The Registry February 2010 Issue by The Registry

THE

Registry BAY AREA real estate JOURNAL

february 2010

Back to Basics: Restoring Common Goods pg. 14

Charting the Course: Bay Area Map of 50 Public Works pg. 18

Region’s Architects, Contractors Touch Nation, Globe pg. 20

Cities Battle Budgets pg. 6

Transit-Oriented Development Rides Slow Train pg. 8

Haight Eats Whole Foods pg. 10

Mid-Market Midway pg. 22

By The Numbers: Public Vs. Private pg. 34

Final Offer with Russell Hancock: Remaking the Royal Road pg. 36

Contents FEBRUARY 2010

4 News Desk A summary of recent news from the industry and people on the move

6 Commercial Market Report

25 Commercial

Taxing Times

8 Residential Market Report

Stormy Weather

26 Government

High-Density High Tails It

10 Hot Lot | San Francisco

28 Rob’s REality

Whole Foods and Haight Ambitions

Making Its Mark

Another Way to Skin a Cat

12 Finance

29 Finance

Load of Debt

14 Feature Package:

Going Public • Map: Large-Scale Public Construction in 2010 • Big Build-Up • Waning Hospital Heyday

22 Urban Renewal

Creating a CityPlace

24 Finance Snatching Retreat from the Jaws of Rout

pg. 14

On Loans

30 REal People:

Events Around Town

31 Calendar of Events 32 Commercial Lease Report 33 Commercial Sales Report 34 By the Numbers

Public Figures

36 Final Offer | Russell Hancock

Grand Plan

Cover: The Crystal Springs Bypass Tunnel This page: Underground service and utility tunnel at San Francisco General Hospital

P H O T O s o n c o v e r a n d th i s p a g e B Y ch a d Z i emendorf

THE

Registry

P.O. Box 1184 San Mateo, CA 94403 415.738.6434

Letter from the Publisher

Mission Statement The Registry is a real estate journal that aspires to fulfill the need of Bay Area professionals for accurate, unbiased and timely news, analysis and information. Publisher Vladimir Bosanac vb@theregistrysf.com President Heather Bosanac 415.738.6434 heather@theregistrysf.com Editor-in-Chief Sharon Simonson 408.334.2512 ssimonson@theregistrysf.com Creative Director Karyn Charm Photographer Chad Ziemendorf Writers George Calys, Robert Celaschi, Michael Fitzhugh, Eugene Gilligan, David Guavey Herbert, Diana Samuels, Jessica Saunders, Sharon Simonson, Sasha Vasilyuk Contributors Edward F. Del Beccaro, Joseph Franzetti, Dean Gloster, Rob La Eace, Matt Lewis Advertising 415.738.6434 Printer Bay Area Graphics www.bayareagraphics.com News news@theregistrysf.com Feedback letters@theregistrysf.com Subscriptions subscriptions@theregistrysf.com Ethics Policy The Registry embraces a strict ethics policy for its staff and contributing writers, including columnists and freelance reporters. No person employed by or affiliated with The Registry has accepted or will accept any compensation, monetary or otherwise, in exchange for editorial content. All information that appears in the magazine is selected solely for its informational value to readers.

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Dear Reader, This month’s feature focuses on a part of the industry that we have not covered in very much detail previously. Public projects are a very large part of the industry spending in general, and these days, they are probably the single most active part of the building sector. They have the potential to employ a large number of construction workers, architects and builders, amongst others. Ironically, large scale development, like any development these days, is quite affordable, increasing the likelihood that its activity will continue in the foreseeable future. And as you will see on page 18, quite a few public and institutional projects around the Bay Area are under way or preparing to start. None of this has come easily, however. The state’s budgetary woes are only symptomatic of what is happening on a smaller scale in cities and towns across California. The Bay Area’s three largest cities, San Jose, San Francisco and Oakland, are all dealing with severe budget stress and possible credit rating downgrades. On page 12 we write just how each is dealing with that reality and how they’re managing the constant oversight by firms like Moody’s. Many variables are at play, and each city is doing its best to keep some positive momentum going. In San Jose’s case it’s prudent financial planning, in San Francisco’s it’s increased traffic at its airport, and in Oakland’s it’s the decreased amount of borrowing. Overall, there are worse places in the state and the country than the Bay Area, and to some that is a comforting thought. We continue our coverage into a couple of interesting topics. San Francisco’s Historic Preservation Commission (page 26) has been created to protect the extraordinary historic structures that characterize so much of what is beautiful about our city by the bay. For some, however, the commission’s reach has extended into a kind of ill-conceived preservation that can be a barrier to even the most basic renovation of critical city resources, like firehouses. The article covers a fight that is brewing over the significance of a number of San Francisco libraries, notably the North Beach branch. The struggle has become a template of HPC’s presumed oversight and has raised concerns over how the commission plans to execute its powers going forward. The second topic delves into the high cost of high-density housing (page 8). In the last issue of

The Registry, we wrote about the mixed blessings of mixed-use development, which together with this article tests what used to be the formula for infill development. Naturally, a lot of this is emerging in an extremely tense fiscal environment, but the numbers are starting to work against these projects, likely reducing development of both high-density and mixed-use in the next decade. As an auxiliary to the main feature, we turned our attention to another public work initiative— hospital development. This article on page 20 is a follow up to our May 2008 main feature, where we outlined in detail the projects and significance of hospital development in the Bay Area. The state-wide earthquake preparedness initiative for hospitals has driven construction and renovation across the Bay Area for years, yet the future pipeline shows little promise beyond that. Architects and others at the front of the development process already report a fall off in hospital related work. We close this month’s issue with an interview with Russell Hancock, the president and chief executive of Joint Venture: Silicon Valley Network. He is also the co-chair of the Grand Boulevard Task Force, a coalition of public and private leaders who seek to remake the El Camino Real, perhaps the oldest and one of the most important roadways on the peninsula and in the South Bay. Given the breadth of political and other interests involved, a lesser person might be dissuaded from undertaking such a difficult enterprise. Yet the promise of improvement to this decidedly unattractive and dated thoroughfare is impossible to ignore. We all should hope for the task force’s success and urge our elected officials to do all they can to promote it, in part by swearing off provincial attitudes focused on short-term goals such as increasing sales tax revenue at the expense of neighboring cities or poor land use. A more attractive, functional and modern El Camino can only improve our quality of life and better our commercial climate. Thank you, again for your continued interest in our publication. We welcome feedback and hope that you will enjoy this issue. Best Regards, Vladimir Bosanac Please provide feedback at letters@theregistrysf.com.

Editorial Boards

Contributors Edward F. Del Beccaro Stormy Weather, pg. 25

Edward F. Del Beccaro is the managing partner of the Colliers International Walnut Creek office. He is responsible for the oversight of a full-service real estate operation with expertise across all property types and in leasing and investment sales. He specializes in office leasing and sales with special expertise in distressed properties, land, mixed-use urban developments and medical offices.

Board members of The Registry serve without expectation of recompense or reward. They advise the magazine’s executive team on matters of relevance to the region’s commercial and residential real estate community. The board’s make up reflects the wide readership of the magazine including attorneys, architects, interior designers, residential and commercial real estate brokers, investors, lenders, general contractors and subcontractors, engineers and other professionals.

NORTH

Joseph Franzetti On Loans, pg. 29

Joseph Franzetti is managing director of the debt advisory group for Cohen Financial. He has more than 25 years experience in commercial real estate finance. His current focus is on loan restructuring and modifications for commercial property owners who face a variety of debt-related hurdles including impending loan maturities, reduced property cash flow or the need to make significant capital improvements.

Dean Gloster Snatching Retreat from the Jaws of Rout, pg. 24

Dean Gloster is a partner in Farella Braun + Martel’s San Francisco office and leads the bankruptcy and creditors’ rights practice. He represents real estate industry clients, including builders, developers and lenders, in the restructuring and workout of real estate and asset-backed loans. A frequent speaker on bankruptcy law, Gloster also advises a wide variety of intellectual property-driven companies in licensing, formation, funding, company acquisitions, asset acquisitions, licensing, strategic alliances, joint ventures and related contract issues.

Marc Cunningham

Bruce Dorfman

President All West

Principal Thompson | Dorfman Partners, LLC

Jesshill E. Love III

Daniel Myers

Jeanne Myerson

Anton Qiu

Partner Ropers, Majeski, Kohn & Bentley

Partner, Real Estate Practice Group Leader Wendel, Rosen, Black & Dean LLP

President & Chief Executive Officer The Swig Company

Principal TRI Commercial

Stephen Austin, RPA Regional Property Manager Boston Properties

Phil Williams, P.E., LEED AP Vice President Webcor Builders

Daniel Huntsman, LEED AP President & Founding Principal Huntsman Architectural Group

Paul Zeger Principal, President & CEO Pacific Marketing Associates

Rob La Eace

SOUTH

Another Way to Skin a Cat, pg. 28

Responding to emergencies as a firefighter in a variety of uncertain situations and diverse neighborhoods taught Rob La Eace a lot about how people should be treated, not only during a crisis, but also in everyday problems. Today, these same skills are an asset to those who work with this San Francisco native in his career as a broker associate with McGuire Real Estate. The tools he puts to work as a firefighter are what makes the difference to the clients La Eace works with as an agent. While it may help that La Eace is the type of guy with a warm smile and a friendly attitude, his professionalism, organization and drive to succeed are what make him stand out in his career. Working in his fifth year in the industry, La Eace is in touch with his clients’ needs and with the city—putting a local’s perspective to work.

Terry de la Cuesta, IIDA, LEED AP Associate RMW Architecture & Interiors

Jennifer Dizon, CPA

Erik W. Doyle

Geoffrey C. Etnire

Audit & Advisory Partner Hood & Strong, LLP

President Cornish & Carey Commercial

Co-Chair, Real Estate Group Hoge, Fenton, Jones & Appel, Inc.

Norman C. Hulberg, MAI

Robert Kraiss, CFM

Jody Quinton

Director of Corporate Facilities & Real Estate Adaptec, Inc.

Regional Manager DPR Construction, Inc.

Matt Lewis Snatching Retreat from the Jaws of Rout, pg. 24

Matt Lewis is a partner in Farella Braun + Martel’s San Francisco office and leads the business transactions practice. He represents borrowers and lenders in commercial real estate single-loan and portfolio financing transactions, asset securitizations and other structured financings and the sale and acquisition of financial assets, including real estate and consumer-loan receivables, contracts and Uniform Commercial Code (UCC) matters, with an emphasis on secured transactions. He advises on creditor- and debtor-rights issues, including workouts, reorganizations and restructurings, collections, repossessions and rights in bankruptcy, in technology, real estate, construction, agriculture and other industries. n

Michael W. Field Director, Commercial Real Estate The Sobrato Organization

President Hulberg & Associates, Inc.

Patricia Sausedo

Jeffrey A. Weidell

Vice President of Public Policy & Communications San Jose Silicon Valley Chamber of Commerce

Executive Vice President NorthMarq Capital

News

Desk

Sent to us Peninsula Contractor Recognized for Exemplary Workplace

New On-line Tools for Home Owners, Buyers

Fortune magazine has named Redwood City-based DPR Construction one of the best companies to work for in America. According to Fortune, an annual survey, conducted with the Great Place to Work Institute, is the most extensive employee query in corporate America, polling workers from companies nationwide about their company’s culture and management credibility, respect for individuals, fairness, job satisfaction and camaraderie.

The Santa Clara County assessor has introduced an on-line supplemental tax estimator (www.sccassessor.org/ste). The tax estimator is designed to help new and prospective homeowners forecast the property taxes they can expect to pay following the purchase of a home. Supplemental assessments and taxes are in addition to the annual assessments and property taxes. They are generally prorated during escrow, so that the seller and buyer each pay the portion of taxes attributed to their period of ownership.

In addition to the overall 100 Best Company list, DPR ranked sixth among the top 10 Best Companies where employees feel “encouraged to balance their work and personal life.” DPR was recognized for low turnover, annual pay, employee-referral bonuses and fully paid sabbaticals. Eighty-five percent of DPR employees responded to the survey, and those survey results accounted for two-thirds of DPR’s score, according to the contractor.

Colliers’ Bay Area Offices Join Global Commercial Real Estate Services Firm Commercial real estate brokerage Colliers International and FirstService Real Estate Advisors will combine their operations and global real estate platforms to create a new global real estate concern. The San Francisco and Northern California offices of Colliers International will become part of the new Colliers International, the world’s third-largest commercial real estate services firm, with 15,000 employees and 480 offices in 61 countries. Alan Collenette will continue to lead Colliers International’s San Francisco office, while Jeff Fredericks will continue to lead Colliers International’s Silicon Valley operations. The Colliers International Bay Area operation will consist of 365 real estate professionals in 12 offices. The unified firm will manage more than 8.9 million square feet of commercial property throughout the region.

Cornish & Carey Partners with RiverRock Northern California brokerage Cornish & Carey Commercial/ONCOR International and RiverRock Real Estate Group have joined to establish a property management company, C&C RiverRock. Rebecca Rogers, a 14-year property management veteran, will head C&C RiverRock’s operations and will be based in C&C’s Walnut Creek office. The company will offer comprehensive property management including tenant services, building operations and maintenance, service contract management, lease administration, property accounting and financial reporting.

Independent Valley Brokerage Joins New National Firm Santa Clara-based CPS CORFAC International has agreed to join Cassidy Turley BT Commercial to form Cassidy Turley CPS. The firms will be among the founding members of Cassidy Turley, a new privately held national firm that will immediately be the country’s fourth-largest real estate company. CPS CORFAC International expects to rebrand as Cassidy Turley CPS beginning March 1. At the same time, the San Jose office of BT Commercial will rebrand and operate as Cassidy Turley CPS. Todd Beatty will be executive vice president and managing partner of Cassidy Turley CPS, reporting directly to Mike Kamm, chief executive of Cassidy Turley BT Commercial.

Civil Engineering Firm Consolidates Locations Ben C. Gerwick, Inc., a civil and structural consulting firm, is merging its San Francisco and Oakland offices into a single location in Oakland City Center in downtown Oakland. The firm has leased 14,996 square feet at 1300 Clay St. for 10 years beginning May 1.

Dome Construction Commemorates Milestone San Francisco-based Dome Construction Corp. is celebrating 40 years in business. The company began as corporate tenant-improvement contractor, said President and Chief Executive Mark Bley. Dome has built research labs for the Joint BioEnergy Institute in Emeryville, a nanotechnology lab for UC Berkeley, the State of California’s Forensic Laboratory in Point Richmond and California’s Department of Hazardous Materials facility in Berkeley.

At the same time, homebuyers can now access free, unbiased information at the ZIP code level about average mortgage loan prices, including interest rates and closing costs in their region. The tool is available at www.FairLoanCertification.com and is provided by the nonprofit Fair Mortgage Collaborative.

Oklahoma Brokerage Eyeballs Bay Area Tulsa, Okla.,-based Stan Johnson Co., a net-lease brokerage firm, is probing expansion into San Francisco as part of a larger national rollout into key U.S. markets. Daniel Herrold, executive managing director of business development, is leading the initiative. “We see today as an opportunity to hire more talented brokers, penetrate new markets, and grow our brokerage platform at a faster pace,” Herrold said. The company specializes in working with buyers and sellers interested in single-tenant, net-lease properties. Such buildings require little or no management responsibilities as the tenant pays for most or all expenses.

Fort Baker Awarded National Grant Sixty-eight road projects in 31 states will receive $93.9 million in Public Lands Highways grant funds to improve access to public lands. Nearly $1 million will be used for alternative transportation improvements around the Fort Baker area in the Golden Gate National Recreation Area. This work includes pedestrian connection improvements, upgrades to National Park Service shuttle buses, planning for bio-diesel refueling capacity and installation of signs, bicycle racks, benches and related equipment.

Green Modulars Showcased The Crissy Field Center, an award-winning environmental education facility operated by the Golden Gate National Parks Conservancy, the National Park Service and the Presidio Trust has moved to temporary digs during San Francisco’s Doyle Drive/Presidio Parkway reconstruction. The 7,200-squarefoot interim home was created through a partnership involving Project FROG (Flexible Response to Ongoing Growth) and Caltrans, the California Department of Transportation. The modular facility, currently on track for LEED Gold certification, will serve not only as a hub of sustainability programming in the Golden Gate National Recreation Area but also as a convening spot and resource for local community organizations, visiting diplomats, politicians and educational leaders.

JLL: Recovery Imminent in East Bay Industrial Market Recovery in the Northern California industrial market appears to be taking shape, according to Jones Lang LaSalle. Space markets near major ports and distribution centers are experiencing a flight to quality and look poised to capture future growth as industrial expansion takes shape. The limited amount of large-sized (100,000+ square feet), high-quality space within the Oakland/East Bay Interstate 880 corridor, which runs from Richmond to the north to Milpitas to the south, is being absorbed and represents one of the strongest market sec-

continued on page 35

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PEOPLE on the move Hoge Fenton Expands With Two Alison P. Buchanan (left) has been elevated to shareholder at Hoge Fenton Jones & Appel, a leading Northern California law firm. Buchanan focuses on all aspects of civil litigation, with particular expertise in business litigation, professional liability and malpractice and legal ethics. Crystal N. Riggins (above right) has also joined the firm as an associate attorney. She is based in the firm’s Silicon Valley office and is a member of its litigation group.

Multi Family Investment Group Expands at Colliers Laila Salma has joined the multi-family investment group at Colliers International. She will be based in the San Francisco office and will specialize in urban San Francisco apartment building sales.

Ma Joins CCI General Contractor CCI has hired Michael S.N. Ma as its business and project development manager. Engaged in the Bay Area/Northern California market since 1992, Ma’s expertise includes project management, estimating, scheduling, business development and marketing. Ma holds a bachelor of science in civil engineering from Cal Poly San Luis Obispo, a masters in operations management from Golden Gate University and an executive MBA from Pepperdine University.

E&Y Adds to Real Estate Practice Ernst & Young LLP has appointed Sean O’Reilly as a manager in its transaction real estate practice. Prior to joining Ernst & Young, O’Reilly founded and operated his own independent real estate appraisal firm serving banking, legal, corporate and accounting clients in the San Francisco Bay Area.

