Monday, April 21, 2014

SF Bay Area News - April 21, 2014

Two interesting events this week, one on Tuesday evening and the other all day Friday. The BABC St. George's Day Celebration and New Member Drive at Hotel Vitale is this Tuesday. Enjoy spectacular views from the roof-top deck and mix and mingle with fellow BABCers and potential new members of the BABC Also, the CREW California Conference this coming Thursday evening through Saturday


New York City-based TIAA-CREF will be getting a four cap rate on its purchase of the 379,330 square foot 55 2nd Street office building in the South Financial District in San Francisco, according to sources familiar with the transaction. This return is based on the current net operating income being produced by the property.

Sale of SoMa McDonald's site across from Giants' ballpark could set records.

3140 16th Street, in the heart of the Mission District, San Francisco just sold. Urban Group represented the Seller of this 20,400 SF property. Cornejo stated, "The Mission District is a vibrant neighborhood in high demand and 3140 16th is in the midst of all the excitement." The property received multiple offers, selling at $8.7 Million. This transaction constitutes one of San Francisco neighborhood districts' largest commercial sales in the last year. The Buyer, a private investor, plans to repurpose the building from its current use as an auto body shop.


More than a quarter-century in the making through a combination of public and private financing, the city’s Transbay Redevelopment Plan will transform the nearly 40 acres in San Francisco’s SoMA district south of Mission Street by bringing more than 4,400 housing units, 11 acres of new public parks and nearly 1,000 hotel rooms, along with 100,000 SF of retail and six million SF of office space. The crown jewel of the redeveloped area, the 1,070 foot Transbay Tower, should open by 2018. The city’s tallest building, it will sit adjacent to the redeveloped Transbay Transit Center for a combined cost of $4.5 billion. The latter has been designed as a regional transportation hub already dubbed the “Grand Central Station of the West.”.

ECONOMIC NEWS’s close to $1 billion investment in the Salesforce Tower is the kind of deal that would normally take at least a year to put together. But when talks between Salesforce and developers Boston Properties and Hines got under way last December, both parties kicked into high gear, the chairmen of both sides were involved on a daily basis, to get the 714,000 SF lease done in about five months.

The San Francisco Office market ended the first quarter 2014 with a vacancy rate of 9.2%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 387,772 SF in the first quarter. That compares to positive 613,157 SF in the fourth quarter 2013. Vacant sublease space increased in the quarter, ending the quarter at 1,336,596 SF.

New office buildings in San Francisco are filling up years before they’re ready for occupancy. Much of the 5.5 million SF of new Class A office that will be added in the next four years is pre-leased, meaning rental prices could continue increasing significantly.

A combination of lack of new supply, the strength of technology and energy tenants and a deep talent pool is responsible for strong absorption in the San Francisco office market, Maria Sicola, head of research for the Americas for Cushman & Wakefield, tells Q1 US office-market absorption increases of 133% year over year, with San Francisco’s occupancy gains coming in at 1.2 million SF for the quarter, behind Midtown South New York (1.7 million SF) and Chicago (1.4 million SF).

Tuesday, April 15, 2014

SF Bay Area News - April 15, 2014

This evening, Tuesday April 15 RICS Northern California is having an educational event providing refreshing insight into our 'Rules of Conduct,' their relevance in practice, and overall importance to RICS. This event is generously sponsored by Clark Construction. Open to those curious about the RICS as well as members. All sign-up were meant to occur by 5PM on Monday. If you would like to attend please let me know as soon as possible and I will see if I can add you to the list (building security means that walk-ins are not permitted).


During the 1st Qtr this year, Norges Bank, the Norwegian sovereign wealth fund, acquired a 48% interest in 425 Market Street. Asian buyers picked up 1550 Bryant Street and 211 Sutter Street, and 225 Bush Street is in contract with a Chinese buyer. The quarter’s largest investment transaction was Invesco’s purchase of 101 Second Street for $765 psf at a sub-4% cap rate. “With mounting pressure to place money here, potential buyers are lowering their size threshold and are willing to invest in smaller deals,” added Caroline Rooney, managing director for Capital Markets Research at Cushman & Wakefield.

