The Registry March 2010 Issue by The Registry

THE

Registry BAY AREA real estate JOURNAL

FutureTech cleanTech Future Tech: The Impact on Industry and Beyond California Green: Delayed Development pg. 14

Mighty Mites pg. 18

Better Bricks and Mortar pg. 20

Good Measure Tracking Energy to Save pg. 8

Hot Lot: At Sea in Redwood City Remaking A Gritty Shoreline pg. 10

Taxing Forgiven Debt IRS Doesn’t Forgive Even If Banks Do pg. 12

Up Your Alley San Francisco Captures Lost Real Estate With Mood pg. 22

By the Numbers: Rising Tide Commercial Defaults May Force Bankers to Sell pg. 30

Final Offer with Hamid Moghadam Looking Up With Industry pg. 32

march 2010

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

FutureTech cleanTech pg. 14

Contents march 2010

6 News Desk A summary of recent planning events from select cities, news about the industry and people on the move

8 Commercial Market Report

22 Development

Up Your Alley

24 Rob’s REality

Should I Stay or Should I Go?

The Voltage Count Down

26 Commercial Lease Report

10 Hot Lot | Redwood City

27 Commercial Sales Report

Embracing the Bay

12 Residential Market Report Double Whammy

28 Calendar of Events 30 By the Numbers

14 Feature Package:

Future Tech & Clean Tech • The Clean-Tech Push Back • Buying Time • Big is Very, Very Small • Regulators Ride In • Green Inside & Out

Delinquency Rises Across the Board

32 Final Offer | Hamid Moghadam

High Hopes

THE

Registry

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

Editorial Boards 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.

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.

NORTH

Publisher Vladimir Bosanac vb@theregistrysf.com President Heather Bosanac 415.738.6434 heather@theregistrysf.com

Stephen Austin, RPA Regional Property Manager Boston Properties

Marc Cunningham

Bruce Dorfman

President All West

Principal Thompson | Dorfman Partners, LLC

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

Jesshill E. Love III Partner Ropers, Majeski, Kohn & Bentley

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, Broderick Perkins, John Sailors, Jessica Saunders, Sharon Simonson, Sasha Vasilyuk Contributor Rob La Eace

Daniel Myers

Jeanne Myerson

Anton Qiu

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

President & Chief Executive Officer The Swig Company

Principal TRI Commercial

Jennifer Dizon, CPA Audit & Advisory Partner Hood & Strong, LLP

Phil Williams, P.E., LEED AP

Paul Zeger

Vice President Webcor Builders

Principal, President & CEO Pacific Marketing Associates

Erik W. Doyle

Geoffrey C. Etnire

Michael W. Field

President Cornish & Carey Commercial

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

Director, Commercial Real Estate The Sobrato Organization

SOUTH

Advertising 415.738.6434 Printer Bay Area Graphics www.bayareagraphics.com News news@theregistrysf.com

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

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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Norman C. Hulberg, MAI President Hulberg & Associates, Inc.

Robert Kraiss, CFM

Jody Quinton

Patricia Sausedo

Jeffrey A. Weidell

Director of Corporate Facilities & Real Estate Adaptec, Inc.

Regional Manager DPR Construction, Inc.

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

Executive Vice President NorthMarq Capital

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Letter from the Publisher

Dear Reader, This month’s feature package is probably the most forward-looking one that we have done yet at The Registry. As our real estate industry struggles to right itself, we are looking ahead attempting to find the threads of our region’s economic future and to give our readers a glimpse into where tomorrow’s jobs may materialize. As we all know, technology is an important industrial engine of the Bay Area, driving commercial and scientific innovation, the flow of investor money, job creation and, by extension, the real estate industry. In the Bay Area, the health of the various technology sectors from information technology to biotechnology is a very important marker of the region’s overall economic health. On page 18, in the story titled “Big is Very, Very Small,” we consider one aspect of the tech industry that is quietly making the Bay Area a global leader in its development. Nanotechnology companies are sprouting all over the Bay Area, and our three biggest cities, San Jose, San Francisco and Oakland, rank in the top six nano metros nationally. As the story reports, nanotechnology’s applications are amazing, and the industry is truly transformative, yet nanotech often flies under the business radar because the technology is nearly always integrated into other products, obscuring perhaps its true impact. In addition, many companies are very lean, with production sites outside of the Bay Area and even on other continents. Still, there is no question that having a viable and growing nanotech sector in our region can only be for the good, visible or not. The news may be less happy for the Bay Area economy in the political arena. Unfortunately, what was conceived as a way to help our environment and promulgate progressive thought and action has become a battleground of political ideologies. AB32, the California Global Warming Solutions Act, was passed in 2006 and, if it survives, will become effective in 2012. The good old days of 2006 seem a lifetime (certainly a lifestyle) away. For that matter, what the world will be like two years from now really no one could tell. On page 14, we look at the efforts of a California assemblyman and his political allies to push back the implementation of AB32. Their success or failure has potentially large

implications for the Bay Area. Our region, especially Silicon Valley, has fast become a center for the development of new clean tech/green tech products and services. Any loss in momentum behind these emerging technologies would not be helpful for us. I for one am not certain what to make of the competing perspectives, especially as both sides seem to justify their positions by promising their approach will achieve the same goal—jobs. Finally, there is the notion of intended foreclosure: intended by the borrower, at least. As you will see on page 24, our residential columnist Rob La Eace takes a hard look at the morality of so-called strategic defaults: mortgage defaults by borrowers who can afford their monthly payments but no longer care to make them because their home is worth so much less than they paid. It is a difficult issue to consider, and it has fervent supporters on both sides. In either case, what some are finding the hard way is that their obligations to the IRS do not necessarily go away even in cases when a short sale is conducted. On page 12, in the piece titled “Double Whammy,” we look at just how some former homeowners have fared in these transactions. 2010 is going to be very interesting, which is why the windmills on the cover are both symbolic and real. Windmills and wind farms have become tangible signs of the push toward harnessing clean, alternative energies. At the same time, they symbolize something else we would all like to see: some proverbial wind to provide the muchneeded inertia in our industry. Will it be future tech, existing industries or something else? It remains to be seen. We’d love to hear feedback from you on these topics. As always, please do not hesitate to drop us a line and offer your piece of mind. Thank you again for taking the time to read our magazine. Best regards, Vladimir Bosanac

Please provide feedback at letters@theregistrysf.com.

