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One Montgomery

Single Property Fund #4

Falcon Real Estate, in partnership with RRIA Associates of San Francisco, purchased One Montgomery, an historic building at the corner of Montgomery and Post Streets in downtown San Francisco. This is a premier location in the Financial District of that city. Although there were nine years remaining on a lease to Wells Fargo Bank at the time of purchase, the building was bought with the intention of repositioning it when such action became possible. Prior to repositioning, the building would provide a secure income return because of the Wells Fargo lease.

One Montgomery was purchased at a price of $26 million and a mortgage of $19 million was provided by Credit Suisse First Boston. After the building was purchased, Falcon pursued two different routes to enhance the value of the property. On the one hand, negotiations were undertaken with Wells Fargo to have them give up some of their space so that it could be re-leased at higher rental rates for either office or retail use. At the same time, a major study was undertaken as to the feasibility of constructing a residential tower above the existing building.

While negotiations with Wells Fargo were positive and while the City of San Francisco gave initial encouragement to the development of housing units in the downtown area, Falcon was able to negotiate the sale of the property to American Financial Realty Trust at a price of $36.6 million. This price surpassed our initial projections for the property and it provided the equity investors with a compound annual rate of return of close to 25% for the four years it was held.

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One Montgomery