Another office condominium was closed by me last week at the asking price. Only three units left available in the approximately 130 unit, Union Square medical office building. Prices are now averaging over $650 PSF.

LaSalle Hotel Properties has acquired Hotel Vitale, a 200-key lodging in San Francisco, for $130 million. The hotel was purchased subject to a ground lease with the City & County of San Francisco, Municipal Transportation Agency, which expires on March 8, 2070. The company funded the acquisition with borrowings from its senior unsecured credit facility.


There are now two non-entitled development sites in the South of Market neighborhood in San Francisco up for the sale that will test the investor demand for these projects. The two locations are 701 3rd Street and 500 Townsend.

New residential condo development in Hayes Valley to kick off. San Francisco-based 7×7 Development is planning a new 69-unit condominium development at 388 Fulton Street in the Hayes Valley region of San Francisco. The company recently acquired the .29-acre site for a price in the neighborhood of $11 million, according to sources with direct knowledge of the transaction. Included in the purchase price were the design plans and contracts with consultants who had worked on the project over the past two years from the previous owner.

A new VA Medical Center in San Francisco, the project everyone seems to want to happen, may not happen at all. Or maybe it will. On the eve of a report from the Bay Area Council Economic Institute that clearly outlines how a public-private partnership may help the San Francisco medical center move from near Lands End to Mission Bay, the project's future appears uncertain. But there also seems to be a lot of work, of the "nondisclosure agreement" variety, happening behind the scenes. "I certainly think within the year" there will be movement on the project, Mayor Ed Lee said Friday.

Developers plan to add 5.5 million square feet of new Class A office to San Francisco’s hot market in the next four years, but with much of that space pre-leased, rental prices could continue increasing significantly in the next few years.

Second Phase Complete at L+M’s Candlestick Heights Community in San Francisco. New York-based L+M Development Partners celebrated the completion of the second phase of construction this month at the company’s first California community, Candlestick Heights, in San Francisco. Temporary certificates of occupancy (TCOs) are expected at any time for the development’s 130 new rental units that will bring a high-quality affordable living option to The City’s Bayview Hunters Point neighborhood.


Health-Care REITs Get Back on Their FeetCompanies that own health-care facilities such as clinics and nursing homes, once viewed as one of the safest and most dependable sources of real-estate income, were spurned last year by investors. This year, though, health-care real-estate investment trusts once again are feeling the love. Since the beginning of 2014, health-care REITs have been among the top performers in the REIT sector.

The recovery of the Bay Area’s real estate markets has muted the public outcry to change Proposition 13’s restrictions on assessed value increases. Passed in 1978, Proposition 13 has come under fire for fostering unequal tax burdens. The reasons that tax-reform fervor is weakening are twofold. First, as the recovery spurs real estate sales, properties will be reassessed at higher market values under Proposition 13’s acquisition value system.

Tuesday, March 25, 2014

SF Bay Area News - March 25, 2014

This Thursday evening RICS Northern California is having a joint membership event with the Appraisal Institute, American Society of Appraisers, and Commercial Real Estate Women San Francisco. This is members only but if you have missed the information please let me, your local RICS President, know.


Hamm’s Building in The Mission District Sold by TMG Partners and Alcion Ventures. As the Bay Area’s office market continues to ignite the interest of investors, yet another signature building in the city recently traded hands in an important deal. TMG Partners and Alcion Ventures announced this week that it had sold The Hamm’s Building. The rumored price is $90 Million ($487 PSF) although that is unconfirmed. The building is located at 1550 Bryant Street in San Francisco’s Mission District and totals 184,706 square feet of office space.

26 Ocean Avenue, a 3,729 SF freestanding retail building in the Mission District sold for $221 PSF ($800,000) last week. It shows the contrast between values in different submarkets throughout San Francisco.