East Bay CREW Elects Officers Tillie Ross has been elected 2010-2011 president of the East Bay chapter of the Commercial Real Estate Women, CREW. Ross has more than 25 years experience in commercial real estate in various capacities as a developer of residential subdivisions and in the sales and financing of commercial properties.

Michael

Heidi Timken has been named East Bay CREW’s 2010-2011 president-elect and will serve as a chapter delegate to CREW Network. Liana Epperson has been elected East Bay CREW’s 2010-2011 treasurer. Teresa Kulesza Goodwin has been elected East Bay CREW’s 2010-2011 secretary.

DEAN

Brokerage Welcomes Veteran Executive Todd Motoyoshi joins the San Francisco office of Colliers International as a senior vice president in its occupier services group. Motoyoshi joins Colliers after serving as a senior vice president at Cornish & Carey for more than four years. Motoyoshi has represented Morgan Stanley, Union Bank of California and The California Culinary Academy.

A leader. An authority. An ace.

Gensler Promotes Two

Widely recognized for his expertise in real estate law, Michael led the

Kirsten Ritchie and Tommaso Latini have been named principals in the San Francisco office of Gensler, a global design, planning and strategic consulting firm.

the district into a retail shopping center. He is a leading authority on real

Ritchie is a civil engineer with more than 25 years experience in the engineering and design industry. She is the regional director of Sustainable Design at Gensler in San Francisco. Since joining Gensler in 2006, Ritchie has applied her sustainable design expertise to new product design, commercial interiors and large mixed-use developments. She led the sustainability assessment and LEED certification of new and existing corporate campuses across the Pacific, including projects in the San Francisco Bay Area and Chengdu, China.

team that helped a regional hospital district develop property owned by property issues, with an emphasis on commercial development, leasing and financing matters. Michael co-authored the California Continuing Education of the Bar (CEB) “classic” Commercial Real Property Lease Practice and is a sought-after speaker before numerous organizations, including the CEB, the International Council of Shopping Centers, the National Retail Tenant’s Association and the State Bar of California. He

Latini joined Gensler in 2003 with 26 years experience in project design and architecture, construction and program management and business development. As a senior program manager, he has been involved in numerous nationwide retail rollout programs for clients including Toyota, REI, Nike, Williams-Sonoma, The North Face and Bank of America.

served as the firm’s managing partner for almost a decade, helping to

Gensler employs more than 2,100 professionals across 32 locations on five continents. Besides San Francisco, it has Bay Area offices in San Jose and San Ramon.

the leader

continued on page 35

establish Wendel Rosen as a leader in real estate law throughout the West.

...in

wendel.com

real estate

commercial market report

Taxing Times Commercial and industrial property owners are seeking billions of dollars in tax reductions. By Diana Samuels

“California overall is taking a huge hit in terms of our real estate market. San Francisco is no different than anywhere else.”

roperty owners across the Bay Area have flooded county assessors’ offices, asking in overwhelming numbers to lower the taxable values of their properties. Now, as county staffs work through thousands of appeals, officials say that commercial and industrial properties are making up a significant— and costly—portion of assessment value declines. Those declines hit city and county coffers hard, impacting everyday government services ranging from public safety to schools. In theory, for every loss of $100 in taxable value, taxing agencies lose $1 in tax revenue, though voter-approved special assessments can push the tax take up well above that. Meanwhile, for the first time since Proposition 13’s passage in 1978, the California State Board of Equalization has determined that assessors across the entire state must cut all properties’ taxable values by 0.25 percent, based on a decline in the California Consumer Price Index. The reduction applies to the 2010-2011 tax roll now being prepared, according to the San Mateo County assessor’s office. In all but five of the last 33 years, the price index has climbed, allowing California tax rolls to rise two percent across the board. That is the maximum annual, allowable increase under the law for homes and commercial buildings that have not changed owners. In San Francisco, after already bridging a nearly-half-billion-dollar gap during budget season last year, the city continues to face a $53 million budget shortfall in 2009-10. With its $6.6 billion budget already tight, city officials announced in November that they were setting aside

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an extra $35 million because so many unexpected property assessment appeals had been filed. Assessor-Recorder Phil Ting said San Francisco anticipates about 5,500 total appeals—a 200 percent increase over what the city saw last year. As of December, when there were about 4,500 appeals, 664 of those were commercial properties. “California overall is taking a huge hit in terms of our real estate market,” Ting said. “San Francisco is no different than anywhere else; we’re seeing significant drops in value.” Before Ting’s office sent out initial assessments in July, they had already proactively reduced the assessed value of 11,500 residential properties on the city’s $152 billion assessment roll. Despite the large number of residential properties being reassessed, Ting said it is commercial properties that make up about 85 percent of the tax dollars at risk. As the city is still processing appeals, it’s not yet clear how many dollars that adds up to, but Ting said he expects it to be on the “higher end” of what he has seen historically. At a peak in 2005-06, $169.9 million in tax revenue was at risk. “If you have $100 million at risk, it’s a large amount of money,” Ting said. “It’s critical that we work very hard to defend every dollar that is at risk for the county and city.” Besides property taxes, other sources of city revenue are also in trouble. As real estate sales slowed, so did the money flowing in from San Francisco’s transfer tax, which is charged when a property sells. From its

photo by C h a d Z i emendorf

Phil Ting, San Francisco’s Assessor-Recorder

An exemplary approach to preconstruction. Unrivaled team building. Total project ownership and attention to detail. These are the qualities that have quickly established BCCI as one of peak in fiscal 2006-07, when the city received $144 million, transfer tax revenue decreased to $49 million in 2008-09. “Until investors can access capital, I don’t know if the market is going to bottom out, or if it is going to improve,” Ting said. Other Bay Area jurisdictions face similar situations. In San Mateo County, the values of about 29,000 properties saw reductions in assessed value so far—a total of $5.4 billion from the county’s approximately $143 billion assessment roll, said Terry Flinn, special assistant to the assessor. That included about 210 commercial properties, which dropped a total of $762 million in assessed value, he said. Ninety-nine of those were office buildings, totaling a reduction of $423 million. Another 28 hotels saw reduced assessed values totaling $216 million. Alameda County is still processing information about the appeals that came in, said Jim Johnson, chief of the assessment services division at the assessor’s office. But before the end of the fiscal year, the county proactively reviewed and reduced the values of about 98,000 residential properties and 277 commercial properties. The commercial properties were previously assessed at about $1.5 billion, Johnson said, and the county reduced their assessed value by $326 million. Alameda’s assessment roll totals $202.6 billion. It is likely that commercial and industrial assessed property values will see further declines next year, following the steeper drops in residential values. “We think of course that the commercial market chases the residential market,” he said. In Santa Clara County, Assessor Larry Stone said he was surprised at the high percentage of appeals he has seen from commercial and industrial property owners. The county is not done processing the approximately 12,000 appeals it received before the county’s deadline and another thousand or so it received after. Santa Clara is seeing twice as many appeals as last year, Stone said. The highest previously was 7,000 appeals in 1996. Of the appeals the county has processed, Stone said approximately 40 percent are for commercial and industrial properties. Of 465,000 total properties in Santa Clara County, about 65,000 (roughly 14 percent) are commercial and industrial, Stone said. The county already proactively reduced the assessed value of 90,000 residential properties—a quarter of the homes in the county—taking $17.2 billion off the approximately $303 billion assessment roll. Non-residential properties make up 32 percent of assessed values, but only 12 percent of all parcels, according the county’s annual report. Because commercial and industrial property owners tend to be savvier than homeowners about appealing for reassessments on their own, the county focused on proactively reassessing residential properties, Stone said. Even so, the county did approach about 100 hotels about reassessments. About 50 responded to a questionnaire the county sent, and all but one subsequently had its value reduced, Stone said. The assessed value of the Fairmont Hotel in downtown San Jose, for example, went from $110 million to $80 million in one year, he said. “Commercial and industrial is the next shoe to drop, and we are seeing it now,” Stone said. n

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DESCRIPTION BCCI Quarter Page Ad

TITLE Strructural Builders

PUBLICATION The Registry

LIVE 4.375” x 5.875”

TRIM 4.375” x 5.875”

INSERT DATE February 2010

CLOSE DATE January 4, 2010

13 2 STUDIO

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RESIDENTIAL market report

High Density High Tails It Transit-oriented development, which calls for dozens of homes per acre of land, is less and less feasible as house prices fall. By Eugene Gilligan

“It comes down to basic mathematics.” Jason Kliewer, partner and general counsel, Trumark Cos.

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ransit-oriented development has become a staple for Bay Area cities looking to limit sprawl and promote public transit use. But new-home builders say the decline in home prices is eroding the financial underpinnings for such high-density projects, raising questions about how this land-planning formula will be successfully applied in years ahead. It comes down to basic mathematics, said Jason Kliewer, partner and general counsel for Danville-based homebuilder Trumark Cos. Because home prices have fallen so much, the revenues that can be derived from these dense developments today are not covering the costs to build them. The problem intensifies as the developments get denser. A 10-story condominium project built on a podium uses a great deal of expensive construction materials, such as steel and concrete. Less dense housing, such as single-family homes, are built with less-expensive wood. The capital-constrained and increasingly conservative lending environment and the continued weak economy also are contributing to the problem. In a typical, singlefamily home development, a homebuilder buys land and builds homes close to the pace at which they are selling, limiting standing inventory. Contrast that with the risk a developer of a mid- or high-rise condominium must take on: The entire project must be built at once, even though many units may take months to sell. That forces the developer to carry the inventory and its overhead much longer, increasing the likelihood that borrowed sums will be repaid slowly or not at all. Condominiums, by their nature, also have many fixed, upfront costs, said Drew Hudacek, senior vice president of Regis Homes of Northern California. If a builder has promised a pool or a recreation room, he must have it up and running very early, even if only a few buyers occupy the complex. As a consequence, “the capital markets are looking at these projects with a jaundiced eye,” said Kofi Bonner, regional vice president of Lennar Urban, a division of Miamibased Lennar Corp., one of the largest U.S. homebuilders. “They are being very conservative, and they certainly don’t want to provide capital with uncertain timeframes and, in their mind, a risky outlook.” The debt news is not much better for individual buyers, said Michael Van Every, senior vice president of Republic

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Urban Properties in its Silicon Valley office. Republic has entitlements to build three, 15-story condo towers, townhouses and retail on a former bus lot on the cusp of downtown San Jose. Today, because lenders have tightened standards, the buyers of such units would be required to put down 20 percent of the purchase price, said Van Every. “On a $300,000 condo, that means $60,000,” he said, which many buyers can find difficult to produce. Land scarcity around stops adds another layer of complexity, Kliewer said. “You don’t see 10 vacant acres near these stations,” Kliewer said. “It’s more like half-an-acre.” That means developers have to assemble parcels for development. “You might get three out of five [property owners] to sell,” he said. “But you may have one or two who hold out for top-market prices. They may have a business on the site, which is generating cash, so they can afford to wait.” To keep projects on track, cities and developers both will have to adjust their game plans. The mandate that residential developments contain a certain number of belowmarket-rate units is one major impediment. Some affordable housing requirements, which stipulate that 10 percent to 20 percent of units sell at below market rates, mean that a major portion of $500,000 condominiums must sell for $300,000, Kliewer said. “If it is a development that is teetering on the brink of feasibility, that [loss of revenue] can kick it to the infeasible side.” Cities also must do all that they can to reduce their development fees to keep these projects on track, he said. Trumark is making adjustments in light of the realities of today’s market place. The company is cutting out “all of the fat, all of the gingerbread” from its designs and reducing the size of all its product types from condominiums to single-family homes. And, while he would not name the developments, the builder is seeking reductions in the density requirements of two projects from 50 homes an acre to 22, Kliewer said. The company also is seeking to build more townhomes and detached homes on these sites, which can be built with wood and sold in smaller increments. Whatever its present difficulties, dense development will have to progress because of Northern California’s housing shortage, said Robert Freed, president and chief executive officer of Palo Alto-based SummerHill Homes. Cities should have the opportunity to dedicate more land

RMKB attorneys handle your nightmares so you can sleep at night. to residential development due to the problems in commercial real estate. He sees opportunity in rezoning former car dealership sites to allow some retail as well as townhomes or apartments. “I know cities are very protective of their retail tax base, but some retailers may never come back,” he said. “You can only kid yourself for so long.” As an executive for KB Home earlier this decade, Freed oversaw development of the so-called San Jose Saddlerack site, a mixed-use project that contained approximately 250 units near a light-rail line. The Saddlerack was the first development of that type in the nation that the huge homebuilder pursued and has a density of about 40 homes an acre. While transit-oriented-development is running into roadblocks today, the long-term outlook appears much brighter. “In the right markets—coastal cities and jobgrowth centers—it makes a great deal of sense,” Bonner said. Demographic trends favor dense development, and many Bay Area cities want a wider range of housing options, which includes high-density projects. “The amount of time spent in cars is a key factor for young professionals. They prefer to live in urban areas and to take transit, walk and bike to restaurants or bars, parks and other amenities after work,” Bonner said. Urban, pedestrian-friendly communities also appeal to active Baby Boomers who are considering selling their family houses on the urban edge or in the suburbs and moving into the urban core to be closer to the very same amenities as the younger generations. Indeed, denser, walkable communities may have to become the new normal if California hopes to meet the requirements of its new greenhouse gas reduction law, which mandates reductions in carbon emissions. “To achieve these goals, policies will have to be developed that encourage development near transit hubs,” Bonner said. Developers, including the large, publicly-traded singlefamily homebuilders, are likely to eventually find the right housing mix to make the denser developments work, Van Every added. “It’s like flat-screen TVs, which got better and cheaper as more were built. They will find better ways to control construction costs.” n

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Whole Foods and Haight Ambitions How will the upscale grocer fit into diverse Haight-Ashbury?

“People who buy into the HaightAshbury feel they are buying into community.” Calvin Welch, Haight-Ashbury Neighborhood Council

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an Francisco’s Haight-Ashbury might be one of the most-famous neighborhoods in the world, forever known as the epicenter of 1967’s Summer of Love, birthplace of the renowned Haight-Ashbury Free Clinic and one-time home of the Grateful Dead and Janis Joplin. Forty years hence, the Haight remains a beacon for young drifters, some no doubt hoping to recapture a bygone era. They panhandle, patronize head shops and used-clothing stores and hang out in nearby Golden Gate Park. But in the more than four decades since its rise to notoriety, Haight-Ashbury has evolved, becoming a sought-after neighborhood. Located close to the geographic center of the city, served well by public transit and home to some of San Francisco’s best-preserved Victorian architecture, the area has emerged as a less-expensive alternative to the Marina, Pacific Heights and Nob Hill neighborhoods. Residential property values today range from $500,000 to around $3 million. The Haight, perhaps improbably, even has become home to young families, the well-to-do and the famous, including city Mayor Gavin Newsom, who reportedly lives on upper Masonic Avenue. But living in Haight-Ashbury does not always involve love, mostly due to ongoing tension among its residents. Some property owners, who say all they want is a safe, clean place to live and work, blame the transients for most of the Haight’s problems. Other long-time residents prefer the Haight remains accessible to all and are wary of development and gentrification. The drama may be familiar to any

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transitional inner-city neighborhood, but the Haight is not just any other place, and every change looms large. Today the tension is more palpable than ever, brought to the surface by upscale grocer Whole Foods Market Inc., which plans in September to open a new 16,000-square-foot outlet at 690 Stanyan St. The company seeks to refurbish the building where Cala Foods operated until 2006. For some, the neighborhood desperately needs a fresh perspective, and Whole Foods, which has signed a 20-year lease, seems a good vehicle. Today’s inhabitants of the huge Victorian homes are tech professionals, educators and retirees who enjoy modern entertaining while living in an area that offers a sense of nostalgia and yesteryear and, possibly, a connection to their youth. Whole Foods, with its organic produce, natural meats and a broad range of gourmet groceries, could afford them a means to accomplish their dual goals of improving the quality of life in the area while retaining some of the timbre that makes the Haight unique. “It is absolutely no fun to come out your front door and clean up human feces in the morning,” said Bonnie Spindler, a Realtor with Zephyr Real Estate who specializes in the Haight’s famous Victorian homes and resides in the Haight herself. “People who live immediately along Haight Street have problems with people sleeping in their entryways. You walk down the street and someone is trying to sell you drugs.” But residential real estate agent Donna Cooper of Hill

photo s by C h a d Z i emendorf

By Jessica Saunders

hot lot | san francisco

& Co., who also lives in Haight-Ashbury, worries that the Whole Foods store and its 44-car parking lot will prove too small for the neighborhood and threaten the store’s success. Parking is a big problem in the Haight. “If it is not successful, it will be terrible for the neighborhood. If Whole Foods can’t make a go of it, I don’t know who could,” Cooper said. “If you have to wait a half-hour for parking every time you go there, if they make it so small the variety is not that good, it will make it hard. It needs to be an easy place to shop to make it work.” The Trader Joe’s grocery on Masonic “always has a line of cars waiting to get into the parking lot,” Cooper adds. Whole Foods’ current plans are the product of an evolution themselves, forced by some neighborhood organizations that have sought to reduce the store’s footprint and thereby, they believe, help to better preserve the Haight’s traditional bohemian feel. The grocer’s original plans were to lease the ground floor of a mixed-use development incorporating three floors of condos and below-grade parking. That project’s developer pulled the plans last year saying the city approval process had become so drawn out and expensive that it could not get financing. Opposition to the larger project rose from a small group within the Haight, the Haight-Ashbury Neighborhood Council, which objected to the project’s size and traffic impacts, among other concerns, said Calvin Welch, the council’s housing and land-use chair. A smaller Whole Foods should be an improvement, he said. People who pay the Haight’s relatively high home prices could afford to buy almost anywhere in the Bay Area, so they are choosing the atmosphere consciously, Welch said. “This is not a neighborhood that, in large measure, has the sensibilities of a restricted residential enclave. People who buy into the Haight-Ashbury feel they are buying into community,” he said. “One of the great neighborhood traditions is a respect for diversity.”