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theregistrysf.com 5

News

Desk

Planning News from around the Bay San Francisco 1080 Sutter Street The San Francisco Planning Commission approved a conditional-use authorization and code variances for an 11-story mixed-use building at 1080 Sutter St. proposed by JS Sullivan Development for a former parking lot. The project will include one commercial space and 35 residential units ranging from one to three bedrooms, including four affordable units. The planning commission agreed to allow up to 39 off-street parking spaces and a building height above 40 feet in a residential district, as well as variances for rear-yard area, projections over streets and alleys, and dwelling-unit exposure.

5075 3rd Street The San Francisco Planning Commission and Zoning Administrator granted a zoning variance to reduce the number of off-street parking spaces to zero for the new 10,600-square-foot city branch library in Bayview. The single-story building at the northeast corner of 3rd Street and Revere Avenue would have been required to have five parking spaces. The proposed library would replace a smaller, red-brick building constructed in 1969 using a $185,700 bequest from Anna E. Waden, a city clerical employee. The 1969 building bears Waden’s name. The new Bayview library is among $106 million in bond-funded improvements to the city branch library system that voters approved in 2000.

use and the site plan and architectural review for the planned 64,700-squarefoot building. Kaiser’s new offices will be a part of the city’s redevelopment of a part of the horse-racing track.

EMERYVILLE Permit Extensions The Emeryville Planning Commission is evaluating a temporary extension of planning permits for current projects up to five years from the date of final approval. The commission has agreed to apply the measure only to current projects and to allow its use only on a case-by-case basis. It has directed staff to prepare an ordinance for consideration at its next meeting.

Pixar Campus; Emery Station on Horton, Hollis streets The Emeryville City Council had approved general plan amendments to increase the maximum floor-area ratio allowable on the Pixar Animation Studios campus and on property belonging to Wareham Development. The council increased the Pixar floor-area ratio up to a maximum of 3.0 and the Wareham FAR up to a maximum of 4.0. Pixar pulled construction permits last year for its new 155,000-square-foot production building at the northeast corner of Park Avenue and Hollis Street. Both Pixar and Wareham are pursuing development in these areas currently.

SAN JOSE

Oakland

675 N. 6th Street

Central District, Central City East and Coliseum Redevelopment Areas

The San Jose Planning Commission recommended approval to rezone a half acre on the west side of North 6th Street from light industrial to planned development to allow First Community Housing to build 75 affordable senior housing units there. The project is within the Japantown Corporation Yard Redevelopment Area.

2112 Monterey Road The San Jose Planning Commission recommended rezoning 2.8 acres on the east side of Monterey Road to allow development of up to 102 attached units of affordable housing by Charities Housing and the Emergency Housing Consortium.

SAN MATEO Kaiser Advances at Bay Meadows Kaiser Permanente cleared a hurdle in the approval process for a proposed three-story medical office building on a six-acre portion of the former Bay Meadows practice track. The city of San Mateo granted a negative declaration of environmental impacts, a specific plan amendment for medical office land-

Redevelopment agency staff is to recommend to the City Council redevelopment proposals for six city-owned sites in three redevelopment project areas. All sites are potentially eligible for subsidies such as land write-downs and enterprise-zone tax credits. The sites include one acre at San Pablo Avenue, 18th and 19th streets adjacent to the Fox Theater and the Uptown complex in the Central District Redevelopment Area; 3.6 acres at 6775 Oakport St., directly across from McAfee Coliseum where the city wants commercial or industrial offices or an auto dealership; the one-acre “Fox Block” at 1800 San Pablo Ave. where the city wants a midto high-rise development with ground-floor retail or other commercial services, 200 parking spaces, but no housing. They also include 1.6-acres at Foothill Boulevard and Seminary Avenue where the city hopes to see retail or retail and senior housing; a half-acre site at Clara Street and Edes Avenue envisioned for housing with ground-floor commercial space; and 1.2 acres at 73rd Avenue and Foothill Boulevard, where the redevelopment agency envisions a Peralta Community College District education center, a city branch library, a restaurant or coffee shop and possibly senior housing. n

Sent to us Law Firm Forms One-Stop Real Estate Shop Hanson Bridgett, a Northern California law firm with four offices in San Francisco, Sacramento, Larkspur and Foster City, has formed a Real Estate and Construction Section to provide clients with a one-stop resource for comprehensive legal services in the areas of real estate, land use, construction and sustainable development, including green building. The new group will be headed by David C. Longinotti.

CMBS Returning to Life Investment banks are stepping back gingerly into the commercial mortgagebacked securities market, Timothy B. Gallagher, a managing director for Goldman, Sachs & Co., said. “We are aggregating loans for securitization and a number of other banks we are competitive with are too,” Gallagher told a San Francisco gathering Feb. 17. Banks’ and buyers’ practices won’t be what they were during the boom, he said. Each issuance will be smaller with fewer loans and smaller deals. In addition, investors will underwrite every asset in detail themselves, rather than rely on rating agencies or others to do it. The CMBS lending market collapsed during the credit crisis. While the market provided only 20 percent to 25 percent of all commercial real estate credit during the run up, the money was often cheaper than bank or life-company credit. The precipitous drop in CMBS lending as well as a paucity of new loan originations elsewhere are widely viewed as contributors to falling commercial property values though weakening fundamentals such as rental rates and falling occupancy are clearly a problem too. From 1988 through 2009, outstanding commercial real estate debt in this country grew by 300 percent to $3.3 trillion at last count, said Andy Zighelboim, a senior vice president with Colliers Investment Services in San Jose.