Plenty of heads have been scratched over what will happen with’s 14 acres of land in Mission Bay, purchased four years ago for $278 million as a potential new headquarters before the company decided to expand in the financial district instead. The rumors have suggested buyers from Google Inc. to the VA Medical Center to the Warriors to “friends of UCSF.” The land is (nearly) entitled for 2 million square feet of office space and has been labeled “the best parcel of land between San Diego and Seattle.” The University of California, San Francisco announced March 7 that it’s in discussions to buy 3.5 acres (Blocks 33 and 34) of the 14-acre plot, across Third Street from its campus.


China's woes could hurt San Francisco real estate. On March 18, New York Times reporter Neil Gough wrote a story titled "China's rapid growth hits the brakes.” "New pockets of economic weakness in China emerged on (March 17), as the collapse of a highly indebted real estate developer and weak home sales pointed to a slowdown in the sprawling property sector," Gough wrote.

San Francisco trophy office rents rocket toward $100 per square foot. Investors continue flocking to pick up trophy properties while at the same time tenants fight over the best of the trophy spaces, according to a report from JLL. Competition for the best space in San Francisco could push rents to record highs near $100 per square foot.

A 26-Story History of San Francisco. 140 New Montgomery is the San Francisco headquarters of Yelp. The local business information company occupies nine floors of a newly refinished building that once served as the headquarters of the Pacific Bell Telephone Company.

Monday, March 17, 2014

SF Bay Area News - March 17, 2014

Evolve and take your business to the next level by joining us at the 2014 CREW California Conference (April 24-26, 2014) in San Francisco. CREW chapter attendees include San Francisco, Silicon Valley, East Bay, Sacramento, Inland Empire, Los Angeles, Orange County and San Diego.

RICS Northern California is having a joint membership event with the Appraisal Institute, American Society of Appraisers, and Commercial Real Estate Women San Francisco on Thursday, March 27. This is for members only but if you have missed the information please let me, your local RICS President, know.


UCSF’s pending deal to buy 3.5 acres in Mission Bay from Salesforce would pump $32 million into affordable housing and infrastructure improvements. UCSF is in talks to purchase lots 33 and 34, the rectangular-shaped property across Third Street from UCSF’s under-construction women’s, children’s and cancer hospitals. The acquisition would allow UCSF to build 300,000 SF of office space needed to support its new hospital and research campus.


Et Tu, Caesar's? Plans For New Condos On The Edge Of North Beach. While the project has yet to be approved, plans have drawn to raze the former Caesar's Restaurant on the southwest corner of Bay and Powell and construct a four-story building with 17 condos, a new ground floor restaurant, and underground parking in its place.

The five-alarm fire that consumed half of the MB360 development in South Mission Bay was contained to the 170-unit building under construction along Fourth Street at the intersection of China Basin, a building which was slated to open its doors mid-year. The Mission Bay Block 5 building continues to smolder this morning and will be a complete loss, not to mention a setback for the development of the Fourth Street retail corridor.

The AFL-CIO Housing Investment Trust has recently revealed a $58-million financing commitment towards construction of 101 Polk, an $82.8-million multifamily development in San Francisco. The all-union construction is expected to generate approximately 350 union jobs. The HIT investment of union and public employee pension funds will help finance the 13-story building offering 162 housing units with underground parking.


Growing push for T-Line extension to Fisherman’s Wharf. MUNI's Central Subway tunnel boring machines have already made it past Union Square and are inching their way towards Chinatown. Once they make it to North Beach, the SFMTA plans extract the machines without building a station, and wave goodbye to the neighborhood. Many San Franciscans see that as completely nonsensical, and hope to convince transit authorities to keep the machines underground until they reach tourist-filled Fisherman's Wharf. Advocacy organization "SF NexTstop" has formed to fight for the extension of the subway project. To boot, two different articles on the subject appeared in the Chronicle this past week, signaling growing interest in the plans. Local officials are taking note, and the SFCTA is now planning to dedicate $150,000 towards a feasibility study for the extension.