Still, even Welch acknowledges that the neighbor’s tolerance has its limits: “I am not going to say there is not a great deal of angst about the scruffy youth on Haight Street. There was in 1968, and there still is,” he said. The respect for difference also seems to fall just shy of an arguably homogenizing store like Whole Foods. A group looking forward to Whole Foods’ opening is the Haight-Ashbury Improvement Association, whose goals include increasing the number of residents shopping on Haight Street. Currently most residents stick to neighborhood-serving businesses on Cole Street like the hardware store and restaurants and leave Haight “to the tourists,” said the association’s president, Ted Loewenberg. “We have been trying to return people to Haight Street, and Whole Foods is one of the projects that would do that.” Businesses on Haight Street have struggled for years, especially chain stores. Today a Wells Fargo bank and a Ben & Jerry’s ice cream parlor stand among multiple used-clothing stores, head shops and piercing/tattoo parlors. A McDonald’s restaurant sits across the street from the proposed Whole Foods site. Yet some recall the September 22, 1988, arson at the planned site of a Thrifty’s Drug Store, which destroyed eight buildings including apartments, and the regularly broken windows at The Gap, which left the corner of Haight and Ashbury in 2007 after more than a decade. Preservation is one thing and can be good, most people agree. But real estate agent Cooper notes that a true neighborhood needs a mix of retailers and service providers. “We didn’t even have a bank for a long time,” she said. Opposition to change is distorting the neighborhood in some ways, she argues, and making it less livable. There never seems to be a fight when there is an opening of a new used-clothing store, she notes. “It is a very lopsided kind of commercial district. It’s slanted a certain way toward that ’60’s mentality.” n

Above: Bonnie Spindler photographed in her Victorian home. Future home of Whole Foods; formerly Cala Foods.

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finance

San Francisco $8 billion

Oakland $1.9 billion

San Jose $5.3 billion

Load of Debt Economic crisis tests fiscal management by Bay Area’s three largest cities; state money problems don’t help.

ast April, Moody’s Investors Service, one of three major U.S. agencies that scrutinize public and private debt, warned cities around the country that they were on notice. The recession, a Moody’s report noted, was broad and long-lasting. Municipalities that failed to show fiscal restraint and good management could expect their credit ratings to fall. For Bay Area cities, lower ratings would have been if not a knockout punch certainly a solid right hook. Downgraded ratings force issuers to offer higher interest rates to attract bond investors and pay more interest on existing variable-rate debt. But while other California cities and the state itself have felt Moody’s wrath, San Jose, San Francisco and Oakland have managed to largely dodge that bullet thanks to good management and fiscal prudence. Still, analysts warn that they aren’t out of the woods. Debt ratings are deceptively simple. A mix of letters and sometimes numbers, the ratings are shorthand to express an agency’s opinion on a range of measures: a city’s fiscal prudence and management; a community’s overall debt burden, including municipal, schools and special district borrowing; and a local economy’s strength as indicated by industry diversity, employment rate, income levels and livings costs. All three cities have had their strong credit ratings reaffirmed in the last seven months by Moody’s. The agency gave San Jose an Aa1 rating in June with a stable outlook, its second-highest rating. In August, San Francisco received an Aa2 rating with a stable outlook, the third-highest rating, and Oakland in June got a stable A1 rating, the fifth-highest. Of the three, San Jose’s ability to chart its way out of dangerous waters with prudent financial planning is perhaps most impressive. After the dot-com crash in 2000-2001, all three major rating agencies downgraded San Jose Redevelopment Agency debt, for example. “I think one of the real strong positive factors

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San Jose has is that the city council makes the tough decisions,” said Scott Johnson, finance director for San Jose. “We’re not anticipating that our rating is going to be downgraded.” That is not to say that Bay Area cities haven’t been borrowing. San Jose has $5.3 billion in outstanding debt, according to its Comprehensive Annual Financial Report for the fiscal year ended June 30. San Francisco had long-term and commercial paper debt of $8 billion and Oakland just shy of $2 billion, also according to the cities’ Comprehensive Annual Financial Reports for the fiscal year ended June 30. San Jose’s debt, which has risen sharply since 2000, has helped fund what the city calls a “decade of investment;” starting in 2001, the city built a state-of-the-art City Hall, renovated the airport and expanded the convention center. San Jose spending has pushed the city’s debt load on a per capita basis far higher than comparable California cities. As of December 2008, San Jose owed $1,167 per capita compared to an average $391 average for other California cities with similar Moody’s ratings, according to public record. The San Jose figure excludes nearly $2 billion owed by the San Jose Redevelopment Agency, as well as the debt of some other city operations. “San Jose can be given some credit for not overextending itself during the boom,” said Eric Hoffman, a Moody’s senior vice president and an author of the foreboding April 2009 report. He argues that the dot-com crash may, ironically, have played a part. The crash, he said, instilled fiscal discipline in city management before the rest of the country fell into recession, and that the tradition of fiscal prudence continues today. Still, San Jose has faced significant challenges and continues to do so. In September, the state announced that it would withhold $88 million from the city’s redevelopment agency over the next two years, forcing the agency to lay off a quarter of its staff

m i d d l e photo by C h a d Z i emendorf

By David Gauvey Herbert

and delay expanding San Jose McEnery Convention Center and pursuing a stadium site for the Oakland A’s, should they move to the South Bay. Meanwhile, the redevelopment agency’s tax base also grew just 2.7 percent in fiscal 2009-10, less than the anticipated 4.7 percent and way below historical growth rates of 7 percent. That will keep big projects off the horizon in the near future. “We’d like growth in the typical 7 percent range before we come back with any big capital projects,” said David Baum, chief financial officer for the San Jose RDA. In September, Fitch Ratings downgraded its rating on $1.04 billion of San Jose airport debt to A-, a drop of two notches, citing three years of falling passenger traffic and an increase in overall airport debt. While San Francisco and Oakland have maintained lower (but still strong) ratings in comparison to San Jose, Hoffman said San Francisco in particular will need to work harder to maintain Moody’s current opinion. “San Francisco is under some significant budget stress,” he said. If the city achieves a balanced budget through dubious economic growth projections or one-time budget tricks, its rating could be jeopardized. Nadia Sesay, San Francisco’s public finance director, takes something of a laissez-faire attitude towards credit ratings. “There just are so many things that we’re worried about,” she said. “Some of the factors they take into consideration like the economic downturn are beyond our control.” Hoffman says cities control about half of the criteria. Oakland isn’t too worried about its debt ratings either. Dan Lindheim, city administrator, said the only major capital projects on his city’s horizon are the purchase of land for a new Oakland A’s stadium, in the event that the team doesn’t move to San Jose, and the redevelopment of the Oakland Army Base, which will be funded in part by federal stimulus money. “We’re not borrowing a whole lot, and I guess we’re not borrowing a whole lot because of the economy,” he said. Elsewhere in California, the news is worse. Moody’s downgraded Sacramento’s rating in August from Aa2 to Aa3, and Fitch slashed Los Angeles’ rating in November from AA to AAand AA- to A+ on $1.5 billion and $1 billion worth of bonds, respectively. Moody’s has also dropped California’s overall rating as a state to Baa1—the lowest of any state in the nation. On Jan. 15, Standard & Poor’s also lowered its rating on state debt, citing a “severe fiscal imbalance” and “the impending recurrence of a cash deficiency.” Bay Area cities are not immune to the state’s woes. There are signs that California’s recent spate of bad press nationally may be driving some investors away from local bonds. “Your average East Coast municipal fund buyer may not be that aware of what’s going on in the Central Valley, but they are certainly aware of what’s going on with California,” Hoffman said. San Jose, San Francisco and Oakland may have solid credit ratings, but those are footnotes for out-of-state investors, who watch in horror as Gov. Arnold Schwarzenegger plugs gaps in the budget with emergency federal aid. City officials say they have heard from outside consultants that the perception problem is real, but so far, it is unclear just how much the toxic California brand has cost Bay Area cities. n

save the date 2010 CREWSF Calendar FEBRUARY 24, 2010 CREWSF & BOMA Present: Innovations & Solutions: How to Find Opportunities in 2010 MARCH 10, 2010 Evening Networking Event APRIL 14, 2010 Luncheon at The City Club MAY 12, 2010 Evening Networking Event JUNE 9, 2010 Luncheon at The City Club JUNE 24, 2010 Golf Tournament at The Presidio Golf Course SEPTEMBER 8, 2010 Luncheon at The City Club OCTOBER 20 -23, 2010 CREW National Convention NOVEMBER 10, 2010 Luncheon: Economic Forecast DECEMBER 8, 2010 Annual Business Meeting & Holiday Party Commercial Real Estate Women (CREW), San Francisco, promotes the success and influence of women in the commercial real estate industry by providing a forum for business development and professional advancement. Powering Your Success in Commercial Real Estate

Go to www.crewsf.org for Event Registration

A rise in public works spending from roadways and bridges to hospitals and rail lines should help stabilize the construction industry. By Sasha Vasilyuk and Sharon Simonson

Workers at the Crystal Springs Bypass Tunnel assembling PVC pipe.

photo g r a phy by C h a d Z i emendorf

he construction industry has been one of the hardest hit by the Great Recession. But the new year promises the start of multiple big-ticket public projects. Emboldened by federal stimulus money and lower construction costs, municipalities and other public agencies around the Bay are building and restoring the commons. This fall, San Francisco celebrated three momentous civic construction moments: the ground-breaking of its General Hospital, a nearly $900 million project; the start of the long-awaited Doyle Drive reconstruction, a $1 billion redevelopment of the Presidio Parkway; and the start of $4.6 billion in upgrades for the dilapidated Hetch Hetchy water system that serves 2.4 million customers across the Bay Area. Meanwhile, construction continues on both the San Francisco and San Jose airports, a nearly $1 billion bed tower and parking garage for Santa Clara County’s public hospital, the $137 million extension of BART south from Fremont and the $420 million addition of a fourth lane to the East Bay’s Caldecott Tunnel. In coming months, projects such as the San Francisco’s TransBay Transit Center, Central Subway and UCSF Medical Center at Mission Bay are to begin as well.

While attention often falls to private projects as economic barometers and drivers of the construction industry, year in, year out, public works like roads and bridges and institutional building such as university dorms and hospitals make up half of all Bay Area construction. In 2010 such development will be more important than ever, not only because the volume of such projects is generally up but also because private development remains so far down. Public works permitting soared 11 percent in the San Francisco metropolitan area last year with more than $1.5 billion in projects started, according to McGraw-Hill Construction. Institutional building starts rose 12 percent to $2.3 billion. Unlike new home construction, which can be of relatively short duration, public works and institutional building are often multi-year propositions. That means projects permitted last year are likely to continue into 2010 and in some cases even longer, said Robert A. Murray, vice president, economic affairs for McGraw-Hill Construction. The news is less good from the South Bay, where public works permitting is up 3 percent to nearly $300 million, but institutional building is down 12 percent to $633 million.

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â&#x20AC;&#x153;What is helping both public works and institutional building in the current period is the [federal] stimulus bill and efforts at the state level to try to maintain some level of construction activity going forward.â&#x20AC;? Robert A. Murray, vice president, economic affairs for McGraw-Hill Construction

Crystal Springs Bypass Tunnel elevator shaft that transports SFPUC workers underground each day.

photo i llu s t r a t i o n by C h a d Z i emendorf

“What is helping both public works and institutional building in the current period is the [federal] stimulus bill and efforts at the state level to try to maintain some level of construction activity going forward,” Murray said. In California, the state’s budget woes, including the ongoing budget deficits, are thwarting that effort and will likely continue to do so. But the Bay Area’s comparatively slow recovery from the national slowdown in the early part of the decade is in some ways saving its bacon now. “The fact that [the region] did not have a huge boom in the last decade has made the decline of the past year or so less severe than other parts of the country,” Murray said. “If you avoid the boom, you could also avoid the bust.” Another upside of the downside is that reduced demand for construction work is pushing costs down by as much as a third, allowing public dollars to go further. “It is to our advantage to get [projects] done now,” says San Francisco Public Utilities spokeswoman Maureen Barry. SFPUC plans to start 11 major projects around the Bay Area with a construction value of $750 million this year. They are estimated to create more than 3,500 jobs. That’s twice the amount of work the water system did in 2009, Barry said. While some of the public projects have benefited from the federal stimulus program under the American Recovery and Reinvestment Act of 2009, San Francisco had to lock down other financing, said Nancy Kirshner-Rodriguez, director of government affairs in the mayor’s office. Besides the stimulus money, the city has secured funding through bonds and ongoing state and federal programs aimed at specific improvements in areas like transportation. “One of the challenges with the stimulus is that there is a lot of money to be potentially had, but it is all being funded through existing formulas, which means there are constraints,” Kirshner-Rodriguez said. “Part of what is allowing big projects to go forward is that we were able to identify [additional] finance mechanisms. San Francisco is still considered a good investment.” One of the biggest and least talked-about public projects is the Central Subway, the second phase of the Third Street Light Rail Project that will create a long-anticipated extension from the Caltrain Terminal to Chinatown via Fourth and Stockton streets. According to the San Francisco Metropolitan Transit Authority, Chinatown is the most densely populated area of the country not currently served by modern rail transport. With an expected budget of $1.57 billion, the Central Subway project is slated to create up to 43,000 construction jobs in the next seven years. The public-sector activity contrasts with the lack of private-sector work. The value of commercial building permits fell by half last year in Silicon Valley to $191 million, which was itself a nearly 50 percent drop from 2007, according to McGraw-Hill. In the San Francisco metro area, the pattern was similar though not as extreme; commercial building permit value fell by a quarter to $576 million in 2009 from 2008. That said, all construction activity has fallen materially in the region over the last five years. From a cyclical high of nearly $9 billion in 2007, the total volume of all public and private construction work fell to $6.2 billion last year in the San Francisco-Oakland metro area. In Silicon Valley, it has fallen from nearly $3 billion in 2005 to less than half that last year.

Though there are private condominium and office high-rise projects that have been approved by government, backers are in no hurry to turn dirt. “I don’t think most developers know if and when they will be breaking ground,” said Alan Mark, president of The Mark Company, a San Francisco consultant and researcher that specializes in residential development. “While most condo developers know that there will be virtually no [new] inventory in San Francisco by the end of next year, their inability to get financing will result in minimal new construction.” Some local construction giants are weathering the storm by taking advantage of the opportunities they can find in the public sector. “Typically, 95 percent of our work would be private, and it has always been that way. But now 95 percent is public,” said Andy Ball, chief executive officer of San Mateo-based Webcor Builders, which is working on the San Francisco General Hospital and an SFPUC reservoir and is set to rebuild University of California, Berkeley’s Memorial Football Stadium once it is approved. Ball doesn’t foresee “an appreciable return in private-sector projects” in the next 18 months. That means construction job growth in the Bay Area likely will be slow. The San Francisco Building and Construction Trades Council says that about 25 percent of San Francisco’s 16,000 building-trades workers have been unemployed since March. Two years ago, the organization reported nearly full employment. “The upcoming public projects will help, but I don’t think the volume of work that they present will make up for the almost complete collapse of the private sector,” said Michael Theriault, the council’s secretary and treasurer. Nonetheless, construction industry workers are glad to see any improvement. “I have been scraping the bottom of the barrel for some time, but 2010 is looking good,” said Renee Clark of Construction Clerical Unlimited, an Oakland-based company that provides personnel for large construction projects such as the $431 million Highland Hospital that will break ground in Oakland in 2010. At DPR Construction Inc., a national general contractor headquartered in Redwood City that builds projects for the healthcare as well as life sciences, advanced technology and corporate office markets, the company did not meet its revenue goal in 2009, but things are looking up. “Our revenues and sales were down 20 percent [last year], and that was very much a reflection of lesser opportunities across all of our markets,” said Gavin Keith, a project executive at DPR. “We are starting to see reinvestment in the life-science sector and advancedtechnology sector, and we think those are going to be the fastest to recover.” In 2010, DPR plans to break ground on several notable public and private projects, including Palo Alto Medical Foundation, Alta Bates Summit Hospital Patient Care Pavilion in Oakland, the Computational Research and Theory Facility at Berkeley as well as several confidential projects. “The Bay Area is fortunate in that it has a pretty diverse and broad foundation of different kinds of markets,” said Keith. “We are starting to have more opportunities [in the private sector] because there is more access to capital, and companies are starting to hire.” n

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SONOMA 25

Public Transport projects 1. Transbay Transit Center (San Francisco) First phase Project cost: $1.2 billion (with state and federal money, could rise to $1.6 billion) Timeframe: February 2010 to 2015 2. C entral Subway (San Francisco) Construction value: $1.57 billion Timeframe: Early 2010 to 2017 3. BART Warm Springs Extension (Fremont) Construction value: $140 million Timeframe: September 2009 to 2013 4. Sonoma-Marin Area Rail Transit District (Cloverdale to Larkspur) Seventy-mile passenger railroad and bicycle pedestrian path terminating at the Golden Gate Ferry landing Project cost: $590 million Timeframe: 2011 to 2014

Health care projects 5. C alifornia Pacific Medical Center (San Francisco) Sutter Health is replacing acute-care buildings with the 14-story Cathedral Hill hospital at Geary Boulevard and Van Ness Avenue. Construction starting is premised on state approval. Construction value: $1.7 billion Timeframe: December 2010 to December 2014 6. Laguna Honda Hospital and Rehabilitation Center (San Francisco) Main Hospital - Bldg H Wings A to F Construction value: $593.5 million Timeframe: 2005 to March 2010 7. San Francisco General Hospital Construction value: $887 million Timeframe: October 2009 to 2015 8. UCSF Medical Center at Mission Bay (San Francisco) Construction value: $1.5 billion Timeframe: May 2010 to 2014 9. Alameda County Medical Center Highland Hospital Re-build (Oakland) Construction value: $431 million Timeframe: 2010 to 2017 10. Alta Bates Summit Medical Center (Oakland) Adding an 11-story tower. Now going through entitlement process and state review. Construction value: $212 million Timeframe: June 2010 to June 2013 11. Kaiser Foundation Hospital (Oakland) Demolition of the old MB Center shopping center is under way on the site. In late 2009 Kaiser began pouring foundation for the first of several structures in the medical complex. Timeframe: June 2009 to January 2013 12. Kaiser Medical Center (San Leandro) Demolition is under way. Kaiser is working with the city of San Leandro to get final entitlements and permits. Start: Spring 2010 13. Eden Medical Center (Castro Valley) To be demolished and replaced by a new Sutter Medical Center Castro Valley. Construction value: Approx. $400 million Timeframe: July 2009 to October 2012 14. John Muir Medical Center (Walnut Creek and Concord) Construction value: $800 million Timeframe: January 2008 to late 2010 15. Washington Hospital Health Care System (Fremont) Renovation Construction value: $115 million Timeframe: January 2009 to 2012 16. V alley Health Center (Milpitas) 60,000 square feet Cost (including land acquisition and parking): $74 million Complete: Late Spring 2010 17. S anta Clara County Valley Medical Center (San Jose) Bed tower and affiliated projects Construction value: $950 million Timeframe: 2009 to 2012/2013

