Peebles unloads SoMa space for $31M

Miami developer Don Peebles has sold 250 Brannan St. for $31.2 million to Denver real estate and railroad tycoon Pat Broe, marking the latest in a series of condo conversion projects to be abandoned as the office market takes off.

Peebles bought the 104,000 square foot brick-and-timber space in March, 2006, for $19.8 million and planned to convert it to 54 deluxe loft condominiums. But in the year he spent getting the building approved for condos, the city’s real estate landscape shifted significantly, according to Peebles Senior Vice President Daniel Grimm. Suddenly SoMa vacancy rates had dipped into the single digits and tech firms were clamoring for the kind of wide-open creative space 250 Brannan St. offers.

Grimm said Peebles Corp. spent less than $2 million on the property in entitlement and carrying costs. While the deal represents a quick $11.4 million pay day for Peebles Corp., Grimm said it was “a tough decision.”
“We like San Francisco and continue to believe in it as a residential and commercial market. But we are businessmen and had to take a look at potential risk and return,” he said.

The Broe Group, which owns $1 billion in railroads and real estate across the country, is the third investor in recent months to buy a fully-entitled office-to-residential project with the intention of reverting to the former commercial office use. Grubb & Ellis Managing Director Daniel Cressman is now marketing 153 Kearny St., which had won approvals for 45 condos, and Ellis Partners paid $18 million for 717-721 Market St., which Portland Pacific had entitled for 50 lofts. Both buildings are expected to return to office use. Just two major conversion projects are under construction: 74 New Montgomery St. and 733 Front St.

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