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Architect Finds New San Francisco Home Studios Architecture, an international design firm with five offices in the United States and Europe, has moved to The Orrick Building in San Francisco’s Foundry Square at 405 Howard Street. The firm occupied its previous offices at 99 Green Street for 25 years.

Printing Plant Achieves LEED Silver Certification The NADEV Printing Facility in Fremont has earned LEED Silver designation by the U.S. Green Building Council. The 335,660-square-foot Fremont printing plant is the first of its kind in the United States. It is owned by Canadian giant Transcontinental Printing Inc. and is where the San Francisco Chronicle will be printed. The general contractor for the job was St. Louis-based McCarthy Building Cos. Inc., which has an office in San Francisco. The environmental design elements of the NADEV facility include designated parking stalls for carpool and low-emission/fuel-efficient vehicles, 98,000 square feet of bioswale and a 43,000-gallon retention pond. Other sustainable features include recycled materials for the exterior walls, an Energy Star-rated roof-drain system and a non-chemical water treatment system. McCarthy diverted more than 95 percent of total construction waste and achieved a number of credits for surpassing the requirements for using recycled content and materials. continued on page 31

PEOPLE on the move Grubb & Ellis Expands Retail Group Grubb & Ellis Co. announced that Bruce Carlson has joined the company as senior vice president, Retail Group. As its lead, Carlson will engage the group in tenant and landlord representation, as well as investment sales. The group will also specialize in loan work outs and provide adaptive reuse solutions for distressed properties. Carlson joins Grubb & Ellis from Legacy Partners Residential Inc. where he served as a senior managing director since 2007. His primary responsibility was establishing the company’s multifamily development operations in Phoenix and Las Vegas. Prior to Legacy, Carlson co-founded Radius Development in 2000 and was responsible for an approximately 1 million-square-foot portfolio of retail, office and industrial projects. His real estate career also includes two years at GVA Realty, running the San Francisco Office, and six years at CB Richard Ellis, where he specialized in shopping center investment sales and retail corporate services. Carlson holds a bachelor’s degree from the University of California, Los Angeles, and is a member of the Urban Land Institute and the International Council of Shopping Centers.

San Francisco Developer Appoints Two Directors The Swig Co. LLC has named Kirby Sack (left) and Janice L. Sears (right) to its board of directors to replace retiring directors Lynn Sedway and Joseph Seiger. Sack is chief executive of San Francisco-based Sack Properties and heads a group of companies involved in all aspects of multifamily housing. Before joining Sack Properties in 1989, Sack was with First Capital where she originated small business loans made through the U.S. Small Business Administration. Sears retired from Bank of America last year, where she was both San Francisco market president from 2007 to 2009 and head of west coast real estate investment banking from 1998 to 2009. Before joining Bank of America she was with both Citibank and Chemical Bank in New York.

Ernst & Young’s Real Estate Practice Expands Ernst & Young announced that Kevin Nishioka and Dawn Timan, two new senior managers, have joined the firm’s real estate tax practice in San Francisco. Nishioka, a senior manager in the Ernst & Young tax practice, has 13 years of big four public accounting experience. He is a graduate of California State University, Sacramento and is a member of the California Society of CPAs, the American Institute of CPAs and NAREIT. Timan, a senior manager in the tax practice, is an attorney, has extensive experience in private industry and has over 10 years of public accounting experience serving real estate, private equity and venture capital companies and the PG&E Corporation. Timan has degrees from the University of IllinoisChampaign and Loyola University of Chicago.

San Francisco Law Firm Has New Construction Lead, New Associates Farella Braun + Martel LLP has named partner Richard Van Duzer chair of its Construction Practice Group, succeeding Adam Dawson, who served as chair since 2004. Van Duzer focuses on civil litigation in the construction, real estate, hospitality and wine industries. He has represented general contractors, owners, subcontractors and design professionals in connection with construction claims and defect disputes on private and public projects. Van Duzer is on the board of directors of Hearthstone, the largest institutional investor in residential development projects in the country. The firm also welcomes Aman Badyal and Stephanie J. Hall as associates in its San Francisco office. Badyal joins Farella’s Tax Practice Group, and Hall joins the Construction Practice Group.

CBRE Elevates San Francisco Bay Area Executive Los Angeles-based CB Richard Ellis Group Inc. promoted Michael F. Smith to executive managing director of the San Francisco/Bay Area Region. Smith also has been appointed to the company’s Americas Operations Management Board, an internal executive leadership group. Smith will help set policies, best practices and strategic direction for CBRE’s operations throughout the Americas. Since assuming leadership of the San Francisco Bay Area in 2001, Smith has nearly tripled the region’s revenue. continued on page 31

COMMERCIAL market report

The Voltage Count Down Innovations in energy management systems for commercial buildings bring savings—but at a cost. By Michael Fitzhugh

“You have to measure something to manage it.” Cary Vandenberg, chief executive, Menlo Park-based Agilewaves, energy-management systems pioneer