18. VA Palo Alto Health System: Mental Health Center A 76,000-square-foot, 80 bed inpatient psychiatric facility Project cost: $54 million Start: June 2009

enters for Ambulatory Care, Polytrauma C and Blind Rehabilitation 170,000-square-foot polytrauma and blind rehabilitation facility; 300,000-square-foot ambulatory care center; 80,000-square-foot research facility Project cost: $600 million Start: January 2010 19. Stanford Hospital and Clinics/Lucile Packard Children’s Hospital (Palo Alto) Replace and expand adult hospital; expand children’s hospital. A draft environmental impact report is expected this spring. The Palo Alto City Council could approve the project in the fall. State approvals remain. Construction value: $3.5 billion Timeframe: January 2011 to July 2015

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20. Kaiser Foundation Hospital (Redwood City) City entitlements are mostly complete and design/permit work is underway. Timeframe: April 2010 to January 2013

580

21. Sequoia Hospital (Redwood City) Construction value: $240 million Timeframe: November 2007 to May 2013

23. Mills-Peninsula Medical Center (Burlingame) Sutter is building a six-story hospital to replace the old one. Construction value: $600 million Timeframe: January 2007 to July 2010 24. Sutter Medical Center of Santa Rosa not shown on map Sutter currently leases a hospital building form Sonoma County. Sutter is talking with the county about a replacement on the same 15-acre site as the Wells Fargo Center for the performing arts. Construction value: $176 million Timeframe: September 2010 to August 2013 25. Sonoma Valley Hospital (Sonoma) not shown on map A new emergency department, upgraded ambulatory services and new café are all on the drawing board as part of Sonoma Valley Hospital’s new master plan. Construction value: $35 million Timeframe: March 2011 to June 2012

580

22. Kaiser Permanente Medical Office Building (San Mateo) 64,000 square feet Timeframe: Second half 2010 to first half 2011

BERKELEY

80 26

SAN FRANCISCO

40 2

OAKLAND

8 6

880

1 101 50 41

Road and bridge projects: 26. Doyle Drive Replacement Project (San Francisco) South access to Golden Gate Bridge via U.S. 101 Project cost: $1.05 billion Timeframe: November 2009 to early 2013

280

BURLINGAME

29. High Street Overpass Replacement (Oakland) Construction value: $100 million Timeframe: Fall 2009 to Summer 2014

SAN MATEO

27. Bay Bridge-East Span Retrofit Project cost: $6.3 billion Complete: 2013 28. 5th Avenue/I-880 Overpass Replacement (Oakland) Construction value: $130 million Timeframe: Summer 2009 to Summer 2010

22 B

REDWOOD CITY 21

30. Caldecott Tunnel Extension (Orinda/Berkeley) Two-lane, .66-mile tunnel north of existing tunnels on Route 24 between Oakland and Contra Costa County Project cost: $420 million Start: Early 2010

31. R oute 880/92 Interchange Reconstruction (Hayward) Construction value: $151 million Timeframe: October 2009 to October 2011 32. I-680 Southbound Express Lane (Milpitas/Fremont/Livermore) From Route 237 in the south to Route 84 in the north; I-580 Westbound Express Lane (Airway Boulevard Overpass to Greenville Road, Livermore) Construction value: $37 million Timeframe: Fall 2008 to 2011

Note: Construction value is a component of project cost, which includes expenditures such as project design, environmental clearances and right-of-way acquisition. Sources: Public agencies, universities, Construction Industry Research Board, Robert Murray/McGraw-Hill Construction. Map not to scale. Information subject to change.

THE

33. Dumbarton Bridge Seismic Upgrade (Fremont) Bidders conference to be held in April or May Construction value and timeframe unknown. 34. Rohnert Park Expressway to Santa Rosa Avenue/ Wilfred Interchange Project not shown on map Adds HOV lane and rebuilds the interchange including new overpass and roadway beneath U.S. 101 Construction value: $40 million Complete: Late 2012

680

35. Widening of U.S. 101 to create continuous HOV lane through Sonoma County not shown on map New HOV lane opened in December; work on ramps and electrical work remains as well as median work Construction value: $120 million Timeframe: January 2009 to January 2011

36. Rohnert Park Expressway to Pepper Road (Cotati)

PITTSBURG

not shown on map

Construction value: $55 million Timeframe: Spring 2010 to late 2011/early 2012

CONCORD

37. Marin Sonoma Narrows Project (Novato to Petaluma) not shown on map Widening/Upgrading of U.S. 101 through Northern Marin and Southern Sonoma counties. Three-phase project consisting of new ramps, new HOV lanes in both directions; Contract I, first phase: North bound HOV lane to extend from Rowland to Atherton and southbound from Rowland to Delong Construction value: $54 million Timeframe: Late 2010 to late 2013

680 14

WALNUT CREEK

Water Treatment 38. SFPUC Hetch Hetchy Water System Improvement Program: A. S utro Reservoir and Seismic Upgrade (San Francisco) Project cost: $57 million Timeframe: July 2011 to September 2013

680

580

B. Crystal Springs-San Andreas Transmission Upgrade (San Mateo) Five projects on 135 acres near Crystal Springs Reservoir Project cost: $192 million Timeframe: October 2010 to October 2013

CASTRO VALLEY

580

C. Tesla Water Treatment Facility (Tracy)

HAYWARD

not shown on map

Project cost: $113 million Timeframe: Early 2009 to early 2011

48 31

D. Bay Tunnel not shown on map Bores beneath the SF Bay from Newark to Menlo Park Project cost: $347 million Timeframe: January 2010 to February 2015 E. East Bay/Peninsula Pipelines not shown on map Project cost: $250 million Timeframe: February 2010 to August 2012

F. San Joaquin Pipeline System upgrades and additions not shown on map San Joaquin Valley terminating in Tracy Construction value: $280 million Timeframe: May 2010 to September 2013

FREMONT

880 33

G. Irvington Tunnel not shown on map Sunol Valley to Fremont Estimated construction value: $160 million Timeframe: May 2010 to January 2014

PALO ALTO 49

680 101

H. U niversity Mound Reservoir North Basin seismic retrofit not shown on map Project cost: $46 million Timeframe: October 2009 to June 2011

MILPITAS

237

Public Building 39. Federal Building at 50 UN Plaza (San Francisco) Construction value: $121 million Timeframe: Fall 2010 to 2013

280 47

SAN JOSE 280 45

40. San Francisco Public Utility Commission Building Project cost: $190 million Timeframe: August 2009 to 2011

101

41. San Francisco International Airport Terminal 2 Renovations Project cost: $371 million Timeframe: March 2009 to Spring 2011

Registry

42. Computational Research and Theory Facility at UC Berkeley Construction value: $80 million Timeframe: June 2010 to September 2012 43. Richard E. Arnason Justice Center (Pittsburg) Also known as the East Contra Costa Courthouse Project cost: $64 million Timeframe: March 2009 to December 2010 44. Fire Station No. 36 (San Jose) Construction value: $6 million Timeframe: February 2010 to Spring 2011 45. Calabazas Branch Library (San Jose) Construction value: $5.5 million Timeframe: March 2010 to Summer 2011 46. San Jose Family Justice Center (San Jose) The state Office of Court Construction and Management is looking for a site to build a new courthouse with 20 courtrooms and 200,000 square feet to replace six leased facilities. Project cost: $184.1 million Complete: Second quarter 2013 47. Mineta San Jose International Airport (San Jose) Renovation and expansion, phase 1 Project cost: $1.3 billion Timeframe: 2006 to 2010

INSTITUTIONAL/EDUCATIONAL BUILDING 48. Cal State University East Bay, Hayward: Recreation and Wellness Center Project cost: $24.5 million Timeframe: July 2009 to Fall 2010 tudent Services Administration Building S Project cost: $42 million Timeframe: Late 2008 to Spring 2010 49. Stanford University (Palo Alto): Knight Management Center (Palo Alto) Graduate School of Business Construction value: $243.5 million Start: March 2009 tanford Law School Clinics and S Faculty Office Building 60,000 square feet Construction value: $34.7 million Starting construction now tanford University Medical School Learning S and Knowledge Center 104,000 square feet Construction value: $49 million Complete: First quarter 2010 tanford University Medical School, S Stanford Institute of Medicine 199,802 square feet including research labs and lab support Complete: Spring 2010 tanford Institute of Economic Policy and Research S 32,000 square feet Complete: Spring 2010 Stanford Science & Engineering Quad (four buildings): • The Jerry Yang and Akiko Yamazaki Environment and Energy Building, Y2E2 Building 166,000 square feet Complete • School of Engineering Center

Construction value: $58.3 million

• Nanoscale Science and Technology Building

Construction value: $59 million Complete: August 2010

• BioEngineering and Chemical Engineering Building

153,159 square feet Start: Project approved by Santa Clara County but no building permit yet secured

tanford University Concert Hall S 89,000 square feet with 900 seats Start: Project approved by Santa Clara County Planning Department; building permit not yet secured 50. Skyline College Classroom Building (San Bruno) Construction value: $35 million Timeframe: March 2009 to Spring 2011

Big Build-Up Bay Area-based contractors, engineering firms and architects are among nation’s and world’s largest. By Sasha Vasilyuk

hile the Bay Area is recognized as the world’s technology hub, Google Inc. and Apple Inc. aren’t the only heavyhitters headquartered in the region. Lesser-known but impressive is the array of construction, design and engineering firms that work nationally and globally but call the Bay Area home. From heavy construction giants to big electric contractors to international design specialists, the region has proven an ideal center for companies that value top university graduates and the range of local industries. “The Bay Area is the sixth-largest urban region in the country with a diversity of industries and client types, including commercial clients, major oil companies, health care providers and the technology sector,” said Michael Wilson, senior principal at Stantec Architecture, a Canadian firm that recently expanded its San Francisco office into a major hub. “For Stantec to service these clients, we need to be here to actively pursue those relationships.” Bechtel, URS Corp., Webcor Builders, Swinerton Inc., DPR Construction Inc., Devcon Construction Inc. and Hathaway Dinwiddie Construction—all of which are based in the Bay Area—are among the largest general contractors in the country based on 2009 revenues, according to Engineering News-Record magazine. San Franciscobased Gensler, SB Architects, Bechtel and URS are also among the largest engineering and design firms in the world. Some companies recognized the region’s potential long ago. San Jose-based Rosendin Electric was started by Moses Rosendin in 1919 to service the agricultural industry. Swinerton’s local history goes back even further. Started by immigrant mason Charles Lindgren in the 1880s in Los Angeles, the founder soon moved the company to San Francisco to benefit from a local building boom. Although unexpected, the 1906 earthquake provided more opportunities for the young construction firm. “Having to help rebuild San Francisco after the earthquake was what helped put us on the map,” said Chris Day, vice president of corporate business development at employee-owned Swinerton, which is responsible for the Pacific Telephone & Telegraph building, the Francis Drake Hotel and most recently the new De Young Museum, all in San Francisco. Even with the long histories and thousands of employees, the recent recession has still taken many by surprise. “We had a strong commercial office building and corporate practice, but that all but disappeared in the summer of 2008,” said Rob Tibbetts, marketing director at architectural and engineering firm HOK, which has its largest and most profitable office in San Francisco. “Despite that, we were able to maintain our domestic practice by expanding our justice, aviation and health care markets. We were lucky to have avoided the housing market. Our insurance carrier won’t allow us to design housing in the U.S.”

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F E B R U AR Y 2 0 1 0

But even those lucky enough not to have their toes dipped into the residential space took a hit in sinkholes from Las Vegas to Dubai. “There isn’t a design firm that hasn’t had stuff put on hold,” said Scott Dunlap, a principal at Gensler, which is currently working on the expansion of San Francisco International Airport’s Terminal 2. In response, the region’s construction and design companies are looking for opportunities in emerging national and international regions as well as refocusing on industries that hold more abundant promise now such as the public sector and green technologies. Gensler is seeing continued opportunity internationally, particularly in Asia and South America, Dunlap said. “There isn’t a lot happening yet, but we’re hearing from our clients that they’re interested in opening locations in places like Brazil. Just like clients were beginning to talk about China five to ten years ago, they’re starting to talk about South America now.” Gensler, which employs 350 people in its Bay Area offices, also plans to expand its local reach this year by making several senior hires with expertise in education, retail and life-science environments, three areas where the company wants to capture greater market share. For a national company like Rosendin Electric, which employs almost 1,000 people in the Bay Area, there may be no Brazil, but the contractor believes there is still plenty of opportunity in Utah, Texas and on the East Coast. Larry Hollis, vice president of business development, said that specializing in data centers, hospitals and wind farms will help his company find more work in the near future. NATIONAL DESIGN, CONSTRUCTION AND ENGINEERING FIRMS LOCATED IN THE BAY AREA

Bechtel

Rosendin Electric

Devcon Construction Inc.

SB Architects

DPR Construction Inc.

Stantec Architecture

Gensler

Swinerton Inc.

Hathaway Dinwiddie

URS Corp.

HOK

Webcor Builders

“We’re expecting a nice rebound for the wind farms, and there are a lot of hospitals getting built around the country, so having expertise in that helps because companies seek us out,” Hollis said. Locally, Rosendin is scheduled to work on the big Solyndra Inc. solar panel manufacturing plant in Fremont, which recently received funding from the U.S. Department of Energy, as well as San Francisco General Hospital, California Pacific Medical Center and UCSF Medical Center. Rosendin’s main competitor, Cupertino Electric, which installed solar panels on Google and AT&T Park, is also moving to more public projects backed by stimulus money, specifically in the photovoltaic and infrastructure fields. It also plans more data center work out of town. “The demand in the data center market hasn’t dropped off, and we know of a pretty significant pipeline of projects,” said Tom Schott, the electric company’s regional operations manager for Northern California. “That’s a market that could be one of the first markets to take off, and those are big jobs.” n

photo by C h a d Z i emendorf

Gordon Gangitano of Webcor Builders walks one of the many service tunnels underneath San Francisco General Hospital.

ven as Bay Area contractors launch a fresh round of hospital construction, a tunnel is looming at the end of the light. Many of the new projects starting this year are the result of state-mandated deadlines to replace or upgrade buildings that don’t meet earthquake-safety standards. Hospitals have until 2013 or, in some cases, 2015 to meet the new criteria. But beyond that horizon, architects and builders don’t expect much new hospital work, and projects that do crop up are likely to be smaller and further between. The biggest question mark in the industry today is the impact of federal health care reform. To the degree that changes in law or regulations cut into hospital profits, it could slow providers’ ability to expand or remodel. The shifting legislative landscape coupled with the recession and displacement in the credit markets is already affecting hospital financing. Still, in the immediate future, lots of hospital construction work remains on the books. Sutter Health plans to spend $1.2 billion in the Bay Area in the next five years, said Carl Scheuerman, Sutter’s director of regulatory affairs for facility planning and development. Sutter is replacing hospital buildings in San Francisco, Oakland and Castro Valley. Kaiser Permanente plans to break ground this year on new hospitals in San Leandro and Redwood City. San Francisco General Hospital is only a few months into building a new 284-bed hospital. Stanford is expected to spend $3.5 billion to build a new medical center over the next several years with work slated to start in 2011. Despite its plans, Sutter does not have funding lined up for some of its projects already in the pipeline and may not be able to fund everything by the 2013 and 2015 deadlines, Scheuerman said. “Folks like Kaiser, they are sort of hunkering down, if you will, in preparation of their margins shrinking,” said William Roger, director of the health care practice at HOK Architects in San Francisco. “But everyone is being cautious now and probably rightly so.” When it comes to designing new structures, business has already started to slack off. “We’ve known for a long time that the work that is in California is going to eclipse. Most all of our [health care] inquiries and interviews for the last two or three years have been out-of-state

or out of the country,” said Roger Swanson, principal, chairman and CEO of architectural firm Anshen + Allen. Hospital design and construction is highly specialized. The Office of Statewide Health Planning and Development, or OSPOD, controls everything down to the spacing of screws in the wallboard and literally demands perfection in construction, Sutter’s Scheuerman said. “You don’t just pick up any contractor to do OSHPD work,” he said. “One of the first criteria we employ in our team selection is how much OSHPD experience does that contractor have. If it is none, we suggest they look somewhere else.” One key phrase is “built to the approved drawings.” If anything has to happen that isn’t in the drawings, OSHPD has to approve new drawings before work can be performed at the site. “It’s like designing a space ship. Operating rooms today are not like operating rooms of 10, 20 or 30 years ago,” said Jim Hannon, senior vice president and national director of health care for architecture and engineering firm SmithGroup in San Francisco. “Most people’s mouths would fall open in terms of the utilities, electrical systems and mechanical systems. It’s jam-packed.” Heating and ventilation equipment must keep air sterile. Diagnostic equipment demands heavy-duty electric lines and backup power. Each patient room must have ports in the walls and ceilings. “The only thing that is even close in complexity is research labs, and they aren’t subject to the regulatory demands of OSHPD,” said Mark Saunders, president of structural engineering firm Rutherford & Chekene in San Francisco. Rutherford has a number of projects in process right now that haven’t started construction but are expected to soon, he said. “If you haven’t done this work before and you don’t know how to estimate or bid the extra effort associated with it, you will probably lose your shirt,” Saunders said. Between the strict standards and seismic regulations, hospitals cost more to build in the Bay Area than in other parts of the country. “I could probably bring a hospital building in Oregon forward for $400 a square foot,” Scheuerman said. “In California we are looking at upwards of $1,400 a square foot.” That kind of expense is upping the anticipation and even anxiety continued on page 35

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theregistrysf.com 21

urban renewal

Creating a CityPlace San Francisco’s Urban Realty looks to transform Mid-Market.

