New York Times

A billion-dollar bet on luxury office space

Andrew Ross Sorkin, Mar 22, 2022

For nearly 50 years, the Transamerica Pyramid — the distinctively geometric 48-story, quartz-clad tower — has been a fixture of the San Francisco skyline. Now its owner, the real estate developer Shvo, is introducing a sweeping renovation meant to mark the return of swanky offices.

The Transamerica campus is being redesigned by Foster and Partners, the architecture firm founded by Norman Foster. The design mandate, according to Shvo’s founder, Michael Shvo, was luxury: An outpost of the Core club, the private members-only club, will occupy one floor; a lounge and gym will feature in the middle of the pyramid; and a private bar for tenants will sit at the top.

“By the time we’re done with the renovation, you’ll feel like you’re in a Four Seasons hotel,” Shvo told DealBook. The block-length site will also gain new office and retail space, and the half-acre Redwood Park at the tower’s base will be overhauled.

It’s a big bet that the business world will re-embrace the office. Shvo’s firm bought the Transamerica site in October 2020 with the aim of transforming the William Pereira-designed site into a luxury corporate campus. “Our role is to help our tenants bring their employees back to the office,” Shvo said. But Shvo’s expensive bet — buying the property cost $650 million and renovating the area will run to some $400 million — comes as many corporate workers don’t appear in a hurry to return to city-center offices.

Shvo has signed up a variety of tenants, including tech companies, law firms and venture capitalists. Just as important, he said, the renovations have enabled the developer to roughly double rents, which as of the 2020 purchase were around $70 to $100 per square foot, defying recent San Francisco trends.