Since 2/16 the following transactions took place in the SF Bay Area:
Tishman found an investor in China Vanke to develop two connected residential towers – 37 and 42 stories high – with a total of 655 residences. The site is located across the street from The Infinity, a pair of residential towers that also were developed by Tishman.
Tishman Speyer and JP Morgan Chase Asset Management, a partnership that is already building a speculative 300,000-square-foot building at 505 Howard St., expects to start construction on a second building at 222 Second St., a 450,000-square-foot tower on the site of a surface parking lot this despite the fact that Tishman’s Foundry Square III which is a spec building has not landed a tenant yet.
Sunhill Enterprises a Marin-based family investment firm paid $4.6 million, or $313 a square foot, for 527-533 Sutter St., a two-story retail commercial building that consists of 14,778 square feet. The property is fully leased to five tenants including 7-Eleven, Pacific Exchange, the Sheldon Theater on the bottom floor and two other theaters on the second floor. The seller was Barkhordarian Trust, also based in Marin.
Essex Property Trust has bought the apartment portion of Fox Plaza in San Francisco for $135 million, but doesn’t have immediate plans to build a second, 11-story tower that is already approved. The deal for the 444-unit property, the latest in a string of investments the Palo Alto-based company has made in the city, values the Mid-Market building at about $300,000 a unit. The Company plans to spend $27 million over the next several years to renovate both the exterior and interior of the property.The seller was Archstone. The property is a 29-story high-rise tower with Fox Plaza apartments located on floors 14 through 29. The purchase price did not include floors 1 through 12 of commercial office space but did include an adjacent two story building comprised of 37,800 square feet of space leased to retail and office tenants and a two story underground parking garage comprised of 405 stalls. The two story commercial building is entitled for a 250 unit, 11 story apartment community. At present, Essex does not plan to develop the apartment tower but will evaluate this option in the future. Archstone acquired the complex in 2005 for $147.5 million and in 2007 unloaded the 232,000-square-foot office/retail component for $42.7 million to Broadreach Capital, which still owns it. The deal comes less than a week after the city picked Essex and Avant Housing to develop a $250 million tower in the Transbay District. A year ago, Essex joined up with the State of Wisconsin Investment Board and made a seven-year, $175 million preferred-equity investment in Parkmerced, the city’s largest single apartment complex with 3,221 units, which is slated for redevelopment and expansion. Last year Essex bought two SoMa apartment complexes that Avant Housing is building at 260 Fifth St. and 900 Folsom St., a total of 463 apartment homes and a $250 million investment.
San Francisco’s Clift Hotel sold for $120 million. Hospitality Properties Trust a REIT out of Massachusetts acquired the 363-room hotel from Tarsadia Investments, according to Hotels Magazine. The property is managed by New York City-based Morgans Hotel Group. The Clift is the latest hotel to change hands in San Francisco. Six hotels, including the Fairmont, Hotel Milano and Hotel Palomar, sold for more than $230,000 per key last year. The Ritz-Carlton, Harbour Court and Triton Hotel are still looking for buyers.
The cost of construction materials continued creeping up in January, a trend experts expect to see for months to come according to SF Business TimesPrices rose 0.7 percent between December and January resulting in a 1.3 percent jump compared to 12 months ago, according price index tracked by the Associated General Contractors of America, a trade group. Specifically, prices for gypsum, wallboard and lumber, as well as significant increases in the cost of insulation and architectural coatings such as paint is going up along with pump prices for diesel fuel. The increase is fueled by more housing construction and renovations on other types of buildings, the association said in a statement. Rising construction costs typically mean development costs will also spike.
Square signed an expansion option for 81,354 square feet at 1455 Market St. in downtown San Francisco. The company signed for 246,078 square feet at the tower in November. Square will move into the space in several phases throughout the year and will occupy a total of 327,432 square feet by 2014. Congratulations to Jenny Haeg and Eva Gabrielsen of Custom Spaces who represented Square.
OSH will not be able to convert 975 Bryant into a 33,000 square foot store. It appears that the Planning Commission vote was based on the impact of Formula Retail on Cole Hardware, Builder Supply, Center Hardware.