an Francisco’s Mid-Market, the perennially boarded up and seedy stretch of Market Street between 5th Street and Van Ness, is once again attracting attention from local developers. A long-time fray in the urban fabric, the district is drawing new interest from planners, business owners and nonprofit advocates who are weighing in anew on its future. In the two or so decades after World War II, MidMarket was a thriving area, with movie theatres, eateries and assorted small businesses. Served by street-level electric trolleys, the stretch was a people-filled and vibrant area adjacent to Union Square. Photos from the era show four street rail lines (two in each direction), a smattering of automobiles and sidewalks stuffed with pedestrians. Today, that prosperity feels long ago and far away. Only two locations on Mid-Market remain that can be considered mainstream: the Orpheum Theatre, offering Broadway shows, and the Warfield, the well-known concert venue. The theaters function as entertainment destinations, drawing audiences from the entire Bay Area. As businesses attracting a demographic with disposable income, however, their patrons’ behavior epitomizes Mid-Market’s problems: Theatergoers and concert audiences typically arrive, attend a show and depart immediately after. With very few exceptions, they have nowhere nearby to dine, shop or relax, assuming they would even chose to stay. Mid-Market is generally perceived as unsafe. Many storefronts are boarded-up or vacant. Check-cashing services, payday-loan operators and small markets catering to liquor sales are prevalent. Pushers pursue drugdealing and other questionable activities with impunity on sidewalks and alleyways. Most visible are the adultentertainment establishments. Now, Urban Realty Co., a private San Francisco developer specializing in urban infill, and Commonfund Realty Inc., the real estate arm of the nation’s largest non-profit investment manager, have unveiled plans for

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CityPlace. A more than 375,000 square-foot retail development on the south side of Market Street between 5th and 6th streets, the project would bring 750 permanent jobs and 250 construction-related jobs with negligible impact on housing demand, according to city records. With 90 feet of Market Street frontage, the $60 million construction project would replace three vacant buildings with more than 250,000 square feet of retail on seven levels, including a mezzanine and a subsurface retail floor. Two additional floors of below-grade parking with space for 201 cars also are contemplated. The proposed Gensler-designed building would be contemporary, in contrast with some surrounding architecture, but at 90 feet, its anticipated height and mass are consistent with the vicinity. Its location and use also would leverage the recently renovated Westfield San Francisco Centre, less than a block to its east, and Union Square, four blocks to the northwest. The project is intended to meet LEED Gold certification and features large expanses of glass, including a central atrium visible from the street stretching from ground-level to building top. Six retailers are expected to occupy the building, with each of the top three floors accommodating a single tenant, according to the draft environmental impact report published Nov. 4. If all goes as planned, the 25-month construction job could start this spring; stores could occupy by 2012. While no tenants have been named, Urban Realty is in communication with merchants such as Fry Electronics and Bed Bath &Beyond, so-called value retailers. David Rhoades, a principal with Urban Realty, thinks the district is ready for change. “Mid-Market has incredible potential. It is adjacent to the city’s primary shopping district. It is near cultural institutions, theaters, and other entertainment venues. There is easy access to public transportation. All it needs is a catalyst,” he said. CityPlace, he argues, has sufficient scale to be that change agent. But, as is always the case in San Francis-

photo s by C h a d Z i emendorf

By George Calys

r e n d e r i n g s c ou r t e s y of gensler

co, opposition has formed and not without ideological overtones. The development’s proposed below-grade parking has already drawn opposition; this, along with increased traffic, is where the battle lines are forming as Urban Realty seeks to obtain entitlements. Transit and bicycle proponents say Market Street should be limited in terms of private automobiles, that parking can be accommodated elsewhere and ideally, shoppers should be encouraged to use public transportation. Urban Realty maintains that parking within the building is necessary; national or regional retailers won’t locate there without it. The developer says that the U.S. norm for retail parking is four cars for every 1,000 square feet of shop space. CityPlace would provide only 0.8 parking slots per 1,000 square feet, with overflow demand accommodated by surrounding parking lots and garages that the city’s EIR finds have excess capacity. The debate will almost certainly intensify as the Planning Commission takes up the project’s consideration early this year. The final decision will have ramifications

for Mid-Market’s future, possibly for decades to come. Rhoades offers a bold philosophy as to why he would proceed in a district that has seen so little success in the last 60 years: “Market Street is San Francisco’s primary thoroughfare and will always be a destination and gathering place for the region. What we saw is the logical extension of the revitalization spurred by Westfield Centre. But rather than high-end retail, we are focused on valuebased retail. This is a segment of the market largely missing from downtown now, and especially in this economy it seems to be what consumers are looking for.” While CityPlace moves through the entitlement process, developers, planners, architects and retailers are sure to watch carefully. The inevitable question the process will raise is if Mid-Market can be revitalized or will political infighting and ideological intransigence cause it to stagnate further. Will a heavy-handed Board of Supervisors micromanage the development scheme to death? In sum, can Mid-Market, once a bustling commercial center, be saved? n

“Mid-Market has incredible potential.” David Rhoades, principal, Urban Realty Co. Inc.

Left and above: CityPlace will be located on the south side of Market Street, between 5th and 6th Streets.

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theregistrysf.com 23

finance

Snatching Retreat from the Jaws of Rout Guaranteeing a bad real estate debt doesn’t guarantee financial disaster. By Dean Gloster and Matt Lewis

The key is to understand what a lender wants and needs, what lender and borrower alternatives there are and when to make a deal.

24 theregistrysf.com

n real estate, the personal guaranty is pervasive. The loans it backs are the industry’s lifeblood, allowing investors to buy, build and improve residential and commercial projects. In up markets, debt can leverage a small slug of equity into a huge return. But in a recession and credit crunch, leverage multiplies losses. Asset values decline, cash flow won’t pay debt service, and there is no replacement financing. That is where tens of thousands of developers, owners and investors find themselves today. Their equity is lost, and their exposure on guaranties is many times their net worth. They risk owing immense debts after already losing everything. But all is not lost. Many guarantors are settling their obligations on personal guaranties at a discount or negotiating for time or to share upside as the market turns again. The key is to understand what a lender wants and needs, what lender and borrower alternatives there are and when to make a deal. For borrowers, the best time to deal is when things appear most dire; for lenders, the best time is early, so they are among the first creditors to cut a deal while there are still assets to obtain. In one of our typical engagements, a residential real estate developer had guaranteed more than $50 million in loans in connection with six projects under development or construction. Upon retirement, he turned over day-to-day operation of the business to young executives not on the hook for guaranties. He was also responsible, under indemnification agreements to a bonding company, for finishing site work at several project locations. By late 2009, all six projects were in trouble, the loans were in default, and the bonding company was suing for more than $5 million. Creditors get guaranties and indemnity agreements for two reasons: first, as a means of collection if the project entity can’t pay; second, to focus the attention of principals when things get difficult. Almost all guaranties include an attorneys’ fees provision, requiring payment of the creditor’s attorneys fees in a successful collection action. Under Cali-

F E B R U AR Y 2 0 1 0

fornia law, most defenses to enforcement of a guaranty can be waived up front and commonly are. But for a guarantor who owes $50 million, not having the money is an effective practical defense to paying the obligations. Litigating is expensive and despite the attorneys’ fees clauses lenders and bonding companies are often unwilling to pay huge legal costs only to gain paltry recoveries after judgment. Many categories of assets—like IRAs, Keoghs, 401(k)s and other retirement plans—are largely exempt from creditor levy. And under federal wage-garnishment laws, the most all creditors combined can get from future salary—after a judgment—is 25 percent of take-home pay. Lenders also face the risk that after months of litigation, the guarantor will file bankruptcy before judgment. Lenders and bonding companies also often have another agenda, such as getting environmental issues addressed before foreclosure, getting the property back without the delay of a borrower bankruptcy, getting the entitlements extended or getting help with resolving contractor claims. Guarantors therefore have something to trade for a release from a guaranty. Armed with a financial statement and liquidation analysis showing which assets are exempt from judgment levy, a debtor can approach a creditor with compelling facts. When the guarantor is left with an incentive and opportunity to be successful in the future as the economy improves, he or she can also negotiate to share part of that upside, possibly giving creditors more than asset liquidation. For our guarantor client, one of his largest lenders provided a release in return for a deed in lieu of foreclosure. After mediation, the bonding company settled for specific cooperation and a cash payment of less than one cent on the dollar. Another lender agreed to essentially mothball two projects to wait for the market to come back. A final lender on multiple projects is agreeing to a smaller payment in three years (when there may be more liquidity) and a stipulated judgment (to save attorneys fees) in full satisfaction of the guaranty obligations. Although all of this created difficulty for the guarantor and his wife, and he did have to go back to work in a follow-on business, they were able to keep their house and have peace of mind. The weakness in the traditional model of sponsor guaranties backing multiple real estate secured loans is that at the bottom of a market cycle—the time lenders most need them—guaranties are often uncollectible. At the same time, the guarantor can find many decades of success wiped out in one bad year. Some of these weaknesses are addressed by emerging alternatives—cross-collateralized loans on separate projects, specific limited dollar amount guaranties and bad boy guaranties that kick in upon specific misconduct or borrower bankruptcy. But the traditional unlimited personal guaranty has not gone away, and in hard economic times, lenders and guarantors need to be practical, prompt and creative in cutting deals to make the best of a difficult situation. n Dean Gloster can be reached at 415.954.4472 or dgloster@fbm.com; and Matt Lewis can be reached at 415.954.4461 or mlewis@fbm.com.

commercial

Stormy Weather East Bay broker says his market’s journey to stability will take longer than others. By Edward F. Del Beccaro

magine you are heading home to safe harbor in 2010 on the USS East Bay Commercial Real Estate. Your destination is characterized by leased buildings, stable returns, available credit and construction plans. You are a veteran of the commercial real estate wars, having survived the 2001 Tech Bubble Bust or perhaps the 1992 Great Real Estate S&L Crisis or even the Inflationary Wars of the 1980s. You also have survived the Great Real Estate Recession of 2008 -2009. You are tired but ready to make money. Green sprouts are there to see: Asia is starting to boom; housing is starting to stabilize; stimulus money is starting to find its targets. California manufacturers, technology industries and others are beginning to expand and send products overseas. So you shake off the effects of a 12.5 percent California unemployment rate, the statewide loss of more than a million jobs and home-value depreciation of 56 percent since its 2007 peak. You chose to ignore that the number of real estate lease and sale transactions for all East Bay commercial product types declined by 56 percent from year-end 2007 to year-end 2009, that retail store fronts—even in downtown Walnut Creek—have become very vacant, that apartment rents are down and suburban hotel vacancy is up. You became immune long ago to the slow-playing drama of a dysfunctional state government with ever-increasing deficits, county governments that have lost their reason for being and local municipalities, service districts and educational districts that have forsaken their citizen clients with out of control employee pension plans. Then your helmsman approaches to tell you that you are only in the eye of the real estate hurricane, that you are feeling a misleading calm and that the commercial real estate market is experiencing a false dawn. So you batten down the hatches, trim the sails and head back into the storm—a storm that will be called the Great Commercial Real Estate Recession of 2010 where rents drift down a further 10 percent due to lack of job creation, where vacancies rise even more for all product types, where bank and CMBS loans come due and go unpaid, where foreclosures continue increasing. There is one more storm before the East Bay commercial market finds calm in mid-2011. Silicon Valley and San Francisco commercial markets will recover in the second half of 2010 as tech, software design and social and business networking companies actually hire. But the East Bay will lag a year or more behind, as its economic drivers—residential real estate, financial services, education, Port of Oakland and local government—all take longer to recover. Exceptions will be the health care, life sciences and clean-tech industries and the companies working on the road infrastructure projects that actually begin.

Silicon Valley and San Francisco commercial markets will recover in the second half of 2010. But the East Bay will lag a year or more behind.

Some economists fear a first quarter 2011 double-dip downturn or minor economic contraction due to the expiration of the Bush income tax cuts at the end of 2010, an increase in capital gains tax rates, the coming increase in health care related costs and the uncertainty in California about how the new federal carbon tax/clean air rules will be implemented. The other dark cloud is federal monetary policy and its inflationary impacts. Employers are expected to hire conservatively or not at all. As we all know, commercial real estate vacancy directly reflects local job creation. As long as there is double-digit unemployment, rents will not recover, building equity values will fall and many loans coming due will not be paid. Counting sublease space, shadow space and black-hole space (those big empty retail boxes that once housed Mervyns and Circuit City that may need to be torn down), the real vacancy rate for commercial real estate is three to four percentage points higher than actual. This leads directly to the expectation of increased commercial foreclosures and note sales in 2010. Therefore the few sales that will occur this year will be of distressed properties. Banks are becoming healthier, which, perversely means that they will increase the rate at which they foreclose on commercial properties. Meanwhile, they will not be healthy enough to loosen loan underwriting criteria and generate any substantial increase in new commercial loans. Opportunities in this East Bay commercial real estate market will exist however. Tenants who are growing and need to relocate will be in real estate heaven with landlords offering many incentives. Owners will convert buildings to accommodate medical uses in the growing health care sector. There will be major land-use changes as empty auto dealerships and big-box retail buildings provide opportunities to build more urban uses in the inner bay. Apartments will recover first, likely in the second half of 2010, as people come to realize that renting is okay and home ownership is just too expensive even at the lower residential prices we now see. There will be consolidation in commercial real estate brokerage and ownership companies as these entities struggle with declining revenues. But the big story in commercial real estate in 2010 will be how the industry—bankers, investors and developers—comes to terms with the equity lost since the real estate peak of 2007 and its devastating effects on credit quality. So hang on, keep the water of bad economic tidings out of your boat and look for a true safe harbor in 2011. n Ed Del Beccaro can be reached at 925.279.5565 or edelbeccaro@colliersparrish.com.

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Making Its Mark San Francisco’s Historic Preservation Commission scouts for territory. By Michael Fitzhugh

“There is an extraordinary amount of [potentially historic] material out there that is unaccounted for.” Pierluigi Serraino, San Francisco expert on mid-century modernist architecture

26 theregistrysf.com

he potential creation of an historic district to protect a handful of arguably ho-hum modernist branch libraries has developers and property owners worried about what else the newly created San Francisco Historic Preservation Commission might move to protect. North Beach’s branch library, slated for a total overhaul, has become a flashpoint in the drama. It is one of five branches designed by architectural firm Appleton & Wolfard in the 1950s that the commission is considering for landmark status, a deliberation some are viewing as an indicator of how the commission might approach protecting the city’s other mid-century modern buildings— those built roughly from 1933 to 1965. Landmarked structures and locations are treated very differently from others under city code. They are subject to strict limitations concerning construction, alteration, removal or demolition, including modification to accoutrements such as signs, awnings, marquees, canopies and murals. Pierluigi Serraino, a project designer who has written several books on mid-century modernist architecture and has studied the North Beach library situation, is dubious that the branch is worth protecting. “The North Beach library does not represent anything of any kind of league,” he said. “It is poorly situated in relation to the site; its materials are foreign to the area; it does not acknowledge Telegraph Hill or Coit Tower. And while it has the flavor of buildings done in its particular period when libraries were being deinstitutionalized and made accessible to the general public,” that is not sufficient for landmark status, he said. Deliberations over protecting the North Beach li-

F E B R U AR Y 2 0 1 0

brary and four other branches designed by Appleton & Wolfard are receiving close scrutiny from the construction, landlord and development communities. Some are spooked by the idea that a non-contiguous historical district could be established to protect a thematic building collection instead of a geographically defined district. “Everyday it seems like there’s another new policy in place [in San Francisco] making it more cumbersome and costly for the business owner and developer to compete and survive,” said Christopher Harney, a partner at San Francisco’s HC&M Commercial Properties and a property owner. Michael Theriault, secretary-treasurer of the San Francisco Building and Trades Commission, is voicing concern that the HPC could become a barrier to renovating critical city resources such as fire stations. He also fears that preservation efforts might stymie job creation at a time when private construction has stalled. In the first 10 months of 2008, the city permitted $1.7 billion of work. In the same period of 2009, the value of permits fell 62 percent to $669.2 million. “Obviously, our goal is to try to promote historic preservation, so it is hard for us to look at every possible need, but I think we try to be pretty reasonable,” said HPC member Andrew Wolfram, a senior associate and senior project architect at the firm Perkins+Will. In a down economy, Wolfram argues that renovation work is likely to provide more jobs than new construction, and in that context, historic preservation should create employment, especially in cases where the work is covered by federal and state tax incentives. California’s Mills Act also provides for a potential 50 percent reduction in property taxes on qualified historical properties in exchange for the owner’s agreement to maintain and preserve them in accordance with set standards. There is good work to be had in retrofits, Theriault agrees, but it is only true for the largest projects. Concerns also have surfaced about HPC surveys under way in the city’s Eastern Neighborhoods. The surveys are aimed at identifying buildings of historical significance before they disappear. But some fear the effort will lead to a wave of new landmarks and historic districts where contributory resources such as adjacent buildings of a similar age and style to a landmark would also be protected. The Eastern Neighborhoods surveys include South of Market, Showplace Square, North Mission and South Mission as well as several other small areas. The surveys should provide clarity, said Wolfram, helping developers or home owners avoid situations in which their plans are stymied by preservation concerns raised at the last minute. Reviews that come late in the development process, as is the case with the North Beach branch library project, aren’t nearly as effective, commissioners said. Observers of the HPC also are watching how it handles its oversight of the Candlestick Point-Hunters Point Shipyard project, which could ultimately feature more

photo s by C h a d Z i emendorf

government

THE than 10,500 residential units on more than 700 acres. The HPC is due to weigh in on the development’s impact on any potentially historic structures on the property. He expects to see a draft of the commission letter on the subject in late January, said Charles Edwin Chase, the Historic Preservation Commission’s president and an associate principal and director of planning for Architectural Resources Group Inc. Others in the city’s real estate and development communities are still wondering how the commission will differ from the landmarks board that preceded it. The main difference is clarity, Chase said. “In the past, the landmark commission was advisory to the planning department. They could take what we offered and either modify it or ignore it. In the new commission, we have a voice that still remains advisory to the planning department,” but now the HPC has the power to take its advice directly to the board of supervisors. The commission is also now able to make recommendations directly to the state historic preservation office on federal projects and their impact on San Francisco’s historic structures. “It’s really about how the previous process has been clarified in making the lines of communication more direct,” Chase said. Long before landmark status is bestowed on the libraries, a slew of issues must be sorted out and bureaucracy satisfied. For starters, the commission must set a date to vote on a report the planning commission has drawn up summarizing what is known about the historic significance of the libraries. Then, the commission’s recommendation goes to the Board of Supervisors, which decides whether to heed it, and ultimately onto the mayor. The city’s next fiscal year budget also will directly affect the planning department’s ability to produce required materials for consideration of the Appleton-Wolfard libraries for landmark consideration, Chase said. Wolfram, for one, is dubious that the North Beach branch will ever get landmarked. “Even if we did recommend to the board of supervisors [that the North Beach library be designated a landmark], I personally find it unlikely that the board would approve it given the politics of the situation,” he said. For those who worry the commission is going to stymie every project involving a potentially historic structure, Chase suggests a perspective. “There are a very small number of buildings that are under the [commission’s] purview,” he said. The city has 11 designated historic districts and 261 individual landmark buildings designated as significant or contributory so far. That is a fraction of even the city’s residential stock of 115,315 owner-occupied homes and condos. For his part, modernist architecture expert Serraino says the preservation commission has plenty of work to do: “There is an extraordinary amount of [potentially historic] material out there that is unaccounted for. Just because it’s unaccounted for doesn’t mean it isn’t worth being looked at,” he said. n

Registry

Now, more thaN ever, to whom you speak is just as importaNt as what you say.

