Hearst Buys Office Building in SF for About $43 Million

Hearst has bought a 16-story office tower in San Francisco so it can temporarily close its century-old Chronicle newspaper office to revive a stalled condominium project in SoMa.

The New York-based media firm bought the 143,000-square-foot offices at 450 Sansome Street in the North Financial District for an undisclosed price, the San Francisco Chronicle and San Francisco Business Times reported. The seller was Swiss RE, based in Zurich.

The pending deal is expected to close next month.

One unidentified source told the Business Journal that the price was about $300 per square foot, which works out to nearly $43 million.

Swiss RE, among the world’s largest reinsurance companies, bought the Class A building at Sansome and Clay streets near Jackson Square in 2015 for $89 million, or $622 per square foot.

AEW Capital Management, which manages the 58-year-old tower, put it up for sale in early 2020 for more than $900 per square foot.

The purchase of the tower will allow Hearst to temporarily relocate the Chronicle and SFGate out of the Chronicle Building at 901 MIssion Street, Hearst said in a news release. The move is expected to take place this summer.

That will allow the firm to launch the second phase of 5M, the $1 billion redevelopment of a 4-acre parcel of partially Hearst-owned land between Fifth, Mission and Howard streets in South of Market.

In 2022, New York-based Brookfield Properties completed the first phase of 5M, including a 25-story, 648,000-square-foot office building at 415 Natoma Street and a 302-unit apartment building dubbed the George.

Hearst, which sold a part of the land to Brookfield predecessor Forest City Realty Trust, will build the second phase, a 400-unit condominium tower to replace half of the former home of the San Francisco Examiner newspaper at 110 Fifth Street.

Because the Examiner building, owned by Hearst, is connected to the Chronicle building, it shares electrical, air conditioning and heating systems, so newspaper employees must move to allow the partial demolition to proceed.

Hearst, citing “market conditions and construction costs,” had paused development of the second phase in 2023.

Its purchase of the office tower to make way for its condominium project suggests not only improving market conditions, but that Hearst sees a future in San Francisco.

Steve Hearst, vice president of Hearst’s Western Properties Real Estate Division, said the deal reflects Hearst’s belief in San Francisco’s “long-term resilience and appeal as a destination for world-class businesses.”

A timeline for the Hearst development was not disclosed.

“The entitlements are good for another several years, and in preparation for the Downtown revitalization and the market turning around, we started the process of looking at preparing the site for development,” Marty Cepkauskas, Hearst’s head of Western Properties, told the Chronicle.

“In San Francisco, that means going through the design process and working with the city, which takes several years,” he said. “Since the Chronicle building is currently 70 percent vacant, we felt this is the right time to start looking at that development opportunity.”

— Dana Bartholomew