Transamerica Discount May Be Part Of A Trend In San Francisco

The pending sale of San Francisco's iconic Transamerica Pyramid will move forward, but only after a discount. 

An investment group led by SHVO CEO Michael Shvo will move forward on its acquisition of the Transamerica Pyramid with a 10% discount, according to multiple reports. 

Both Transamerica Corp. and SHVO declined to comment on deal specifics. 

Shvo and partners secured an initial $700M-plus deal for the 853-foot skyscraper in February, agreeing to buy the tower and adjacent buildings from Transamerica Corp. and its parent company, Aegon, for a sum of over $700M, Bisnow confirmed at the time. 

The Shvo-led acquisition group includes Deutsche Finance and Bayerische Versorgungskammer, or BVK, a German pension fund. SHVO's signing of a purchase agreement with a 10% discount and the coronavirus-induced delay were first reported by the San Francisco Business Times. 

The skyscraper and buildings at 505 and 545 Sansome St. were first put on the market in August, following nearly two years of a partial stake in all three buildings being available. The three buildings total about 760K SF. 

Discounts on CRE deals are becoming more common as the coronavirus pandemic continues and property valuations drop, and San Francisco is unsurprisingly not an exception, according to Kidder Mathews Senior Vice President Michael Gschwend, who is based in S.F. but uninvolved in the Transamerica Pyramid deal.

"There's been approximately 2.5M SF of sublease space that has hit the market since shelter in place was instituted and minimal lease transaction velocity to absorb it," Gschwend wrote to Bisnow in an email. "Thus, buyers are adjusting their underwriting downward, which in turn has a negative effect on values."

Until Salesforce Tower opened in 2018, the Transamerica Pyramid was San Francisco's tallest building since opening in 1972. It includes tenants like Northwestern Mutual and Greenhill & Co. 

“Transamerica and SHVO continue to move forward toward closing on the sale of the Transamerica Pyramid," a Transamerica spokesperson said in a statement. "We are in a due diligence period and will not share additional details at this time.”