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tart with a room full of humming office PCs. Add heating and ventilation to keep everyone comfy. Light every corner brightly all day long then repeat, nationwide. Suddenly, it’s easy to see how commercial buildings consume 18 percent of our nation’s energy. Managing that constellation of energy-gobbling equipment in an efficient manner increasingly involves energy management systems. Combining software, sensors and controls, these networked webs help facilities managers and building engineers get a handle on all that power usage and spot new opportunities to cut consumption. Today’s lean economic times have dampened immediate interest in investing in energy-management systems as companies focus on survival, said Ken Cleaveland, director of government and public affairs for the Building Owners and Managers Association of San Francisco: “Neither tenants nor property owners want to spend money on putting in things that they don’t necessarily need” right now. In fact, BOMA, which backed the notion of sub-metering in multi-tenant office buildings—tracking tenants’ share of the power bill by metering instead of computing it based on their leased square footage—is now backing away from the idea, which it once endorsed with PG&E before the California Public Utilities Commission. Still, energy management systems have gained a toehold among green-conscious facilities managers, building engineers and owners. Many people in those roles are interested in accessing real-time information about their buildings’ energy consumption to help minimize it. Adobe Systems Inc., the San Jose software giant, trims $30,000 a year from its power bills by monitoring real-time electricity use via its Web-based intelligent-building interface system. That is a miniscule fraction of the company’s usual quarterly profit, yet still worthwhile, said George E. Denise III, a global account manager with Cushman & Wakefield, which runs Adobe’s energy management system. Using the same system that helps to cut its energy bills, Adobe also is able to provide immediate and continuous feed-

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back on indoor air quality, including temperature, air flow and percent of outside air being used by its ventilation systems. “With this information we are able to provide a more comfortable and potentially healthier work environment for employees. And, by operating more efficiently, we are reducing Adobe’s environmental footprint,” he said. Energy-management systems also can help building engineers fine tune their buildings by continually auditing systems and equipment to ensure they are operating at peak efficiency. Such evaluations, called commissioning, are usually carried out by consultants who measure a building’s performance only at occasional intervals. While commissioning generally provides accurate results at the time of its completion, it doesn’t enable the same sort of continual feedback generated by ongoing monitoring. Cary Vandenberg, chief executive of Menlo Park-based Agilewaves, a pioneer of energy-management systems in Silicon Valley, said, “You have to measure something to manage it.” Given the right sensors, Agilewaves can monitor electricity demands in offices and multi-tenant buildings down to the individual electric outlet. “We can display that information to tenants of a building via Web browser or mobile phones and, ultimately, that can shape energy-usage behavior,” he said. Building-management systems have the potential to reduce energy use by 30 percent in retrofitted and newly constructed buildings, according to Agilewaves. System prices vary widely based on criteria such as the size of the building, the number of sensors and the level of measurement resolution the customer requires, as well as the type of measurements the customer wants whether it is for electricity, water or gas, or indoor air quality, including temperature and humidity readings, Vandenberg says. Some building owners also want control systems for lighting or heating and air conditioning. Given those variables, the price for software and hardware ranges from $15,000 to $150,000 or more for typical commercial building implementations, he said.

The potential energy and other resource savings are real as far as the U.S. Green Building Council is concerned. The USGBC now awards points in the LEED certification process for buildings that employ monitoring systems such as those created by Agilewaves and its Oakland competitor, Lucid Design Group. Of course, few incentives carry the weight of direct cash. To date, the federal government has provided more than $20 million in funding to the cities of San Francisco, San Jose and Oakland as part of its Energy Efficiency and Conservation Block Grants program. The energy efficiency and conservation projects that are part of the federal economic stimulus package include money for the installation of energy-management systems. The money is already being put to use by businesses and municipalities to pay for “green retrofits,” said Vandenberg, whose company has picked up some of the work. San Francisco’s Public Utilities Commission has received $7.7 million in federal stimulus funding to perform energy-efficiency upgrades at some of its municipal facilities, too, said agency spokesman Tyrone Jue. It plans to use the money to upgrade the energy-management system at the county jails at 425 7th Street. With the installation of the new system, the operating duration of the building’s chiller will be reduced and the operational efficiency of all other heating, ventilation and air conditioning equipment will be improved, providing an estimated 10 percent cut in energy use, Jue said. As in every part of the green-building boom, old guard players also are exploring the field. Johnson Controls, Honeywell, Siemens and Cisco have all made some inroads into utility and efficiency monitoring. Even Google has gotten into the act, launching Google PowerMeter, a free residential electricity-usage monitoring tool, through its philanthropic arm, Google.org. The company provides a free software tool that displays data on home-energy consumption received from either a utility-provided “smart meter” or another electricity-monitoring device. Agilewaves’ Vandenberg said that he is not too worried about the arrival of the big corporate gorillas to his sector so far. Not one has achieved the breadth of capability offered in the energy-management systems his company makes, he said. The next goal for most in the green-building movement is to create a wave of new and retrofitted net-zero-energy buildings: those that produce as much energy as they consume. Agilewaves claims a 70 percent reduction in energy consumption may be possible in some buildings, through a combination of constant management and monitoring paired with on-site generation via renewable energy technologies. Net-zero may seem only a skip from that threshold, but the last mile is evidently harder to cross than it might seem: according to the U.S. Department of Energy, the first economically viable, net-zero-energy commercial building won’t arrive before 2025. n

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INK STATIONS

hot lot | redwood city

Embracing the Bay Redwood City looks to nature to transform its grungy slice of the bay shore.