A map of the Central Corridor transit lines is below. We are of the opinion that SF is not prepared to handle growth and there is a clear lack of leadership. Oracle World, The Giants Victory Parade, Salesforce trade shows indicate that the City comes to a halt when there is increased traffic. None of the City Departments work together. We rarely see Police Officers on the streets. Worse, as Development increases so does the number of Pedestrian fatalities. District 6 for example where most of the Development takes place has the largest number of Pedestrian fatalities in the City. We are witnessing much construction in SF without any thought as to the impact on traffic, health etc.
The Giant’s Mission Rock project will look like this:
The latest Case Shiller figures indicating that in SF homes are up 14.4% and Condos up 21.3% does not come as a surprise. Far more interesting is the fact that Homes and Condos are respectively still 32.6% and 23.6%below their all time high prices. Consequently, the question is how much upside do we still have?
Who calls the shots? It is common knowledge that Developers large and small are at beck and call of lenders such as Banks, Pension Funds, REITs etc. For example, the new JV between Tishman and China Vanke to build two more towers across the existing Infinity Towers will cost about $620 million, which the developers hoped to fund using $250 million in equity and the remainder debt. The equity was to consist of 70 percent, or $175 million, from Vanke and… 30 percent, or $75 million, from Tishman. In other words lenders will put 60% of the money and in this case Tishman 12%. It consequently comes as no surprise that banks are involved in every detail of construction projects including the choice of the Brokerage firms handling the sale…
Condo construction: As of mid-February, there were 3,700 apartments under construction in the city and less than 400 condominiums… lenders see apartments as low risk right now followed by industrial, office, retail, hotels and then condos.
Can SF handle growth? In response to our feature about SF’s inability to handle growth, it was pointed to us that the boards for the Association of Bay Area Governments and the Metropolitan Transportation Commission are expected to adopt Plan Bay Area, the local iteration of a statewide initiative dubbed the Sustainable Communities Strategy. We explain what it is here:
An outgrowth of 2008 law Senate Bill 375, the SCS aims to concentrate new development within the state’s 18 metropolitan areas in existing urban nodes with the goals of reducing sprawl, promoting public-transit use and cutting pollution and greenhouse gas emissions. In the Bay Area, the 25-year growth framework advocates high-density residential and commercial construction in 180 “priority development areas” centered mostly along or near transportation corridors in the region’s three largest cities: San Jose, San Francisco and Oakland. Each development district is expected to be at least 100 acres, with a full spectrum of housing, workspace and amenities. Plan Bay Area will serve as a transportation and land-use guideline for cities throughout the region. Under the preferred scenario now being evaluated in an environmental impact report, 79 percent of all new homes and 66 percent of job growth would be located in the 180 development zones. In the less-populous and more rural North Bay counties of Marin, Sonoma and Napa, up to half of all new homes are expected to be in a priority development area. The Bay Area is expected to generate 1.1 million new jobs by 2040 bringing the total to 4.5 million; 27 percent of the new jobs would be in Santa Clara County, 17 percent in San Francisco. The population is expected to surge to nearly 9.3 million, 2.15 million more than today. The newcomers are proposed to need 660,000 new homes.
Under the preferred scenario, the development pattern is one of compact communities connected by transit with a goal of avoiding the financial and environmental downsides of continuing to build suburban-style subdivisions on the fringes.The proposed plan contends the requirements continue an established regional bias toward multifamily housing, including apartments and condominiums. In 2010, 65 percent of all new Bay Area housing was built in the multi-family format compared to 44 percent in 2000 and 25 percent in 1990.The higher-density, concentrated development is supposed to help the Bay Area contribute to reaching the state’s overall target reduction of 15 percent statewide in greenhouse gas emissions set by the state Air Resources Board for the next 23 years.
To persuade local jurisdictions to implement the land-use, housing and transportation goals of the state and federal governments, the Metropolitan Transportation Commission has created the OneBayArea Grant Program. Under the program, the MTC is to invest approximately $795 million in federal funds during the four fiscal years from 2012-2013 to 2015-2016 in transportation projects supporting AB 32 goals (the California Global Warming Solutions Act). It provides financial rewards for jurisdictions that approve new housing development for all incomes, preserve open space and build bike and walking trails. The Building Industry Association of the Bay Area but the loss of funding through the state’s nearly 400 redevelopment agencies, which had to spend 20 percent of their revenue to finance low-cost housing, is a major blow to development of urban-infill apartments and condos, he said. Such development is expensive given high urban land values, the compliance cost of environmental regulations and local building fees.
