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California

Top Developer Ends S.F. Venture

With a high vacancy rate in the region, Equity Office dissolves a partnership to build offices.

January 03, 2003|From Bloomberg News

SAN FRANCISCO — Equity Office Properties Trust, the largest owner of office buildings in the U.S., said Thursday that it ended a venture to build offices in the San Francisco area because of the region's high vacancy rate.

Equity Office, whose chairman is billionaire Sam Zell, invested $253 million to construct four office projects with developer William Wilson, including buildings for Sun Microsystems Inc. and Siebel Systems Inc.

Chicago-based Equity Office will keep a stake in some properties, and others will continue to be jointly owned with Wilson, said Robert Winter, senior vice president at Equity Office. He wouldn't disclose financial details.

The venture was formed in June 2000, when San Francisco's vacancy rate was less than 5% and developers rushed to build offices for the growing Internet industry.

The vacancy rate has risen to 21.5%, and 1 million square feet of new buildings begun during the boom are poised to be completed.

"It was a single-purpose entity focusing on office development, and office development in that market, for a while, will be off," Winter said.

Among the projects Equity Office and Wilson developed was Foundry Square, a four-building complex in San Francisco. Two of the buildings are built. Sun Microsystems is trying to find a subtenant for up to half of one 233,000-square-foot building at Foundry Square, and it paid an $85-million fee to call off a lease for a planned 110,000-square-foot building.

Another Foundry Square building that was developed without tenants may soon be half-occupied, if a lease with a "major San Francisco law firm" is completed, Winter said. Another corner of the site remains vacant.

Equity Office owns several large buildings in Southern California. Among them are SunAmerica Center in Century City, Two California Plaza and 10960 Wilshire Blvd. in Los Angeles.

Orange County properties include 2600 Michelson Drive and 18301 Von Karman Ave. in Irvine and 1100 Executive Tower in Orange. Among the company's San Diego buildings are Centerside II and Nobel Corporate Plaza.

William Wilson founded San Mateo, Calif.-based William Wilson & Associates in 1978. It was acquired by New York-based Cornerstone Properties Inc. in late 1998 for $1.81 billion.

Equity Office bought Cornerstone in June 2000 for $4.7 billion, making it the largest landlord in California.

Wilson "wanted to stay on in the development business out there, and they were the best people to work with," Winter said, referring to the formation of the joint venture.

A new entity, Wilson Meany Sullivan, will continue without Equity Office to develop urban Bay Area properties, branching into housing and retail.

Times staff writer Roger Vincent contributed to this report.

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