San Francisco needs more housing, lots of it, to come anywhere close to meeting demand. There were about 600 housing units under construction at the end of 2013 with another 6,000 approved for construction. Over the past 20 years, the city has seen an average of 1,500 units completed annually. But that still falls short of meeting the needs of the growing city, officials said. Mayor Ed Lee wants the city to build some 5,000 units of new housing per year until 2020.

With San Francisco’s housing affordability a top political issue, the city has begun to look at how it might convert some of its own land into new homes. Mayor Ed Lee has ordered city departments to take inventory of their properties that are vacant or underused, regardless of size.

The strategy of holding title to investment real estate in single purpose entities as a liability shield often passes for conventional wisdom. Yet many savvy real estate entrepreneurs hold and borrow against real estate without a layer of corporate “insulation.” What do they know that you don’t? This is a “big dollars” issue that has been hiding in plain sight for years.

Tuesday, March 11, 2014

SF Bay Area News - March 11, 2014

This week I am off to the Sperry Van Ness National Conference in San Antonio. I will be receiving an award for being in the top 100 brokers (out of over 1,000). The exact ranking is kept secret until the ceremony. For those of you who follow me on twitter I’ll let you know how I do.

Evolve and take your business to the next level by joining us at the 2014 CREW California Conference (April 24-26, 2014) in San Francisco along with statewide Commercial Real Estate leaders and professionals for a dynamic and informative conference you don’t want to miss. The conference will provide excellent networking opportunities to expand your business throughout your local region or statewide. A large portion of our attendees are Presidents, CEOs, Partners and Senior Managers of their firms. CREW chapter attendees include San Francisco, Silicon Valley, East Bay, Sacramento, Inland Empire, Los Angeles, Orange County and San Diego.


KRON-TV is betting the start of construction on the California Pacific Medical Center’s $2 billion Cathedral Hill hospital at Cathedral Hill will help drive a hefty payday. Young Broadcasting, which owns the local television station, has come to market with 1001 Van Ness,, a 106,000 square foot office building a block from where CPMC is building the hospital. The television building, which could be converted to medical office or knocked down to make way for 200 housing units, is expected to fetch about $25 million.

San Mateo-based JB Matteson Inc. paid $50 million for the Rafael Town Center, a mixed-use development in downtown San Rafael. Completed in 2002, Rafael Town Center features 113 apartments, 41,783 square feet of office space, 20,312 square feet of street-level shops and restaurants, and a 257-space parking garage on a 1.02-acre parcel at 999 4th Street.


Three seasoned San Francisco residential builders are jockeying to develop Block 8, a Transbay District parcel that is approved for 740 housing units. The groups bidding on the property are: Millennium Partners, which developed the Four Seasons San Francisco on Market Street and the Millennium Tower on Mission Street; Related California, which built the Paramount at 680 Mission St.; and Golub, the Chicago-based developer that was selected to construct 299 Fremomt, a $200 million, 32-story residential tower.

A busy and joyous crowd gathered Tuesday in San Francisco’s Chinatown to celebrate another significant milestone in this city’s colorful neighborhood. The occasion was the topping off ceremony hosted by general contractor DPR Construction to mark the bolting of the last beam of a steel skeleton that in less than two years will be the new Chinese Hospital. The $103 million project, designed by Jacobs Engineering Group, is planned for completion at the end of 2015, when the community and its leaders will mark the opening of this 80,000 square foot hospital.


S.F. urged to legalize thousands of in-law units in bid to tackle housing crisis. San Francisco should establish a process to legalize thousands of illegally-constructed housing units and bring them under rent control laws, according to a staff recommendation ahead of a Planning Commission review this week.

Tech companies may be swallowing astronomical rent increases to stay in the city’s trendy quarters, but that doesn’t mean they like the taste. Eventbrite co-founder Julia Hartz told Business Insider that the 100,000 square foot lease she signed in January at 155 Fifth St. “made me want to throw up.” She said the rent — likely above $65 a square foot — was more than double what the company was previously paying.