Let The Registry focus your message on your industry—where it counts!

The only Bay Area publication with 100% focus on the real estate industry.

415.738.6434 | www.theregistrysf.com

Another Way to Skin a Cat By Rob La Eace

alit e R ’s rob es AR

ide

l l Co ntia

he barometer, quintessential tool of the meteorologist, measures changes in atmospheric pressure helping to predict short term weather pattern developments such as pressure systems or fronts. A mass spectrometer vaporizes a sample, charges and accelerates its ions and then identifies the sample or quantifies the amount of a compound within it. Both of these measurement devices were breakthroughs, no doubt. But, my friends, there are others that are just as remarkable. Underwear, for example. What, you may ask, can the tighty whitey quantify? Quite simply, the economy. Though, I must add that during the month of St. Valentine’s Day, I shan’t need great justification to broach the topic. Yes the Men’s Underwear Index (MUI) has proven itself accurate enough to be regarded by even former Federal Reserve Chair Alan Greenspan as an index worthy of note. How does it work? Although most consider underwear a necessity, being that only you (and a few lucky others) can see your undies, imminent replacement upon recognizing that they are a bit tattered is not always a priority. This sentiment is magnified when the going gets tough. Thus, men buy less underwear during recessions and more underwear in good economic times. I guess you could say that undies were not the kind of change that Obama was speaking of on his campaign trail. I couldn’t resist. I digress. By tracking the sales of men’s underwear, we can actually detect real economic trends. In summer of 2009, one industry analyst forecasted that underwear sales would be down 2.3 percent for 2009—the first negative year of sales since data collection began in 2003. The good news is that it has been predicted that sales will only be down .5 percent in 2010. Less bad. We like that. CAR

Buy vs. Lease

NEXT CAR?

This Year

Lease

19%

Average age of car is 3.5 years. Majority are European & Japanese.

Buy

81%

ADVERTISING

19% More

37%

Later

Next Year

50%

25%

How much will you spend this year compared to previous years

Less

25%

Same

44%

KNOWLEDGE OF HOT SPOTS

Where would you invest money

Singlefamily homes

62%

Multi-units

11% Land

28 theregistrysf.com

F E B R U AR Y 2 0 1 0

Condos

23%

In brainstorming with my publisher, we came up with a semi-scientific way to have some fun and maybe get a gauge of our market status and agent/broker confidence as a tell tale sign of where the market could be heading. As we know, actions speak louder than words. Rather than simply asking for opinion regarding the market, we peered into the discretionary spending of our ranks to see if we can see any trends or signals. Calling upon our crack team of The Registry statisticians (and, NO crack team does not mean that they smoke it), we have created the CRACK Index. This highly sensitive market gauge measures Cars, Regular vacations, Advertising budget, Coffee expenditures and Knowledge of hot spots. For our, and hopefully your amusement, we hit the pavement to survey as many managing brokers and agents as possible. The link below will take you to the survey questions: www.surveygizmo.com/s/230962/crack In an attempt to gather the broadest sampling of responses from industry professionals, we solicited the help of Alexander Clark of www.thefrontsteps.com, who helped us spread the word. We thank all of you for your responses. I must say the results were a little surprising. The graphs below show what will now represent our baseline CRACK survey data, which we will use to measure against future surveys. Although we have not conducted any previous surveys to make a comparison, and our short time frame yielded less than 20 responses, we are starting to see some interesting information. One thing is for sure: Agents and brokers appear to be watching their pennies closely. They are holding onto their cars longer and spending less on vacations, advertising and coffee. We will see down the road if this behavior has any direct correlations to our market. Although, I am now left with one question: Could agents be spending less on these items because they are spending more on underwear? Deep thoughts, indeed. n Rob La Eace can be reached at 415-290-7228 or rob@roblaeace.com.

WHERE DID YOU GO? 75% took a vacation in the past 12 months

Europe

Domestic

56%

25%

30%

HOW MUCH DID YOU SPEND ON VACATION?

Compared to previous years

Same

Longer

Other

19%

HOW LONG WAS YOUR VACATION?

Compared to previous years

25%

Shorter

25%

Usual

50%

31%

Less

38%

31%

COFFEE

25% 20% 15% 10% 5% 0%

Buy coffee Used to out but not buy out as often but now make at home

Not Make coffee Coffee really at home is for into and still do the coffee weak

Buy coffee Used to make out and still do coffee at home, but buy it out now

FINANCE

On Loans Necessity nurtures borrower and lender creativity. By Joseph Franzetti

enders, be they balance sheet lenders or CMBS special servicers, will have to negotiate existing debt and disgorge commercial real estate assets in the coming year. “Kicking the can down the road” and “pretend and extend” have become trite industry phrases; the strategy is in fact useless when confronted with an asset that is unable to generate anywhere near the yield it once did. For many loans, debt-service coverage has become an oxymoron. The bottom line is that a tremendous amount of value has been lost and the loss must be shared by borrowers and lenders. Finding the best way to allocate those losses will be the Gordian knot for the commercial mortgage industry in 2010. Lenders and borrowers are going to have to think fast. Delinquencies on commercial mortgages approached 5 percent at year-end. Projected maturities of commercial mortgage-based securities are approximately $40 billion in 2010 and approximately $190 billion in commercial real estate loans sit on banks’ balance sheets. Even with the return of some capital market lenders, there will not be enough debt to refinance this year’s maturities. Meanwhile, for the overwhelming majority of properties, there are no prospects for property value or cash flow growth. Loan modifications are emerging as the obvious point to retreat. So far, based on a year’s worth of work on some two dozen cases, four formulas are emerging at Cohen as borrower favorites: discounted loan payoffs, loan extensions, re-classifications and newly formed A/B structures. With a discounted payoff, the borrower proposes to purchase a loan from the lender at a price less than the outstanding balance. For loans that had reached a maturity date but could not be re-financed, borrowers looked to extend from one to five years. In some of these cases, the borrower needed to invest in the property for a lease rollover but was disinclined to do so when they were facing a near-term maturity that put not only their original equity but also the new equity at risk. Borrowers also sought adjustments to either eliminate loan amortization or to convert the loan to interest only. They also sought debt service moratoriums with the deferred interest added to a balloon maturity or an overall reduction in the amount of debt outstanding. Some also sought to restructure their notes into senior and junior pieces. The senior note is sized to a level that is supported by current cash-flow and value. New equity is invested between the two notes and gets a priority payment to the B-note. Generally a lender doesn’t want a property back un-

less he is convinced the current borrower can no longer manage the asset or has lost faith in the borrower’s credibility. In 2009, the most successful restructures were those where a capable and committed borrower brought new capital to the transaction. Here, the lender can see that there is a better long-term chance to recover its full investment. Getting extensions, modifications and even A/B structures in those cases made sense to borrower and lender. On the opposite end of the spectrum, discounted payoffs could be achieved when the lender assessed that the fastest and highest return would be to take any proceeds the current borrower could muster. In most of these situations there was a distressed property in a weak market where the current owner was the best option, and the lenders realized there were few good alternatives were they to foreclose, hold and sell. What many borrowers sought and few lenders would consider was an outright reduction in the debt outstanding. There seems to be little incentive for a lender to accept this situation when an A/B structure keeps at least some upside alive. Lenders need to evaluate the many options available when faced with a maturity or term default. Their decisions are influenced by the borrower, the quality of the market and property and the amount of money that needs to be reinvested in the property. Given the variables, predicting what a lender will do is more art than science. There are situations where it just makes good sense for the borrower and the lender to terminate the relationship and let the borrower amicably hand the property over to the lender. As simple as that sounds, a few lenders still preferred not to step into the chain of title but to seek a receiver to manage the asset, keep the borrower in name only and sell the asset to a third party while simultaneously modifying the note. In this way, the note remains outstanding, and the lender has effectively offered seller financing to the buyer. We expect a greater velocity in troubled loan resolutions in the year ahead. Foreclosure and sale is a resolution, if often an unhappy one. However, both lenders and borrowers have come to realize that there is no quick fix to improving cash flow and value. Will lenders foreclose, just to sell into a depressed market? Why? Will they foreclose and hold the asset for a better day? Perhaps. Yet, even then value restoration over time cannot be guaranteed. n

Finding the best way to allocate losses will be the Gordian knot for the commercial mortgage industry in 2010.

Joseph Franzetti can be reached at 201.594.9100 or jfranzetti@cohenfinancial.com.

F E B R U AR Y 2 0 1 0

theregistrysf.com 29

Left: San Francisco Mayor Gavin Newsom

“Coast to Coast Deep Energy Retrofits” Luncheon Mayor Gavin Newsom, Empire State Building owner Tony Malkin and U.S. Green Building Council Founder David Gottfried spoke to a select group of industry executives on Friday, January 8th, 2010 at USGBC – Northern California Chapter headquarters. The lunch focused on the Empire State Building’s green retrofit and San Francisco’s energy-efficiency program for existing commercial buildings.

Above: Mayor Gavin Newsom speaks to luncheon attendees Left (l-r): David Gottfried, USGBC/World Green Building Council Founder, Regenerative Ventures; Tony Malkin, Malkin Holdings, and Dan Geiger, USGBC-NCC

Below: Mayor Gavin Newsom; Kevin Surace, Serious Materials, and David Gottfried, USGBC/World Green Building Council Founder, Regenerative Ventures

Right (l-r): Kevin Surace, Serious Materials; Dana Schneider, Jones Lang LaSalle, and Ian Sullivan, Serious Materials Left (l-r): David Gottfried, USGBC/World Green Building Council Founder, Regenerative Ventures; Paul Rode, Johnson Controls; Dana Schneider, Jones Lang LaSalle; Stephen Doig, Rocky Mountain Institute and Tony Malkin

Right (l-r): Phil Williams, Webcor Builders, and Dan Geiger, USGBC-NCC

30 theregistrysf.com

F E B R U AR Y 2 0 1 0

P hoto s by J oseph D a nnels | E y es Ahe a d P hotogr a ph y

Above: Empire State Building owner Tony Malkin, Malkin Holdings

10 Calendar

january february march april may june july august september october november december

CREW Silicon Valley will host a monthly program called An Insider’s Tour of HP Pavilion from 11:30 a.m.- 1:15 p.m. at HP Pavilion at San Jose, 525 West Santa Clara St., San Jose. Lunch will be provided. Members $50 and non-members $80. Register online at crewsv.org.

ULI San Francisco will host a brown bag lunch called CA Constitution Convention: Implications for Real Estate from 12 p.m.- 1:15 p.m. at Allen Matkins, Three Embarcadero Center, Ste. 1200, San Francisco. This event is free for members only. Visit ulisf.org for more information or to register online.

SPUR will host a lunchtime forum called Stop Circling the Block: How technology will change parking in SF 12:30 p.m. at 654 Mission St., San Francisco. This event is free for members and costs $5 for non-members. Feel free to bring your own lunch. Visit spur.org. for more info.

SPUR will host a lunchtime forum called Transit 2.0: A public and private perspective at 12:30 p.m. at 654 Mission St., San Francisco. This event is free for members and costs $5 for non-members. Feel free to bring your own lunch. Visit spur.org. for more info. SPUR will host an evening symposium called Closing the Climate Gap: perspectives on environmental justice and the Bay Area’s future at 6 p.m. at 654 Mission St., San Francisco. This event is free for SPUR and APA Northern California members and costs $5 for non-members. Visit spur.org. for more info.

USGBC Northern California Chapter will host a workshop called LEED Green Associate Exam Prep from 8:30 a.m.- 5 p.m. at XL Construction, 851 Buckeye Court, Milpitas. Contact info@usgbc-ncc.org for more information or register online at usgbc-ncc.org. BOMA San Francisco will host a BOMA 360 Performance Program - Membership Briefing from 11:30 a.m.- 12:30 p.m. at Pacific Gas & Energy Company’s Pacific Energy Center, 851 Howard St., San Francisco. This is a free event for members only. Register online at bomasf.org.

SPUR will host a lunchtime forum called Plans for a New Public Realm: Improving our Parks, Streets and Plazas at 12:30 p.m. at 654 Mission St., San Francisco. This event is free for members and costs $5 for non-members. Feel free to bring your own lunch. Visit spur.org. for more info.

IFMA Silicon Valley will host a roundtable luncheon called Marketing Facilities Management from 11:30 a.m.- 1 p.m. at Fenwick and West LLP, 801 California St., Mountain View. Members $20 and non-members $30. For questions contact Joy Dunn at 408.226.0190 or admin@ifmasv.org or to register visit ifmasv.org.

SPUR will host a lunchtime forum called Healthy San Francisco: The future of universal health care in San Francisco at 12:30 p.m. at 654 Mission St., San Francisco. This event is free for members and costs $5 for non-members. Feel free to bring your own lunch. Visit spur.org. for more info.

IFMA Silicon Valley will host a FMP Class called Business of FM from 8 a.m.- 5 p.m. at SAP, 3475 Deer Creek Rd., Bldg. 7, TNT Room, Palo Alto. Members $600 and non-members $800. For questions contact Joy Dunn at 408.226.0190 or admin@ifmasv.org; to register visit ifmasv.org.

BOMA Silicon Valley will host a membership luncheon and panel discussion from 11:30 a.m.- 1:30 p.m. at San Jose Holiday Inn, 1740 North First St., San Jose. Principal members and guests $30, associate members $50 and non-members $75. Visit boma-sv.org to register.

SPUR will host a lunchtime forum called Shanghai’s Fabric of Everyday Life: A conversation with UC Berkeley professor Renee Chow at 12:30 p.m. at 654 Mission St., San Francisco. This event is free for members and costs $5 for non-members. Feel free to bring your own lunch. Visit spur. org. for more info.

CoreNet Global Northern California Chapter will host a Sacramento-area meeting called Mobility and the Transformation of the Workplace from 11:30 a.m.- 1 p.m. at Hewlett Packard Campus, 8000 Foothills Blvd., Bldg R4, Roseville. Visit corenet-norcal.org to register. ULI East Bay will host a brown bag lunch called Improving Buildings through Retrocommissioning from 12 p.m.- 1:15 p.m. at David Brower Center, 2150 Allston Way, Berkeley. This event is free for members only. Visit ulisf.org for more information or to register online.

9 ULI San Francisco will host an event called Life After YLG: Staying Involved with ULI After Turning 35 from 5:30 p.m.6:30 p.m. at CBRE Offices, 101 California St., 44th floor, San Francisco. Visit ulisf.org for more information or to register online. CoreNet Global Northern California Chapter will host a Young Leader Speed Networking event from 5:30 p.m.- 8 p.m. at the Herman Miller Showroom, 1700 Montgomery St., Ste. 100, San Francisco. Visit corenet-norcal.org to register. USGBC Northern California Chapter will host a program called High Performance Buildings: Codes & Standards from 5:30 p.m.- 8 p.m. at Pipe Trades Training Center, 780 Commercial St., San Jose. Members $15 and non-members $30. Contact Judith Sayler at jasayler@sbcglobal.net for more information or register online at usgbc-ncc.org. SPUR will host a lunchtime forum called Our Better Nature: A conversation with author Philip J. Dreyfus in San Francisco at 12:30 p.m. at 654 Mission St., San Francisco. This event is free for members and costs $5 for non-members. Feel free to bring your own lunch. Visit spur.org. for more info. SPUR will host an evening forum called URBANbuild Local Global: An innovative model for rebuilding and good design in New Orleans at 6 p.m. at 654 Mission St., San Francisco. This event is free for members and $5 for non-members. Visit spur.org. for more info. SPUR will host a lunchtime forum called Connect and Extend: IDEO’s winning proposal for a green school in Hyderabad, India at 12:30 p.m. at 654 Mission St., San Francisco. This event is free for members and costs $5 for non-members. Feel free to bring your own lunch. Visit spur.org. for more info.

BOMA Oakland/East Bay will host a luncheon. Visit bomaoeb.org for more information. BOMA Young Professionals will host a Member Benefit Review from 11:45 a.m.- 1 p.m. at BOMA Conference Room, 233 Sansome St., 8th Floor, San Francisco. There is no charge for this event. Register online at bomasf.org.

16 ULI East Bay will host a brown bag lunch called Walnut Creek In-Fill Development Opportunities from 12 p.m.- 1:30 p.m. at Walnut Creek City Hall, 1666 N. Main St., Third Floor Conference Room, Walnut Creek. This event is free for members only. Visit ulisf.org for more information or to register online. SPUR will host a lunchtime forum called Neighborhood Retail Streets in SF: Planning a thriving mix of formula and independent retail at 12:30 p.m. at 654 Mission St., San Francisco. This event is free for members and costs $5 for non-members. Feel free to bring your own lunch. Visit spur. org. for more info. SPUR will host an evening symposium called The Federal Stimulus Plan, One Year Later at 6 p.m. at 654 Mission St., San Francisco. This event is free members and costs $5 for non-members. Visit spur.org. for more info.

