https://i.imgur.com/qEmTBMd.png https://i.imgur.com/qEmTBMd.png It's pretty staggering.

junon 3y ago

Anyone have an archive link that works? SF chronicle refuses to let you use the site with an ad blocker.

chrisjj 3y ago
And falsely claims this vanilla Android Chrome has an adblocker. Odd.

fblp 3y ago

A subtext of this is how much the Canadian pension fun lost out. Hudson Pacific bought the property in 2010 for $93.0 million [1]. The Canadian pension fund bought a 45% stake for $219 million, and Hudson Pacific kept the remaining 55% [2]. So that equivalent $486 million ($474/sqft) valuation was a 5.2x return in 5 years... Hudson buys that 45% stake back for $43.5 million in 2024, an equivalent valuation of ~$96million or a 1/5th of the prior valuation. The article states that it's because the pension fund "weren’t willing to put any more capital in”. The SF city is paying $40/sqft for 157,000 sqft, yet 1,025,833sqft the building was valued at building [1] at the equivalent of $94/sqft in that transaction. Meanwhile, the other building mentioned in that article sold for $72/sqft... so I guess the pension fund didn't do too bad... [1] https://www.sec.gov/Archives/edgar/data/1482512/000119312510284807/dex991.htm https://www.sec.gov/Archives/edgar/data/1482512/000119312510... [2] https://realassets.ipe.com/cppib-kicks-off-hudson-pacific-joint-venture-with-san-francisco-deal/10006135.article https://realassets.ipe.com/cppib-kicks-off-hudson-pacific-jo...

naijaboiler 3y ago
Hudson Pacific just fleeced the pension fund. Paid 93m, got 219 + 43.5, and now own the building outright and clear.
- ryanwaggoner 3y ago
  219 - 43.5