The housing market in the Bay Area is one of the most dynamic in the world, but it is starting to show signs of maturity. The region, which has seen roughly 60,000 new jobs created in 2013, about a third of that in San Francisco alone, has seen an equally robust increase in property values as well as highway traffic times. But the story everyone came to hear at the second installment of the ULI SF Market Update Series was housing.

Monday, February 24, 2014

SF Bay Area News - February 24, 2014

As President of the RICS Northern California, I would like to invite you to attend our upcoming event on the evening of March 4, 2014. Get involved with our local chapter and gain insight into current RICS and regional industry initiatives. Please contact me direct for more information.


Polidev has acquired its third San Francisco office building, paying about $22.5 million for the 47,000-square-foot 1912 Renaissance-Baroque structure at 332 Pine St. The price was about $470 a square foot, 41 percent more than the building traded for in 2012.

LaSalle Hotel Properties is under contract to buy a leasehold interest in the 200-room Hotel Vitale in San Francisco for $130 million or $650,000 per room. The public REIT released this information for its fourth quarter and full year 2013 operating results last week.

The sale of the 383-room Mark Hopkins Hotel in San Francisco has produced a 4 percent cap rate, according to sources familiar with the transaction. This return is based on the net operating income for the property for the 12 months of 2013.

Host Hotels & Resorts has acquired the 151-room Powell Hotel in downtown San Francisco for $75 million. The buyer released this information today as part of its fourth quarter 2013 and full year 2013 operating results. The seller of the property was a Hong Kong-based family.

82-84 First Street, the family-owned 16,000-square-foot structure sits smack in the middle of the second biggest development site in San Francisco's Transbay District, has sold for a record price in San Francisco: reportedly $22 million or $1,400 a square foot.


Condo Developer Outbids Apt. Developer Recently. KB Home purchased a shovel-ready, 81-unit site at 2655 Bush St. in San Francisco's Lower Pacific Heights from Los Angeles-based investor Ares Management LLC and Mill Valley, CA-based multi-family developer Thompson | Dorfman Partners LLC. Betzler tells that when Thompson Dorfman and ARES purchased the property in 2012, apartment developers were regularly outbidding condo developers. “However, condo prices went up about 20% while they were designing the building. This significantly increased the purchasing power of condo developers.” According to Betzler, “This allowed KB to make a compelling offer just as Thompson Dorfman was about to break ground on the project.”


Tech city: Too much of a good thing for San Francisco? As tech firms and tech wealth become subjects of controversy in San Francisco, those who remember the dot-com bubble worry about the city’s breakneck pursuit of tech jobs. Is the S.F. economy now too reliant on a single industry?

More restrictions on retail wrong formula for S.F. In San Francisco’s long running and highly charged chain-store debate, dispassionate voices are few and far between. On one side, you have chain store opponents determined to keep “formula retailers” and their vile mix of jobs, tax receipts and expanded choice of retail goods out of as many city neighborhoods as possible. They are adroit at working both the official and unofficial levers of power, have the sympathy of many if not most supervisors, and are used to achieving their goal.

Sponsored by Supervisor Wiener, the Port of San Francisco, Planning Department, City Administrator, Controller, Office of Economic and Workforce Development, Municipal Transportation Agency, and Mayor’s Office of Housing and Community Development will all have a chance to report on the impact of adopting the Waterfront Height Limit Right to Vote Act with respect to the City's future housing, transportation, and open space needs. Assuming Wiener's resolution authorizing the review is adopted by San Francisco’s Board of Supervisors next week, the departments will be asked to produce their reports by March 7.