17 SPUR will host a lunchtime forum called Shanghai’s past/ present/future: Historically-sensitive development in Shanghai at 12:30 p.m. at 654 Mission St., San Francisco. This event is free for members and costs $5 for non-members. Feel free to bring your own lunch. Visit spur.org. for more info. NAIOP San Francisco Bay Chapter will host a luncheon called The Role of the Federal Government in Commercial Real Estate in 2010 from 11:30 a.m.- 1:30 p.m. at Four Seasons Hotel, 757 Market St., Grand Ballroom, San Francisco. Visit naiopsfba.org for more information. USGBC Northern California Chapter will host an event called Living Homes: Sustainable New Concepts in Prefabricated Homes from 5:30 p.m.- 8 p.m. at USGBC-NCC/AIA SF Offices, 130 Sutter St., Ste. 600, San Francisco. Members $15 and non-members $30. Contact info@usgbc-ncc.org for more information or register online at usgbc-ncc.org.

ULI San Francisco with CoreNet Global Northern California Chapter will host an event called Trouble in the Real Estate Debt Markets from 3:30 p.m.- 6:30 p.m. at Oracle Conference Center, 350 Oracle Parkway, Redwood Shores. Cocktails will be served directly after the panel session. Visit ulisf.org for more information and to register online. CREW East Bay will host a luncheon called Navigating Your Future: Goal Setting to Maximize Your Potential. Visit eastbaycrew.org for more information. BOMA Silicon Valley will host a breakfast with San Jose Mayor Chuck Reed. Visit boma-sv.org for more info. CoreNet Global Northern California Chapter will host a chapter meeting with ULI starting at 3:30 p.m. at Oracle Conference Center, Redwood Shores. Visit corenet-norcal. org for more information.

20 CREW East Bay will host a special EBC event-CREW Careers. Visit eastbaycrew.org for more information.

22 SPUR will host an event called 2010 Good Government Awards starting at 5:30 p.m. at San Francisco City Hall, North Light Court. Visit spur.org/ggawards for more info.

23 SPUR will host a lunchtime forum called Building Green in China: A presentation by architect Jeff Heller 12:30 p.m. at 654 Mission St., San Francisco. This event is free for members and costs $5 for non-members. Feel free to bring your own lunch. For more information, visit spur.org. SPUR will host an evening symposium called Creating our own Champs-Élysées: SPUR Young Urbanists and Next American City take on Market Street at 6 p.m. at 654 Mission St., San Francisco. This event is free for SPUR members and Next American City subscribers and costs $15 advance/$20 at the door for non-members. RSVP to americancity.org/urbanexus/san-francisco.

24 CREW San Francisco with BOMA will host an event called Innovations & Solutions…How to Find Opportunities in 2010 at 12 p.m. at Hotel Nikko, San Francisco. Visit crewsf. org for more info. BOMA San Francisco will host a membership luncheon from 11:30 a.m.- 1:30 p.m. at The City Club, Main Dining Room, 155 Sansome St., 11th Floor, San Francisco. Members $55 and non-members $70. Register online at bomasf.org. IFMA Silicon Valley will host a monthly meeting called Facilities Frontier from 5 p.m.- 8 p.m. Members $0 and non-members $40. For questions contact Joy Dunn at 408.226.0190 or admin@ifmasv.org.

24-26 BOMA San Francisco will host an Environmental Health and Safety Issues course from 8 a.m.- 5 p.m. at 44 Montgomery St., Lower Level Conference Center, San Francisco. Members $1,010 and non-members $1,110. Register online at bomasf.org.

25 SPUR will host a walking tour of Mission Walk - San Francisco’s newest green affordable housing project at 12:30 p.m. This event is open to SPUR members only. RSVP to tours@spur.org. BOMA San Francisco will host the 4th Annual Texas Hold ’Em Poker Tournament from 5:30 p.m.- 9 p.m. For more information, contact Wendy de Lara at 415.362.2662 ext. 110 or wendyd@boma.com. USGBC Northern California Chapter will host a facility tour and panel discussion called Corporate Social Responsibility: The Heart of Safeway from 5:30 p.m.- 8 p.m. at Safeway Canyon Way Facility, 11555 Dublin Canyon Rd., Pleasanton. Contact info@usgbc-ncc.org for more info. or register online at usgbc-ncc.org. F E B R U AR Y 2 0 1 0

theregistrysf.com 31

activity

Reports commercial leases

City

Lease Sq. Ft.

Tenant/Rep/Brokerage

Landlord/Rep/Brokerage

Shurgard, 22300 Hathaway Ave

Hayward

76,962

American Polyfoam/Dick Hardwig (Mealey Campbell & Co.)

AMB Property L.P./Jeff Starkovich & Sam Higgins (NAI BT Commercial Oakland)

8455 Cabot Ct, 8455 Cabot Ct

Newark

65,920

Sanmina-SCI/Tom Snider (NAI BT Commercial San Jose)

Stephens & Stephens, LLC/Stephens & Stephens

Dal-Tile, 2303-2311 Merced St

San Leandro

57,862

Dal-Tile Distribution, Inc/Jay Hagglund (NAI BT Commercial Oakland)

Charter Properties/Jay Hagglund (NAI BT Commercial Oakland)

Renewal, Warehouse Lease Transaction, 62M Renewal, Industrial Lease Transaction, 24M Renewal, Warehouse Lease Transaction, 84M

Albrae Business Center, 40545-40577 Albrae St

Fremont

57,060

Everest Trading/Jeff Starkovich (NAI BT Commercial Oakland)

AMB Property Corporation/Joe Kelly & Rob Shannon (CB Richard Ellis San Jose)

Warehouse Lease Transaction

Hayward Gateway Center B, 3343-3377 Arden Rd, Bldg B

Hayward

54,205

Peking Handicraft/Jay Hagglund & Marshall Hydorn (NAI BT Commercial Oakland)

Invesco Real Estate, TX/Jay Hagglund & Jeff Starkovich (NAI BT Commercial Oakland)

Warehouse Lease Transaction

Alvarado Center, 2984-2998 Alvarado St

San Leandro

49,200

DHE/Jeff Starkovich & Sam Higgins (NAI BT Commercial Oakland)

AMB Property Corporation/Jeff Starkovich & Tom Damaschino (NAI BT Commercial Oakland)

Warehouse Lease Transaction, 59M

4160 Dublin Blvd

Dublin

37,549

Perquest Inc/Brian Lagomarsino & Ted Helgans (Colliers International Pleasanton)

Tishman Speyer/Brian Lagomarsino & Ted Helgans (Colliers International Pleasanton)

Class A Office

Alvarado Business Center, San Leandro 3004 Alvarado St

34,945

UPS Supply Chain Logistics/John Weatherby (Cornish & Carey Commercial)

AMB Property Corporation/Jeff Starkovich/Tom Damaschino Warehouse Lease (NAI BT Commercial Oakland) Transaction, 38M

1956 Sabre St

Hayward

30,421

Spectrum Bags, Inc/Lee & Associates Oakland

Distribution 1 Patent Tenant, LLC/Greig Lagomarsino, SIOR & Joe Yamin (Colliers International Oakland)

New Lease, 66M

Hayward Industrial Park, 23783-23787 Eichler St, Bldg 3

Hayward

25,233

Mercantile Freight/Ted Anderson (Cushman & Wakefield Oakland)

UBS Realty Investors/Jay Hagglund (NAI BT Commercial Oakland)

Renewal, Warehouse Lease Transaction, 60M

31153-31159 San Benito St

Hayward

23,642

National Upholstery/Lee & Associates Oakland

Lowenberg Corporation/Greig Lagomarsino, SIOR, Mark Maguire & Kevin Hatcher (Colliers International Oakland)

New Lease, 64M

21130 Cabot Blvd

Hayward

15,460

Fleetpride, Inc

Cabot Partners/Greig Lagomarsino, SIOR, Mark Maguire & Kevin Hatcher (Colliers International Oakland)

New Lease, 54M

1300 Clay St

Oakland

14,996

Ben C. Gerwick, Inc/Scott Greenwood & Trent Holsman (Colliers International Oakland)

The Shorenstein Co.

New Lease, 120M

5959 W Las Positas Blvd

Pleasanton

14,990

iTradeNetwork/Brian Lagomarsino (Colliers International Pleasanton)

Automatic Data Processing Inc/Cushman & Wakefield Walnut Creek

Class B Office, Sublease

6210 Stoneridge Mall Rd

Pleasanton

14,954

Pen-Cal Administrators/Ted Helgans (Colliers International Pleasanton)

6200 Stoneridge Mall Road Investors LLC/Ted Helgans & Brian Lagomarsino (Colliers International Pleasanton)

Class A Office

23674 Foley, 23674 Foley St

Hayward

14,062

Bay Area Aftermarket, Inc/Chris Van Keulen (NAI BT Commercial Oakland)

Lee's Imports/Sam Higgins (NAI BT Commercial Oakland)

Industrial Lease Transaction, 36M

30450 Whipple Rd

Union City

13,437

Parts Now!/CB Richard Ellis Pleasanton

RREEF/Mark Maguire (Colliers International Oakland) & Jeff Starkovich (NAI BT Commercial)

New Lease, 40M

12,131

Taleo Corp/Brian McCorduck (Cushman & Wakefield San Francisco)

Tishman Speyer/Chris Crabtree & Derek Daniels (NAI BT Commercial Pleasanton)

Office Lease Transaction, 30M

Honest Reliable Trading/Drew Fischer (Lee & Associates Oakland)

UBS Realty Investors/Jay Hagglund & Joe Fabian (NAI BT Commercial Oakland)

Warehouse Lease Transaction, 12M

AFS Trinity Power Corporation/ NAI BT Commercial Pleasanton

HARSCH Investment Properties LLC/Mike Carrigg (Colliers International Pleasanton)

Light Industrial, Renewal & Expansion

Address

Notes

Alameda County

Dublin Corporate Center 2, Dublin 4140 Dublin Blvd Hayward Industrial Park, 23663-23669 Eichler St, Bldg 5

Hayward

12,000

6724 Preston Ave

Livermore

11,616

10 Hegenberger Pl

Oakland

10,500

88 Truck Mart/Brennan Carpenter (Colliers International Oakland)

Rodgers Family Trust/GVA Kidder Mathews

New Lease, 36M

38505 Cherry St

Newark

10,260

VM Display/CB Richard Ellis Oakland

Dividend Capital Trust/Joe Yamin & Greig Lagomarsino, SIOR (Colliers International Oakland)

New Lease, 120M

825 Potter St

Berkeley

10,100

Alegro Classics/Main Street Property Services, Inc Phil Wood/Aileen Dolby (Colliers International Oakland)

6001 Shellmound St

Emeryville

9,100

Random House

TMG Partners/Aileen Dolby, Ken Meyersieck & Elena Cohen (Colliers International Oakland)

New Lease, 66M

3684 Enterprise Ave

Hayward

9,080

Green Morning Inc/Lee & Associates Oakland

Parker One, LLC/SB Hayward LLC/Kevin Hatcher, Greig Lagomarsino, SIOR & Mark Maguire (Colliers International Oakland)

New Lease, 64M

832 11th St, E., 832 11th St, E.

Oakland

9,000

EJS Construction/Brian Collins & Gary Fracchia (NAI BT Commercial Oakland)

Richard Cochran/Brian Collins & Gary Fracchia (NAI BT Commercial Oakland)

Industrial Lease Transaction, 36M

29067 Viking St

Hayward

8,000

Moffett Towers/Mark Maguire (Colliers International Oakland)

RREEF/NAI BT Commercial

New Lease, 12M

1679 Atlantic Ct

Union City

6,281

Unistrut Corporation/CB Richard Ellis Oakland

Young's Holdings Inc/Rick Keely & Greig Lagomarsino, SIOR (Colliers International Oakland)

New Lease, 36M

6748 Preston Ave

Livermore

5,808

Reddy Ice/Mike Carrigg (Colliers International Pleasanton)

HARSCH Investment Properties LLC/Mike Carrigg (Colliers International Pleasanton)

Light Industrial, As-Is

1 Kaiser Plaza

Oakland

5,461

AIS/Jones Lang LaSalle

CIM Group/Trent Holsman, Ken Meyersieck & Scott Greenwood (Colliers International Oakland)

New Lease, 60M

2150 Shattuck Ave

Berkeley

5,279

MPR Associates

Beacon Ventures Group/Aileen Dolby (Colliers International Oakland)

New Lease, 60M

New Lease, 36M

Contra Costa County Commons Office Park, 2270-2278 Camino Ramon San Ramon

29,256

Bella Dance@/Michael Copeland (NAI BT Commercial Pleasanton)

James & Margaret Gresham/Marcy Place (Cornish & Carey Pleasanton)

Office Lease Transaction, 24M

Norris Tech Center, 4450- San Ramon 4500 Norris Canyon Rd

21,755

Thoratec Corporation/Sam Chun (NAI BT Commercial Pleasanton)

VIF/ZKS Norris Tech, LLC/Marshall Snover (Colliers International Pleasanton)

Office Lease Transaction, 72M

32 theregistrysf.com

F E B R U AR Y 2 0 1 0

commercial Leases Address

City

Lease Sq. Ft.

Tenant/Rep/Brokerage

Landlord/Rep/Brokerage

San Rafael

10,146

Golf Mart Inc/RenĂŠ Brochier (Colliers International Pleasanton)

Thomasville Retail Inc/Pacific Union

Retail, Sublease, As-Is

San Francisco

33,291

Carat USA, Inc/Mike Brown (Newmark Knight Frank)

TMG Partners/Mike McCarthy, Mike Monroe, SOMA Team (Colliers International San Francisco)

N/A N/A

Notes

Marin County 530 W Francisco Blvd San Francisco County 875 Howard St 685 Market St

San Francisco

16,959

Prudential/Scott Harper & Shane Quivey Practicing Law Institute/John Abel (Axiant Group) (Colliers International San Francisco)

22 4th St

San Francisco

14,673

DemandForce/Carter Kennedy SOMA Team (Colliers International San Francisco)

Macy's West Stores, Inc./Chris Holland (Jones Lang LaSalle)

Sublease

Prudential/Scott Harper & Shane Quivey (Colliers International San Francisco)

N/A

685 Market St

San Francisco

13,412

Ventana Health Services, Inc/Bill Benton & Colin Luce (Newmark Knight Frank)

735 Market St

San Francisco

7,200

Atomic Public Relations/Marty Melbardis (Colliers International San Francisco)

Millenium Partners/Matt Griffin (Cushman & Wakefield)

N/A

228-230 Shaw, 228-230 Shaw Rd

S San Francisco

36,559

Gimbal's Fine Candies/Marshall Hydorn (NAI BT Commercial Burlingame)

Shaw Road Partners, LLC/Marshall Hydorn (NAI BT Commercial Burlingame)

Renewal, Warehouse Lease Transaction, 60M

230 Shaw Rd, 230 Shaw Rd

S San Francisco

18,500

EASCO/Jason Cranston (NAI BT Commercial Burlingame)

Honig Properties/Marshall Hydorn (NAI BT Commercial Burlingame)

Warehouse Lease Transaction, 37M

1050-1098 Hamilton Ct

Menlo Park

45,600

Rennovia, Inc/Sherry Gubera (Cornish & Carey Commercial)

AMB Property

R&D

696 Trimble, 696 Trimble Rd, E.

San Jose

36,776

Berger Manufacturing/Drew Arvay (NAI BT Commercial San Jose)

F.E. Trimble/Mark Zamudio & Steve Zamudio (Colliers International San Jose)

Renewal, Industrial Lease Transaction, 60M

4055 Campbell Ave

Menlo Park

27,391

Iscience Surgical/Ben Stern & Phil Mahoney (Cornish & Carey Commercial)

4045 Campbell, L.P.

R&D

3979 Freedom Cir

Santa Clara

24,907

Verint Americas

SRI Mission Towers II, LLC/Phil Mahoney & Randy Gabrielson (Cornish & Carey Commercial)

Office Office

San Mateo County

Santa Clara County

1091 North Shoreline Blvd

Mountain View

22,128

The Fanfare Group/Wayne Kumagai, Randy Scott JW Equities/Wayne Kumagai, Randy Scott & Ben Stern & Ben Stern (Cornish & Carey Commercial) (Cornish & Carey Commercial)

2975 San Ysidro Wy

Santa Clara

22,000

Ambarella/Ben Stern & Phil Mahoney (Cornish & Carey Commercial)

Renault & Handley PA

R&D

MP Partnership/Keith Claxton & Nick Lazzarini (NAI BT Commercial San Jose)

Industrial Lease Transaction, 38.5M Renewal, R&D Lease Transaction, 47M Renewal, Office Lease Transaction, 26M

90 Karina, 90 Karina Ct

San Jose

20,613

Unitrace, Inc/Keith Poe (Cornish & Carey Commercial Santa Clara)

BUBB ROAD, 10131 Bubb Rd

Cupertino

18,000

Apple, Inc/Mike Connor (NAI BT Commercial Palo Alto)

Elisabeth E. Griffinger/Ron Himes & Mike Courson (NAI BT Commercial, Palo Alto)

Mountain View Courtyards, 1200-1390 Villa St

Mountain View

12,628

BroadOn Communications Corp/Wayne Kumagai (Cornish & Carey Commercial Palo Alto)

Metzler Realty Advisors Inc/David Hiebert & Boyd Smith (NAI BT Commercial Palo Alto)

Santa Rosa

35,626

Amy's Kitchen, Inc/Michael Flitner (Keegan & Coppin Co, Inc)

Zynobia, LLC/Jennifer Turner (Simons & Woodard)

Sonoma County 975 Corporate Center Pkwy

Renewal; Suites 100, 110, 140A&B, 170; NNN Lease

commercial sales Address

City

Property Size

Buyer

Seller

Price

Product Type

Brokers

Pleasanton

354 units

Springhouse Investors LLC Curtis Gardner

Principal Life Insurance Company

$51,000,000

Multi Family

Apartment Realty Advisors San Francisco Office

Mountain View 63 units

Baywest Realty Capital

Jack Tersi

$6,420,935

Multi Family

Deed in Lieu Transaction

San Francisco

Shree Jalaram Lodging

Prana Associates Twenty One $4,400,000

Retail

N/A

$3,850,000

Retail/ Office

N/A

Alameda County 5505 Springhouse Dr Santa Clara County 291 Evandale Ave San Francisco County 1133-1139 Market St

27,225 sf

101 Cyril Magnin

San Francisco

12,475 sf

Shins Investments LLC

Cyril Magnin LLC, Mohammad Sheikh

1007-1017 Valencia St

San Francisco

9,560 sf

Jie Chen

Nuccitelli Family Trust

$3,150,000

Retail

Brad Lagomarsino & James Devincenti (Marcus and Millichap)

