A vacant 25-story office building in San Francisco’s South Financial District has flown off the clearance rack and into the hands of private equity giant Blackstone and DivcoWest. The companies want to dust it off and make it into a nerve center for the city’s artificial intelligence sector.
To make their vision for 199 Fremont Street come true, the joint venture partners scored a $163 million loan from Wells Fargo Bank, according to property records filed in San Francisco County. The length of the loan and other deal terms were unclear, and spokespeople for Wells Fargo, Blackstone and DivcoWest declined to answer specific questions about the debt.
Blackstone and DivcoWest bought the 416,000-square-foot office tower from the Munich-based Manova Partners, previously known as GLL Real Estate Partners, and CalSTRS for $111.3 million, or about $265 per square foot, earlier this month, the San Francisco Business Times first reported.
That’s a more than 70 percent discount from the building’s price just over five years ago. DivcoWest and California’s largest teacher pension fund, CalSTRS, bought a 49 percent stake in it for $900 per square foot in December 2019 — just before the onset of the 2020 pandemic and the rise of remote work.
The city’s office market woes took a toll on 199 Fremont, which was built by Freemont Properties in 2000 and was previously home to ticket reseller Stubhub and wearable tech brand Fitbit. Stubhub shuttered its office at the property in 2022, and Fitbit’s lease spanning 160,000 square feet expired in 2024.
San Francisco is still glutted with office space. Office vacancy climbed to 34.7 percent in the first quarter of 2025, up from 33 percent at the same time last year, according to a report by Cushman & Wakefield. Tech companies have continued to dump huge chunks of office space onto the sublet market, with Elon Musk’s X exiting 460,000 square feet at 1355 Market Street last year.
But David Levine, co-head of acquisitions for Blackstone Real Estate, thinks the firm has found a silver lining to the cloud hanging over the Golden Gate.
“We are big long-term believers in San Francisco,” Levine said in a statement.
The private equity company and DivcoWest plan to add a full floor of tenant amenities as part of the renovations. And they’ll rebrand the property as 300 Howard, according to an announcement about the project last Tuesday.
DivcoWest’s Gregg Walker, who heads real estate asset management for the San Francisco-based company, said in a statement that the project will “reimagine the building as a next-generation workplace.”
The partners are laser focused on attracting AI talent to the address, Walker added.
CalSTRS, for its part, is currently underfunded and buckling under the mounting costs of paying out retirees in California. The pension fund sold off $555 million in real estate assets in the second half of 2024, according to its most recent semi-annual filing.
A spokesperson for the pension fund declined to comment on the sale of 199 Fremont Street.
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