Facebook's Billion-Dollar SF Office-Owner Sells In 49% Deal, Depriving City Of $16 Million Tax

A pending deal to sell 49% of one of San Francisco's tallest office buildings for $539 million will deprive the city of a 3% transfer tax, or more than $16 million, since the deal is for less than half of the value of the property, according to the San Francisco Chronicle

Upon completion of the deal, the Park Tower building owned by MetLife, John Buck Co. and Golub will be valued at at $1.1 billion, or $1,445 per square foot, according to Boston Properties CEO Owen Thomas. 

While Boston Properties isn't involved in the deal, it is the city's largest office owner - recently having acquired development firm Hines's 5% ownership stake in Salesforce Tower for $187 million.  

The likely buyers for the Park Tower stake are Hong Kong Monetary Authority, which manages Hong Kong’s sovereign wealth fund, and Hines, according to three people with knowledge of the impending deal who weren’t authorized to speak publicly.

Property data firm Real Capital Analytics also lists the authority and Hines as the pending buyers in its database. -San Francisco Chronicle

While the Hong Kong Monetary Authority declined to comment on the deal, Thomas said during this week's earnings call "it’s fully leased and is being sold to a developer fund manager backed by a sovereign wealth fund." 

San Francisco office space has become some of the most expensive in the nation, making the prospect of cashing out by selling minority ownership stakes an attractive prospect for owners. 

Investors have purchased minority ownership stakes in some the city’s most valuable offices buildings, occupied by tech companies such as Google, Slack, Twitter and Uber.

New York, the second-most expensive U.S. office market, is also seeing an increase in partial ownership sales, which aren’t subject to a transfer tax there, either. -San Francisco Chronicle

Last year Facebook leased the entire 755,900 square-foot Park Tower in the largest single lease in San Francisco history, which makes it an attractive investment for institutional investors, according to tax attorney Jeffry Bernstein. It is unknown whether Facebook actually occupies the rental yet, as the building was completed last year. 

While the city of San Francisco will miss out on their $16 million, the deal may be subject to federal and state capital gains taxes, according to Bernstein, while the owners will pay property tax. That said, the 49% stake will not trigger a reassessment of the property