680-686 Valencia St

San Francisco

8,478 sf

Rasmi Zeidan

Nissim Lanyadoo

$3,499,000

Retail

Clinton Textor (Marcus and Millichap)

3400 Cesar Chavez (Walgreens)

San Francisco

0.69 acres

Betty A Polse

Seven Hills Properties

$11,000,000 (reported)

Retail

N/A

Santa Rosa

13,140 sf

Mendocino Avenue LLC Gilbert Robello

Clement Carinalli

$2,700,000

Office

N/A

Sonoma County 2425 Mendocino Ave

For-Sale Transaction Data provided by:

Public Figures 5000

2,245

Residential

4000

4,561

3,5210

2,506 2005

1,706 2006

960

3000

1,132

1,484

3,329

1,373

in millions

27%

2008

2005

in millions

621

708

Residential

$1,250

1,337

1,204

922

Public Works

$1,000

460

300

325

30%

Healthcare

Educational

499

Healthcare

43%

287

633

Other institutional

906

253

$500

Other Institutional

10%

F E B R U AR Y 2 0 1 0

Other institutional

Healthcare

Educational

Healthcare

34 theregistrysf.com

43%

Other Public Works

Highways and Bridges

in millions

25% 2008

$1,000

25%

Other Public Works

Highways and Bridges

Other Institutional

2007 Healthcare 2008 10%

2006

2009 Environmental Public Works

Educational

Healthcare

Other Public Works

Educational

2008

in millions

Other Public Works

2009

25%

(preliminary)

Educational

65%

43%

$1,500 Educational 65% $1,250

Other institutional

Educational

Healthcare

Environmental Public Works

Other institutional

Educational

Other institutional

Educational

30%

2007

2006

Highways and Bridges

39%

Environmental Public Works

36%

Environmental Public Works

Other Public Works

36%

Highways and Bridges

24%

47%

Environmental Public Works

29%

$750

$250 $0

Other Public Works 2006

2005

25%

Educationaln Commercial/ Manufacturing

65%

2007 Highways and Bridges

n Institutional 39%

Environmental Public Works

36%

Other Public Works 2009

2008

24%

n Residential

2007

Highways and Bridge

39%

2009

$500

25% 85

Healthcare72 Other Public Works Healthcare

Educational 2006

2005

Healthcare

138 Other Highways and Bridges Other InstitutionalEnvironmental Institutional Educational 2005 62 27% 2006 2007 2008 2009 159

Other Institutional

25%

412

Public30% Works

2006

Other Construction Starts Public Works

296

Other institutional

Healthcare

$250

2005

2005 27%

Other Institutional

Public Works Breakdown (2009)

Educational

Healthcare

$750

Institutional Breakdown (2009)

2005

n Public Works

Highways and Bridges

47%

Environmental Public Works Other Public Works

753

Other

27%

n Residential

Other Public Works

2009 2009

Highways and Bridges

2009

Highways and Bridges

$1,500

Institutional

2008 2008

2007

$750

Highways and Bridges

704 Institutional401Educational 222

Other institutional

698 Educational

379 Healthcare

2006 2006

Commercial & Manufacturing

2007 2007

Prelim.

2005 2005

$0 $250

2009

65%

2006

$1,500 (preliminary) 36%

(preliminary) $0

Environmental Public Works

2008

n Institutional

Environmental Public Works

Healthcare

Other institutional

2007

$1,000 $2,000 $750 $1,000 $500

Educational

$250

2008

Environmental Public Works

2006

2007

Other Public Works

2005

$1,250 $3,000

in millions

0 $250

Educational

Healthcare

$1,000 2000 San Jose-Sunnyvale-Santa Clara $750 1000

$1,500 $4,000 2009

2008

$1,250 3000

$500 Includes: San Benito, Santa Clara

2007

$250 Healthcare

2007

Other institutional

2006

in millions in millions

2005

Educational

2008

Other institutional

$5,000

$250

4000 $1,500

2007

$500

5000

2006

$1,000

2006 $750 Commercial/ Manufacturing

382

2008

$500

Other Public Works

2005

2007

Environmental Public 2009 Works

$1,250

2009

39%

65%

$1,500

Highways and Bridges

$750

$1,000

2005 Other Public Works

25%

2006

$750

$250

10%

$1,000

$250

2009

2005

$1,000

$500

Healthcare

Educational

10%

Highways and Bridges

550

2008

Healthcare

Other institutional

Public Works

Healthcare 2009 43%

$1,000 $2,000

$500

2006Environmental 2007 2008

$1,250

25%

$1,000

$1,250

588

30%

2008 $1,500

Other Institutional

$2,000 Educational

25%

$1,000

Healthcare $4,000 2009 43%

$3,000

Highways and Bridges

$1,000

617

$1,500

$750

$1,250

2007

30%

$5,000

Public Works Breakdown (2009)

$1,500

Other Institutional

Other Construction Starts Institutional $2,000 Educational

2000

Other Institutional

Healthcare

Other2005 Institutional

1,520

2006

$4,000

27%

$3,000 2006

Environmental Public Works

2007

Other Public Works

2,011

957

2005

2009

Highways and Bridges

1,748

2005

Environmental Public Works

958

1,938 1000

2009

in millions

1,121

in millions

1,198

671

Other institutional

$4,000

in millions

1,385 2000

1,637

Healthcare

1000 0

5000

Educational

2008

$2,000

$1,000

in millions

2009

$5,000

Environmental Public Works

2008

Educational

Healthcare

Prelim.

966

1000

2007

2000

3000

Institutional Breakdown (2009)

$5,000

3000

Institutional Public Works

2006

4000

5000

Commercial & Manufacturing

$3,000

5000

Includes: Alameda, Contra Costa, Marin, San Francisco, San Mateo

2007

3000

Healthcare

2005

San Francisco-Oakland-Fremont

2006

$4,000

said Mike Lucki, global leader of Ernst & Young’s Construction, Engineering $4,000 1000 and Infrastructure practices. $3,000 Michael Lehmann, a professor0 emeritus in economics at2007 the University 2005 2006 2008 of San Francisco, says government spending on public works and societal $2,000 improvements, such as better schools and community colleges, does $1,000 stimulate the economy, but not all public spending is created equal. “The $0 classic criticism is that you hire people to rake leaves, and there is no 2005 2006 2007 2008 2009 2005 2006 permanent improvement,” he $1,500 says. Public projects should be evaluated from a cost-benefit perspective. Spending on upgrades such as that now $1,250 being undertaken by the San$1,000 Francisco Public Utilities Commission on the Hetch Hetchy water system$750 seem intrinsically good, he notes. “We all $1,500infrastructure.” Other know the threats from earthquakes and crumbling $500 $1,250 public undertakings are less obviously ideal. For instance, even as the city $250 of San Jose invests $1.3 billion to upgrade its dated airport, passenger $1,000 traffic has fallen from 14 million$0 in fiscal 20012006 to than 2008 eight 2005 2007 $750just more million in fiscal 2009. The decline led Fitch Ratings to downgrade airport $500 debt in September. Less than a month later, Fitch upgraded the debt of $250 San Francisco’s International Airport, which is also undergoing facelift. n

2005

$5,000

4000

2000

When the economy stumbles, businesses including building 4000 contractors often turn to the public sector for help. Public works such as roads and bridges and institutional construction like schools 3000 are viewed, often rightly, as stable if perhaps less flashy sources of work 2000 that produce short-term economic growth and render longer-term 1000 community gains. A recent Ernst & Young survey of chief financial 0 officers for some of the largest construction and engineering contractors found that in the year ahead, most expect diminishing opportunity in the commercial real estate sphere. But, transportation construction, health care and education, power and renewable energy work, and water, sewer, waste and environmental/hazardous waste construction $1,500 all were seen as pockets of hope. A little more than half of those surveyed reported that they have already been awarded contracts $1,250 funded by government stimulus money from the American Recovery$1,000 and Reinvestment Act. “Clearly, the construction and engineering sector is $750 in for another challenging year in 2010 with many companies that might $500 not typically pursue government contracts expecting to supplement their $250 declining commercial book of contracts with federal and state work,”

4000

5000

in millions

Numbers

Highways and Bridges

by the

29%

Source: McGraw-Hill Construction

Hospitals

continued from page 21

photo by C h a d Z i emendorf

about what will happen when, or if, Congress gets done with any new health care overhaul. Sources say they have not heard of any component in the new legislation that would help to fund construction. They also worry that any changes will mean less revenue per patient. Combined with the recession, health care organizations already have become more conservative in their planning. “Many of these hospitals do have more difficulty getting construction loans and selling bonds,” Saunders said. “If they have to sell bonds, they may not get as favorable [interest] rates. All those financing issues are definitely out there.” A hospital easily can take six years to design and build, noted Rob Matthew, a director at KMD Architects in San Francisco. “The institutions are not pushing as hard because they aren’t sure where it will be best for them to make their investments, and the financial institutions aren’t sure where the cash flow will come from,” Matthew said. Nine health care systems, with about one-third of the state’s hospital beds among them, already have asked the state to once more extend the mandated seismic-upgrades deadlines, citing financial woes. “In the end I guess you could say they are playing chicken with the legislation,” HOK’s Roger said. But even if hospitals get their wish for a little more time, that only spreads out the construction and related architectural and design work, rather than creating new projects, Scheuerman noted. n Construction on San Francisco General Hospital began last October and is scheduled for completion in 2015.

Sent to us

continued from page 4

tors in the region. Outlying markets in the region such as Tracy and the Central Valley will likely continue to struggle with high vacancy rates until demand begins to outpace supply near the coast.

Home Foreclosure Activity Wanes Foreclosure activity dropped dramatically in December, according to ForeclosureRadar.com, a Discovery Bay-based research firm. Notice of default filings, the first step in the foreclosure process, dropped 32.5 percent on a daily average basis month over month, and notice of trustee sale filings dropped 32.5 percent. The declines were not a seasonal aberration, based on previous Decembers’ activity. Meanwhile, foreclosed properties that went back to the bank declined 28 percent. Homes sold to third parties fell 41.8 percent. The dramatic drop in third-party sales appears to follow a significant decline in foreclosure discounting by lenders, rather than investors taking time off to celebrate a very profitable year at the auctions. For most of the last year, lenders discounted the opening bid at foreclosure auctions from the amount they were owed by nearly 40 percent. Last month that discount dropped to 33.7 percent. Foreclosure activity in the Bay Area continued to lag other state hot-spots including Los Angeles, San Diego, Riverside and San Bernardino counties, the researcher shows. For instance, in San Francisco only 168 notices of default were filed in December, down from 212 in November. n

PEOPLE on the move

continued from page 5

Residential Brokerage Looks to Drum Up Business Jason Miller has re-joined residential brokerage Pacific Union International Inc. as director of business development. He will work from the firm’s San Francisco Presidio office, calling on large, local, regional and international corporations to expand Pacific Union’s relocation business. Pacific Union has offices in Alameda, Contra Costa, Marin, Napa, San Francisco and Sonoma counties. The company operates Pacific Union Real Estate and Morgan Lane and has an exclusive relationship with Christie’s Great Estates in the San Francisco Bay Area. It is locally owned and operated.

Law Firm Elevates Three Ethan Friedman has been promoted to shareholder and Serena Patitucci Torvik and Stephen Velyvis promoted to senior counsel at Walnut Creek-based Miller Starr Regalia. Friedman specializes in eminent domain and inverse condemnation as well as land use and development. He represents private property owners and public agencies in all aspects of land disposition and acquisition, land planning and public project law. Patitucci Torvik represents clients in residential and commercial real estate disputes with a special emphasis in purchase-and-sale transactions, quiet title and easement, construction, mechanic’s liens, contracts, disclosures, agent/broker liability and leases. Velyvis specializes in land use and environmental law, with increasing focus on renewable energy, sustainable development and climate change. His expertise extends to the California Environmental Quality Act, the National Environmental Policy Act and the California Coastal Act, as well as state and federal legal and regulatory frameworks governing clean water, clean air, endangered species and electricity generation and transmission.

Project Director Joins FME Architecture + Design FME Architecture + Design has hired of Kristen Cramer as project director in the firm’s interiors department. Prior to joining FME, Cramer worked as an intermediate interior designer at MSA Planning & Design Consultants in San Francisco. n

F E B R U AR Y 2 0 1 0

theregistrysf.com 35

FinalOffeR Grand Plan

Russell Hancock

By Sharon Simonson

El Camino Real, The Royal Highway, traces 43 miles from Daly City to central San Jose. There is perhaps not a thoroughfare in the country with a less apt name. Anyone who has traveled El Camino knows it epitomizes much that is dreadful about mid20th century American development: Vast expanses of suburban parking surround low-rise, often charmless buildings, mile after mile. But to borrow the advertising tagline of one of Silicon Valley’s best-known corporate residents: There is an app for that. It is the Grand Boulevard Initiative, a collaboration of nearly two dozen Peninsula and Santa Clara County cities, five regional and state transportation agencies, commercial interests, Santa Clara and San Mateo counties, and housing, bicycle and open-space advocates. Formed three years ago by Joint Venture: Silicon Valley Network and the San Mateo County Transit District, the Grand Boulevard Task Force is co-chaired by Russell Hancock, president and chief executive of Joint Venture. Created by the colonizing Spaniards, El Camino Real connected the Franciscan missions that began to dot California beginning in the late 1770s. The Grand Boulevard effort aims to transform the roadway and a quarter mile buffer on either side. Talk includes futurist transportation, increased development density, more housing, fewer cars, more bike and walkways—in short, the replacement of a shameful comedown of what should be a regal symbol of the region’s rich history with a showcase of its best impulses. Why are you involved in this effort? RH Joint Venture: Silicon Valley Network cares about the region— that’s why we exist. We want Silicon Valley to be a vital and highly functional place, a dynamic place, the kind of place you want to grow a family and start a business. All of our work is aimed at that. So in that context, we come upon El Camino Real, our region’s Main Street. Are we proud of it? Well, frankly, no. Let’s face it: it’s ugly. No one thinks of it as an asset. It’s a throwback to another time, an anachronism. So we asked ourselves, ‘Can’t this road be an asset? Can we make it something we can be proud of?’ People have an image that Silicon Valley is a gleaming, glittering place, but sadly it’s not. It’s really a bunch of low-slung warehouses with dilapidated infrastructure, and El Camino sort of epitomizes that. We’d like to fix it up. Are there areas on El Camino that reflect what you would like El Camino to become? RH The area north of Stanford Shopping Center in Menlo Park’s downtown is one example, among others. That city has done some nice things. There is pleasing architectural design. There is space and scale. People are happy to go to the area and don’t mind sitting outside, even though they are right on El Camino. The road still has plenty of through-put. There is integrated retail and housing and some density. There are nicely adjacent transit options in downtown Menlo Park. What have been the greatest achievements so far? RH First, just getting everybody into the same room is an achievement. It makes cooperation and collaboration possible. The cooperation is critical. Until now, there was no forum where city people and transit providers and the relevant agencies were all talking together, and as a result you got some pretty quirky outcomes—like cities making bulb-out in the sidewalks for bus stops without coordinating the size of those bulb-outs with the bus providers. Another quirky thing: VTA (Valley Transit Authority) and SamTrans buses can’t go into each other’s counties, which is ridiculous. So you have to get off at the San Francisquito Creek (because that’s the county line) and walk over to the Stanford Shopping Center and get onto SamTrans to continue your journey northward. Really, we need to run buses the length of the corridor, which means we need joint power agreements, revenue sharing and other arrangements that have to be hammered out. So finally, for the first time in our history, we have a framework in place to deal with all of this on a regional scale. That’s one achievement. The second achievement was getting everybody to agree on an overarching set of guiding principles. It’s harder than it looks. Remember, we have all of these people with fierce opinions, advocates for their

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city or interest, and somehow we have forged agreement on a set of guiding principles, stipulating what we want to see on El Camino Real. And we have taken the principles to each of the 19 member cities and the councils have adopted them. Now, it’s not binding, of course, because each city keeps its land-use powers. But it is encouraging that they have said—in good faith—that they will weigh all future development against these principles: set-backs, density, transit integration, pedestrian amenities, fresh approaches to the problem of parking. We are giving awards to the developments that we think epitomize the vision. We are in the process of taking nominations for the 2010 awards now. There were 10 nominations submitted this year. Only cities and counties can submit projects. The third achievement is that we have been able to bring in quite a few resources. We attained a $3 million federal earmark to spend on streetscape improvements and capital projects for El Camino Real in San Mateo County. We also have been able to raise money for some crucially important studies. We have a multimodal, transit-corridor study that we are doing with top transportation experts. They are looking at bus rapid transit, signalization, express buses and the integration with Caltrain and BART. It’s a $300,000 study financed by Caltrans (California Department of Transportation) and being executed by VTA, SamTrans and the San Mateo City/County Association of Governments. We also have another study looking at housing potential on the strip and how it can be integrated with retail and transit. That’s a $200,000 study financed mostly by the San Mateo City/ County Association of Governments and the Silicon Valley Community Foundation. What is in your way? RH Let me give you a list. One difficulty is local control. Cities are of course very concerned about their land-use authority. They always have veto power, and they will exercise it, and yet we are promoting a regional vision here. So our best approach is to bring cities’ resources and incentives to do things that are harder and take more vision. Cities are also listening to strong voices out there that don’t like density, and that is going to have to be overcome. Another obstacle in our way is the current recession, which means that funding for these projects and opportunities is difficult to obtain. Finally, the biggest thing we have to overcome is ourselves. Somehow we have settled for less in this country. People need to understand that the American landscape doesn’t have to be this way. I go to Europe as often as I can. It is my favorite destination. I love the built environment there. They know how to build grand boulevards. Then I come home, and it’s just so ugly! So what’s going on here? Why can they do it and we can’t? It’s us. We’re the ones to blame. n

City of Hope’s Northern California Real Estate and Construction Business Alliance Presents The

AWARD DINNER

honoring

H A M I D M O G H A DA M AMB P ROPERTY C ORPORATION

T HURSDAY E VENING , M AY 30, 2010 T HE P ALACE H OTEL , S AN F RANCISCO For registration information and event details visit www.cityofhope.org/rec/spiritoflife or call (800) 732-7140 Media Sponsor

THE

Registry