“Redwood City has developed a keen awareness of what a treasure this area is and how the city can relate to this great resource.” Jeff Birdwell, commercial division president, Sares Regis Group

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magine hopping aboard a river taxi near downtown Redwood City, puttering down Redwood Creek beneath Highway 101 and out to a Redwood City bay port where ferryboats await, destined for Alameda, Oakland, San Francisco and beyond. From either a river or bay launch, you could choose recreational sailing, sculling, outrigger canoes or dragon boats to navigate the river, the sloughs and canals of Bair Island or the bay itself. Trails along the creek bed or shoreline offer access to shopping, entertainment, history and ecology tours, alfresco dining, bay and river vantage points or your own docked vessel. The vision may seem a far stretch from today’s decidedly gritty reality, but Redwood City, the only deepwater port on the San Francisco Peninsula south of San Francisco itself, sees the potential for a future as rich as its history. Last summer, the city bought 9.6 acres of bayside land bordered by Maple and Blomquist streets, from the CEMEX concrete company for $4.45 million. “The purchase of that property is just a small part of what we are doing. It’s adjacent to the police station parcel and part of a bigger vision. Redwood City wants to be a city on the bay, not a city along Highway 101,” said Peter Ingram, Redwood City manager. Today, the parcel is largely used by industrial and commercial firms, along with the Bair Island Aquatic Center of human-powered boating. But the city plans to redevelop the property as part of the Redwood Creek Harbor Master Plan, a mixed-use community of industrial and commercial locations plus city government fa-

cilities, parklands and public access to the water. Lodged between the Port of Redwood City and Redwood Creek, the 9.6 acres are conceived as a buffer between the heavy industry of the port and the lighter industrial and public uses along the shoreline as it leads into a re-made Redwood Creek. “We believe that the creek and sloughs and other areas offer a wonderful amenity for many different perspectives, including recreation and its wildlife habitat. Other communities have enhanced and made this kind of property a focal point. It’s fabulous, exciting and invigorating to have so many different things with great access to water. It can be used to show a connection from the waterfront to downtown Redwood City,” said Jill Ekas, planning manager with the city’s Department of Planning, Housing and Economic Development. A product of the Gold Rush era, Redwood City was founded as a lumber operation, floating redwoods from Peninsula hillsides to the streets of San Francisco. Shipbuilding and other deepwater port activities followed and flourished until the forests were laid nearly bare. With the advent of railroads, the horseless carriage and oil pipelines, much shipping left the bay and headed for land. The port has had its ebbs and flows but has remained relatively intact through two world wars and as the city’s focus turned downtown to a multimillion-dollar redevelopment effort there. The port remains largely industrial, transporting cement, gypsum limestone, gravel aggregates and recycled scrap metal by rail and by water, says Port Director Mike Giari.

p h oto s by C had Z i emendorf

By Broderick Perkins

But it is also home to Spinnaker Sailing School, Sequoia Yacht Club, Municipal Marina Public Boat Launching Facility, an office and conference complex and Bella By The Bay Restaurant, among other facilities. “There are not too many cities on the Peninsula that can take advantage of the bay. Foster City and Redwood Shores have artificial lagoons but they don’t have access to the bay. Redwood City is a little different,” said Giari. Today, a town, once called “Deadwood City,” has the waterfront redevelopment potential of Wilmington, Del.; Baltimore, Md.; Vancouver’s Granville Island, the famed Riverwalk in San Antonio, Texas, some say even Paris, if on a different scale and scope. “I think it’s a hidden jewel,” said Jeff Birdwell, commercial division president of Sares Regis Group, a real estate development, acquisition and management company that was hired by Redwood City to help acquire the CEMEX property. Birdwell says South Bay towns for decades have turned their backs on the South San Francisco Bay, focused instead on getting the populace to and from gleaming technology centers along Highway 101. But the highway also cuts public access to the waterfront and its vast but largely hidden attractions. That includes the 3,000-acre Bair Island and Bair Island Ecological Reserve, where even casual boaters can get an easy glimpse of sea lions, egrets, Canadian geese, birds of prey and gleaming mallards enjoying the Pacific migratory stopover. “Land use patterns have not really reached out and embraced the resources here, but that’s changing. Redwood City has developed a keen awareness of what a trea-

sure this areas is and how the city can relate to this great resource,” Birdwell said. Change will likely come slow. Ekas says while the Redwood Creek Harbor Master Plan offers the city great opportunity for land-use transition from heavy industry in the Seaport area to mixed-use closer to shore, the newly acquired parcel is years from a true remake. “This is a snippet of the [overall general] plan. We’ve got quite a bit a planning to do. We just added this to our general plan draft document in November. There is a lot of other stuff going on,” Ekas said. Last year Scottsdale, Ariz., -based DMB Associates sent a proposal to Redwood City to develop the 1,433acre Cargill Saltworks parcel, a two-square-mile salt production and harvesting flat. Adjacent the Seaport area, the Saltworks parcel is the size of San Francisco’s Presidio and the city’s largest undeveloped property. DMB’s proposal calls for 50 percent of the property to be developed as transit-based housing, retail and commercial with 50 percent dedicated to wetlands restoration, open space and recreation. Roland Aberg, a principal with Hart Howerton, a San Francisco-based master-planning firm hired by Redwood City to help it review the Cargill development plans, sees nothing but potential: “What we have in Redwood City is rare. An estuary, Bair Island’s protective elements, accessible sloughs and creeks and waterways you can use small craft to get in and out of and explore for miles. It’s full of wildlife,” he says. “I defy you to find other places on the bay that have what Redwood City has,” he adds. n Above: Pacific Shores Center Port of Redwood City Opposite page: Jeff Birdwell showing Sharon Simonson the map of the Redwood City shoreline redevelopment.

residential market report

Double Whammy Some homeowners lose their house then owe unexpected taxes. By Robert Celaschi

“If they did a refinance on their home, it converts it to recourse debt.” Chris Province, a partner with accountants Armanino McKenna LLP

