Pinterest kitchen Renovations
Pinterest may need some indoor decorating advice. The image-sharing company is about to spend $18.9 million for renovations at an office space it just leased in San Francisco.
That amount was disclosed in a Securities and Exchange Commission filing made by issuers of mortgage securities related to the property that Pinterest leased at 651 Brannan St., in the SoMa neighborhood. Together with the landlord, which is throwing in $4.1 million into space improvements, Pinterest’s 101, 304 sq. ft. space will cost $23 million to spruce up, according to the document.
“That’s an eye-popping number, ” said JD Lumpkin, a top broker in San Francisco at real estate brokerage firm Cushman & Wakefield.
“Pinterest’s space will include other amenities such as a kitchen expected to serve over 2, 000 meals a day and modeled after a food truck, ” the document said. It will also include “all hands meeting areas and training rooms, showers, and other features that are considered to be desirable to tech tenants in the San Francisco area.” Showers, Mr. Lumpkin said, are becoming popular additions to spaces to accommodate employees who bike to work.
“[I]t is our understanding that our project’s projected to cost is in line with the renovations completed by other tech companies in the area over the past few years, ” said Jamie Favazza, spokeswoman at Pinterest. She added that the company is making changes to “modify the space to our specific needs and the collaborative style of our work.”
The average asking commercial lease in the city shot up to a record of $66.71 per square foot in the third quarter, surpassing the previous high of $66 in the fourth quarter of 2000, according to research by Cushman & Wakefield.
The run-up in spending has some venture investors worried. Chamath Palihapitiya, of Social + Capital, called out excessive spending at a recent venture event in San Francisco hosted by StrictlyVC. He said that it would be hard to excuse a startup’s failure if “if you fail because you didn’t have the courage to move to Oakland, and instead you burn 30% of your cash on Kind bars in the office and exposed brick walls.” Last year, Bill Gurley, at Benchmark Capital, has said he’s alarmed by the cash-burn at some startups, including on leases. In the dot-com bust of 2000, startups ended up going bankrupt in part because they had signed long-term leases at high prices that they couldn’t pay.
Pinterest has raised $1.3 billion in funding so far and started generating revenue for the first time this year. The company’s latest valuation was $11 billion in February.
The company’s renovations’ spend comes out to $227 per square foot, according to the document, while the typical range for a creative or technology company nowadays is between $120 to $150, Mr. Lumpkin estimated. Prices rose about 50% over the past 18 months, mostly due to demand and limited supply of labor that allowed contractors to charge more, Mr. Lumpkin said.
He added that the average he cited doesn’t include the spending for furniture and information technology infrastructure, which could cost another $40 to $50 per foot. It’s unclear if the total cited in the document for the Pinterest project includes these additional upgrades.
Pinterest’s seven-year lease comes out to $58.71 per square foot, which is lower than the average of $69.22 for SoMa, according to broker Colliers International. Pinterest started its lease payments on June 1 and plans to move into the space in November, according to the document.
This isn’t Pinterest’s only project. The company also signed a pre-lease on a building that hasn’t been constructed yet, at 505 Brannan St. Terms of that deal haven’t been disclosed. The company says it has more than 500 employees.
Pinterest’s investors include Andreessen Horowitz, Bessemer Venture Partners, FirstMark Capital, Fidelity Management, Goldman Sachs, Pequot Ventures, Rakuten, SV Angel, Valiant Capital Management, and Wellington Management Co.