Because of AB 32 there is a legal mandate to reduce polluting emissions. The basic framework needed is jobs and housing close to public transportation. The so called Priority Development Areas are in San Francisco, Oakland and San Jose; the Lake Merritt area near downtown Oakland; the area around the Oracle Arena and the Coliseum off I-880 in Oakland; the Shattuck Avenue corridor in Berkeley and the “Grand Boulevard,” or El Camino Real corridor in the South Bay and along the Peninsula; and the downtown districts of such cities as Livermore and Cloverdale.
Here’s what Essex Fox Plaza mentioned above will look like:
SF Demand for growth is almost entirely concentrated in one sector:94.7 percent of the expected net absorption comes from technology companies. In contrast, financial services firms represent 1.9 percent of anticipated growth and business services accounts for 4.3 percent. Meanwhile, other industries are shrinking: legal service companies are looking to downsize their office space by 1.8 percent and government/social services are also reducing occupancy, by about 1 percent, according to CBRE.San Francisco office tenants out looking for space represent 900,000 square feet of positive absorption, enough to add about 7,000 new employees to the city’s workforce, according to a new report by CBRE. Even though high-profile technology firms like Twitter and Salesforce account for nearly 95 percent of future net positive absorption, the crop of growing companies is actually quite diverse, ranging from social media to software to hardware to cloud computing.The growth of the tech industry is generating more need for professional and businesses services and that is boosting the overall economy.We have often written about this multiplier effect on the pages of this blog.
Together the top three growing technology firms are looking to take 175,000 square feet more than they now occupy. The smart phone-based car service company Uber is in the market for about 100,000 square feet, a 74,000 square foot jump over what the firm now occupies at 405 Howard St. Today Demandforce is jammed into 57,000 square feet at 22 Fourth St., and is looking to add at least 43,000 square feet and Yahoo settled into 42,000 square feet at 475 Sansome St., would like to expand into about 90,000 square feet. Overall, the city’s tenants are in the market for 4.5 million square feet. Non-tech companies looking for space include B of A, Deutsche Bank, and Delta Dental. All of those firms are looking to reduce their square footage in order to become more efficient.
The Apple Campus expected to be completed mid 2016. Here’s the latest rendering:
Sonoma-based A&C Ventures has bought the historic Warfield Theater on Market Street from Mid-Market entrepreneur David Addington for close to the asking price of $6.5 million.The deal is the latest investment into the suddenly desirable Mid-Market neighborhood. Last year Addington sold the Warfield office building, which is being renovated and the top floors of which have been leased to Benchmark.ACV invests in single-tenant retail and entertainment properties around the United States.
Trumark Urban is about to purchase a site for condominium developments in…Pacific Heights: 2155 Webster St. is the site of University of the Pacific Dental School. Trumark replaces TMG who was originally interested in the property.The 222,000-square-foot building includes a 17,000-square-foot surface parking lot — a rarity in densely settled and well-heeled Pacific Heights. The property will be vacated by the University of the Pacific in 2014 when the elite dental school finishes renovating its new campus at 155 Fifth St.
The deal is the seventh property that Trumark is developing in San Francisco. Trumark Urban, a spinoff condo developer launched by the Trumark Cos., is working on entitling projects in Nob Hill, Hayes Valley, Mission District, South of Market and Dogpatch neighborhoods. In addition, the company is in contract on an entitled property in Cow Hollow. Trumark plans to build all of the projects as condominiums rather than apartments, and is poised to become one of the city’s biggest condo developers over the next three years. With the addition of the Webster Street property, Trumark will have more than 650 units in the pipeline. The potential sale of 2155 Webster comes a year after the school unloaded 2130 Post St., a 67-unit, 100,000-square-foot apartment building near its current campus. The buyer was Prado Group.
Market Place a few doors down Nordstrom’s lost J.C. Penney as an anchor tenant a few months back. A potential anchor tenant is now rumored to be Nordstrom Rack. Market Place is a 250,000-square-foot Market Street Place development at 935-965 Market Street between Fifth and Sixth Streets. It was formerly known as City Place.