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s if it weren’t enough to suffer through a foreclosure, short sale or simply handing the deed over to the bank, homeowners are discovering that losing a house can bring one more woe: an extra tax bill. If any mortgage debt is forgiven, the Internal Revenue Service treats the amount as ordinary income, and it can be taxable. For tax purposes it doesn’t much matter how the house changes hands, accountants say. What matters most is the type of debt. Mortgages, it turns out, are not all created equal in the eyes of the tax collector. The details can get complex—after all, this is tax accounting—but one key is whether there is recourse on the debt. Accountants say the time to review the possibilities is long before the house goes into foreclosure or an owner walks away from a mortgage he can still afford to pay. With planning, it may be possible to avoid, or at least postpone, some of the tax mess of losing a house. Accountant Chris Province, a partner with Armanino McKenna LLP in San Ramon, has noticed one change in the type of homeowners with more debt than house. Early on when the market turned, it was people losing middlelevel jobs then having to give up houses they had bought for $300,000 to $800,000 or so. Now he’s seeing more attorneys, doctors and other professionals who have houses that simply aren’t worth as much as the loan. While they too are eager to get out from under what seems a losing proposition, their relative affluence gives them more options. “Some people are going so far as to buy a new house before they walk away from their old house and it hurts their credit,” he said. “We are in some very strange times.” In general, if a home mortgage is nonrecourse debt, the house is the only asset that a lender can touch. But if a mortgage is recourse debt, the lender can go after the borrower to make up any difference between a foreclosed home’s sale price and what the borrower owed. The lender also can forgive the difference. If any debt is forgiven, or

cancelled in accounting-speak, expect the mail carrier to deliver Form 1099-C in that amount when tax season rolls around. Federal 1099 forms are for non-wage income. The C stands for cancellation of debt. States set their own rules about recourse loans. In California, mortgages used to buy a principal residence are generally non-recourse debt, according to the California Civil Code. If a bank forecloses, for tax purposes the homeowner is treated as having sold the home for the amount of the outstanding debt. No debt is cancelled, so there’s nothing to tax. A nonrecourse loan, such as a home-equity loan, changes the stakes. As home prices mushroomed during the housing boom, lots of folks took out home equity lines of credit—sometimes for purposes that had nothing to do with their abode. The difference matters. “If they did a refinance on their home, it converts it to recourse debt,” Province said. So, if a house sells for, say, $800,000 but the owner owed $1 million, then the remaining $200,000 has to be accounted for. Either the lender will expect the homeowner to pay up or, more likely, will cancel the debt. It’s also possible to have a mix of non-recourse and recourse debt, such as having a first and second mortgage on the property. If a second mortgage was part of the financing to buy the house, it’s non-recourse. But if you took the money to Vegas, it is more bad news: The debt is recourse. And if any debt is cancelled, expect the mail carrier to deliver Form 1099-C in that amount when tax season rolls around. Even then, though, there is an out. Federal law lets the taxpayer off the hook for up to $2 million of what it calls Qualified Principal Residence Indebtedness. Basically it applies to cancelled debt that was used to buy, build or substantially improve a principal residence. Take out a home equity loan to buy a boat or send a child through college, however, and it doesn’t qualify. The QPRI exclusion stays on the books through 2012, a creature of Congress to help the beleaguered American taxpayer. The state of California will still tax the cancelled

RMKB attorneys handle your nightmares so you can sleep at night.

debt, but the federal exclusion is still enough to persuade a lot of people that it is worth walking away from their houses, Province said. Homeowners also can avoid paying tax on cancelled debt if they are insolvent or have had their debts discharged through bankruptcy. It can be tricky figuring out what to include or exclude when calculating insolvency, said Tamara Bongi, a tax and advisory partner with Hood & Strong LLP’s San Jose office. A spouse may have separate property, for instance, or there may be other debts involved that are both recourse and non-recourse. With all these moving parts, it’s no surprise that sometimes the players aren’t all on the same page. Lenders have been known to send out a Form 1099-C even when the deal involves a non-recourse mortgage. “It has always been problematic with people getting it right,” Bongi said. A lot of factors can change the formula. The home could be a personal residence for one owner and an investment property for a co-owner, for instance. “If there are different types of interest in the property, you probably have to determine the facts and circumstances with respect to each seller,” said Craig Schmitt, tax manager at Burr, Pilger & Mayer LLP in San Francisco. Or if the owner has been taking a home-office deduction for years, some forgiven debt might not qualify for the federal exclusion. The worst of all possible worlds, Schmitt said, is to wind up with cancellation-of-debt income, not qualifying for the federal tax exclusion and going through a short sale that leaves no cash to pay the tax. With the limitations and exclusions, cancellation-ofdebt income isn’t an everyday event, said Steven San Filippo of Sensiba San Filippo LLP in San Mateo. “I’ve been in practice for over 35 years, and you don’t run across this often,” he said. But when you do, it’s better to spot it from a distance rather than let it sneak up on you. n

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the

clean-tech push back A ballot initiative to delay California’s Global Warming Solutions Act could upend the Bay Area’s burgeoning clean-technology cluster. By Jessica Saunders

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alifornia is two years away from implementing AB 32, also known as the Global Warming Solutions Act of 2006. A law that gives sweeping powers to an unelected board, its goal is to reduce state greenhouse gas emissions, including carbon dioxide, to 1990 levels by 2020. The California Air Resources Board is working on procedures to implement AB 32, effective in 2012, that would include new mandates for energy use, a state cap-and-trade system and new fees for greenhouse-gas producers. California’s economic picture today is very different from what it was when AB 32 passed. At that time the state’s jobless rate was 4.8 percent. Last December, it spiked to 12.4 percent leaving about 2.25 million Californians out of work. Add to that worry recent revelations that some data supporting climate-change theories were fabricated, and one state legislator is pushing California voters to ask themselves whether now is the time to pursue greenhouse-gas reductions. “My concern is that when you stack another truckload of regulations on top of what we have, you have a state that will never recover economically, ever,” says Assemblyman Dan Logue, R-Linda. Logue is seeking to put an initiative on the Nov. 2 ballot to suspend AB 32 until the state’s jobless rate falls to 5.5 percent or below for four consecutive quarters. That has happened twice in the past decade, in 2000 and 2005-2006. A Logue and company victory has special implications for the Bay Area. The nation’s largest clean-tech sector is located in Silicon Valley, and more than half of the top 10 venture-backed clean-tech companies are in the region. The state’s largest lease in the last 20 years, 506,490 square feet of warehouse and manufacturing space, was signed last year by Solyndra Inc. in Fremont. Soyndra designs and manufactures photovoltaic systems for the commercial rooftop market. If Logue succeeds and AB 32’s implementation is delayed, it would carry a clear signal of softening public support for global-warming legislation. And if public support

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The nation’s largest clean-tech sector is located in Silicon Valley, and more than half of the top 10 venturebacked clean-tech companies are in the Bay Area.