Thursday, February 20, 2014

SF Bay Area News - February 19, 2014

As President of the RICS Northern California, I would like to invite you to attend our upcoming event on the evening of March 4, 2014. Get involved with our local chapter and gain insight into current RICS and regional industry initiatives. Please join us, March 4th, for an informative evening of networking and discussion featuring a panel of prominent RICS industry leaders. The event will begin with networking and will be followed by the panel discussion. The panel will focus on topics such as collaborative practice with governments, financial and commercial organizations, and will examine regional business opportunities. This event also provides an excellent opportunity to learn more about RICS as a global professional body. Please contact me direct for more information.


Google is taking over a 35,000 SF former printworks in San Francisco’s trendy Mission district as part of an effort to recruit engineers who do not want to work in its vast Silicon Valley headquarters. 298 Alabama Street is zoned for manufacturing, so it could be used to develop gadgets and devices by hardware companies.

For more than a decade, real estate investors have been angling to snap up the modest office building at 82-84 First St. The family-owned 16,000-square-foot structure sits smack in the middle of the second biggest development site in San Francisco's Transbay District. Now finally the property has sold for a record price in San Francisco: reportedly $22 million or $1,400 PSF.

Financial district building deal shows 41 percent jump since 2012. Polidev has acquired its third San Francisco office building, paying about $22.5 million for the 47,000-square-foot 1912 Renaissance-Baroque structure at 332 Pine St.

Colliers International represented the seller in the sale of 211 Sutter Street, an historic trophy retail and creative office building in San Francisco, to a high net-worth Chinese buyer. 211 Sutter Street is a ten-story, plus penthouse and lower level 38,031 square foot retail and office building located at the southwest corner of Sutter and Kearny Streets within the Union Square District of San Francisco. Currently 97 percent occupied, the property is anchored by Chipotle Mexican Grill (NYSE: CMG) on the ground floor and mezzanine under a long-term lease.


Will 500 Townsend St. be the next 333 Brannan St.? A few days after Kilroy Realty Corp. announced that Dropbox has pre-leased the entire 182,000 SF 333 Brannan St., construction is just starting this week. The collection of warehouses and parking lots just west of the I-280 off-ramp near 6th Street, totals l.25 acres or about 53,000 SF. Under the new rezoning, the property can accommodate a 300,000 SF office building. It’s likely that the property will fetch a higher price than what Kilroy paid for the land at 333 Brannan, which was $120 a buildable square foot. Based on that comp, 500 Townsend could be worth in excess of $40 million.

Mill Valley-based Thompson Dorfman Partners has turned a big profit on the sale of the 0.75-acre site located at 2655 Bush Street in San Francisco. The real estate company and its financial partner, New York City-based Ares Management has sold the site for $38 million or $469,000 per unit, according to sources familiar with the transaction. The sellers had owned the property since August of 2012 when they bought the foreclosed property for $14.5 million.


Brisk 2014 San Francisco office sales market could hit $3 billion. It’s only February but early offerings suggest that San Francisco’s 2014 office investment market could be busier than it was last year. With Invesco in contract to buy 101 Second St. for $297 million, above replacement cost at $765 a square foot, property owners are hurrying to take advantage of the pent-up demand. In SoMa, property owners are coming to market with two properties totaling 475,000 square feet.

Institutional Investors are being able to buy office buildings in Oakland at much lower price points than in San Francisco. One recent example of this is with a property acquired by San Francisco-based Strada Investment Group. The company paid $179 per square foot or $65.7 million to purchase the 172,000 square foot 505 14th Street and the 195,000 square foot 1300 Clay Street in Oakland. This compares to CIM Group recently paying $485 per square foot or $34 million to buy 246 1st Street in San Francisco.

With the two biggest luxury hotels now in its portfolio, one real estate investment group has taken a firm hold of the market on San Francisco’s historic Nob Hill. Along with funds managed by Oaktree Capital Management, affiliates of Michael Rosenfeld’s Woodridge Capital Partners have acquired San Francisco's InterContinental Mark Hopkins for a cool $120 million. If the partnership sounds familiar, it’s because it is the same one that purchased Nob Hill’s historic Fairmont Hotel for $200 million a couple of years back.