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wanes, the question arises: Will governments continue to throw the same kind of money at clean-tech companies that they are spending today? A real estate broker elected to the legislature the same year it passed AB 32, Logue advocates for small businesses struggling under what he sees as a state regulatory burden unmatched in the United States. Suspending AB 32 would give California a chance to make sure it is taking the right actions for the right reasons at the right time, Logue argues. He was struck by just how many aspects of his life would be affected by AB 32 during a December 2009 presentation to the Assembly Natural Resources Committee, on which he sits, Logue says. The California Energy Commission discussed sources of greenhouse gases that need to be regulated. It included “your hot water heater, your air conditioning, the size of your house, the size of your business, what you drive, the level of air compression in your tires, agriculture, forestry, off-road vehicles, onroad vehicles ... absolutely every part of our lives,” Logue said. A study commissioned by the California Small Business Roundtable estimates that implementing AB 32 could cost upwards of $100 billion due to unacknowledged or hidden expenses such as higher food costs due to greater transportation expenses and changes in land use. Overall, the state could see $182 billion in lost economic output, the Business Roundtable says. Current state regulations, without AB 32, cost the average California family $40,000 a year, said Logue, citing another study by the same researchers. Severin Borenstein, co-director of the Energy Institute at the University of California, Berkeley’s Haas School of Business, believes AB 32 opponents exaggerate its costs. “We should be reducing our carbon footprint. We are an incredibly wealthy country and state. Even the costs that the naysayers talk about, which have almost certainly been wildly overstated, are small compared to the economic impact of climate change,” Borenstein said. Climate-change theory itself is under examination after revelations in late 2009 that global warming researchers may have fabricated some data. Scrutiny began with the online publication of emails and documents stolen from East Anglia University in Britain. The records indicate that leading climatechange scientists discussed how to manipulate climate models to achieve results showing global temperatures rising. “Right now, 31,000 scientists believe that either climate change is not real or it is not manmade,” Logue said. “This is the greatest loss of freedom in our lives in the name of a philosophy that has not been proven.” Borenstein disagrees. The emails raise questions about only one piece of evidence supporting global warming: the hockey stick temperature-change graph. “It does not invalidate the science,” he said.

To promote the initiative, Logue has partnered with U.S. Congressmen Tom McClintock of the 4th District in northeastern California and Devin Nunes of the 21st District in central California as well as 25 state legislators. He began the initiative effort after a bill to delay AB 32 died in committee. Logue says he has exceeded his preliminary fundraising goal for the initiative with about $600,000 committed by “numerous business groups” to the People’s Advocate Initiative Committee. People’s Advocate, formed in1974 and involved in the passage of Prop. 13, helped organize the 2003 recall of Gov. Gray Davis. Logue’s total includes $500,000 from a single donor, he says. He declines to identify that donor or the other contributors, and their contributions have not yet been formally submitted to the Secretary of State, based on a review of the secretary’s Web page Feb. 8. In early February, the California attorney general’s office approved the Logue petition for circulation. About 434,000 registered voters statewide must sign the petition in support of the measure by May 15 to get it on the November ballot. Logue is confident that a majority of voters will be willing to delay efforts to reduce greenhouse-gas emissions until the economy recovers. He cites a December EMC Research poll, commissioned by the AB 32 Implementation Group, that found 53 percent of registered voters favor a balanced approach to cutting greenhouse-gas emissions that doesn’t cut jobs, raise household energy costs or hurt the economy. Those polled also ranked the environment and/or global warming tenth behind other state issues of importance, with the budget deficit first. The AB 32 Implementation Group, a coalition of business groups working separately to ensure the law’s implementation does not adversely impact businesses, is not affiliated with the ballot proposition effort and takes no position on it. “The AB 32 Implementation Group agrees that California needs to take steps to reduce its carbon footprint, but we believe our steps need to be technologically feasible. We cannot go it alone,” said Executive Director Shelly Sullivan. “Our efforts need to seamlessly link to other programs regionally, nationally and globally.” If California enacts onerous emission standards, businesses would likely relocate to another state and continue operations that produce emissions there, Sullivan said. “There is serious concern about leakage.” Despite such fears—particularly piquant when the economy is already struggling—initiative proponents may face an uphill battle. Already, a formidable international alliance of government, business and public-sector interests is deeply invested in the climate-change fight. That alliance includes venture capitalists, corporate investors, specialized researchers, analytic and financial services companies

and the clean-tech industry itself, which is absorbing hundreds of millions of dollars from public and private sources in pursuit of new technologies. Venture investment in clean-tech companies rose to $5.6 billion worldwide in 2009, according to The Cleantech Group LLC, an industry advisory organization located in San Francisco. Governments of major economies worldwide committed another $162.9 billion in stimulus funds to clean energy programs from autumn 2008 through third quarter 2009, according to Ernst & Young’s “Cleantech Matters” 2009-2010 report. In the United States, about $1.9 billion in venture capital was invested in clean-tech in 2009, a decline of more than half from 2008, according to a report by PricewaterhouseCoopers and the National Venture Capital Association. But the American Recovery and Reinvestment Act passed by Congress in February 2009, included $83 billion for clean-tech grants, loans and tax credits, including millions for Silicon Valley companies. Federal stimulus funding is expected to promote sector growth into 2010 and beyond, according to Jones Lang LaSalle. Cleantech and its investors are not the only hurdles facing Logue’s ballot proposition plan. The

financial stakes are high, too, for cash-strapped California. Lacking a dedicated source of funding, the state borrowed $83 million from various special funds to pay for AB 32’s implementation. The ongoing work and repayment of the loans were to be funded by fees charged to parties who emit greenhouse gases. But fee collection would be delayed if voters approved the suspension. So would the state cap-and-trade provision, which sets caps on emissions for greenhouse gasproducing entities in California. Emission producers who exceed the caps would have to buy carbon allowances through an auction system under the procedure being considered by an Air Resources Board panel. At a cost of $60 per ton of carbon, the auctions could generate an estimated $143 billion for the state between 2012 and 2020, according to the AB 32 Implementation Group. “That money comes from somewhere. It comes from the working families of California,” Logue said. “I would rather give that money back to businesses, so they don’t have to leave California. The more money they take from the private sector, the less money there is for jobs to be created. And the less opportunity we have to grow out of this recession.” n

buying time

Governments support clean technology, but the industry ultimately must stand alone. By Jessica Saunders

remont-based Solyndra Inc. exemplifies the fundamental role government is playing in the development of the clean-technology industry. The thin-film solar-technology company last year received a $535 million loan guarantee from the U.S. Department of Energy for construction of a new manufacturing plant. The commercial solar installations it makes qualify for a 30 percent federal investment tax credit and rebates under the California Solar Initiative. It also has received more than $500 million in venture capital and plans to raise $300 million in an initial public offering this year. Yet the company is far from turning a profit. Clean technology’s growth “is being totally helped along” by government regulation and investment, said David Link, a senior analyst with Pike Research in Boulder, Colo., a market research and consulting firm focusing on clean-tech. “None of this stuff happens without the grants and the investment tax credits.” That has been proven in other countries. When governments in Germany and Spain wound down their subsidies for clean-tech, many companies left, said Severin Borenstein, co-director of the Energy Institute at University of California, Berkeley’s Haas School of Business. Yet, while an industry can get a “kick start” from government, it’s not a permanent solution, said Todd Jaquez-Fissori, managing director of Hercules Technology Growth Capital in Palo Alto, which provides

venture-debt financing to clean-tech companies. “You can’t rely on it year after year.” “There’s an old saying in the venture biz that you don’t want to sell to utilities or to the government. If you think about what clean-tech is, that is who we are selling to,” Jaquez-Fissori said. Ultimately, making it work means making clean-tech products commercially competitive, and that is beginning to happen, he said. Some are skeptical. In Spain, subsidizing so-called green jobs actually cost $700,000 and 2.1 regular jobs for each job created, said California Assemblyman Dan Logue, R-Linda. Logue has gained legal approval to begin collecting voters’ signatures to place an initiative on the November ballot. The initiative would delay California’s Global Warming Solutions Act, also called AB 32, until state unemployment falls to pre-bust levels. The Bay Area economy could suffer if voters approve the initiative and government and private-sector interest in financing clean-tech startups wanes. “The cost of green energy doesn’t pencil, in my opinion. If I can put a windmill in my backyard and get energy cheaper than I can get it now, I would build a windmill, but you are not seeing them,” he said. The billions of dollars in additional costs the new state law creates through its mandates would be better spent on problems more imminent and urgent than global warming, such as food shortages and disease, Logue said. n

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big is very very small

Nanotechnology, the quiet tech, is well-commercialized, growing and rooted in the Bay Area. By John Sailors

Above: A liquid spill beading up and rolling off 100% cotton Nano-Tex upholstery fabric for commercial interiors.

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p h oto c o u r te s y o f N ano - T e x

hile biotech and cleantech have dominated business headlines in recent years, nanotechnology has evolved from promise to product, lending a tiny yet hugely powerful boost to companies across industries and around the globe. Products that generated revenue in the hundreds of billions of dollars in 2009 from the Apple iPhone to sun cream from Burt’s Bees incorporate nanotechnology. Experts say the rate of such activity will increase substantially in the next few years. The San Francisco Bay Area is a leading center of nanotechnology. The region is home to three of the top “nano metros” in the United States: San Francisco, Oakland and San Jose, according to the Project on Emerging Nanotechnologies, a research initiative run by the Woodrow Wilson International Center for Scholars in Washington, D.C. PEN rates metropolitan areas based on the number of companies and research institutions that they have. Because it is a technology that works in tandem with other applied sciences, nanotech’s effect on industry and job growth is hard to see, much less gauge. Extending the analysis to demand for commercial real estate is even more tenuous. Still, the economic effects and potential from a thriving nanotechnology industry cannot be denied. Global revenue from commercialized nanotechnology products reached an estimated $245 billion in 2009, said Jurron Bradley, senior analyst with Lux Research, an independent research and advisory firm that specializes in emerging technologies. That figure will grow to $2.5 trillion by 2015, according to Lux. By way of comparison, the U.S. gross domestic product, the largest in the world, is about $14 trillion. Among the notable Bay Area companies with products that use nanotechnology are Advanced Micro Devices Inc., Cisco Systems Inc., Gap Inc., Hewlett-Packard Co., Intel Corp., KLA-Tencor Corp. and Seagate Technology LLC, PEN reports. Companies design computer chips on the nanoscale to make them faster, add nanomaterials to paints to help kill germs and manipulate fabrics to make spill-resistant clothes. An inventory of “nanoenabled” products topped 1,000 in 2009, up from 212 three years earlier, PEN reports. The number is headed to 1,600 in the next two years, it says. More than 120 companies and research entities in the Bay Area were involved in some aspect of nanotech as of 2009, up from 91 in 2007, the researcher says. California as a whole had the most of any state with 231, up from 161 in 2007. The state is followed by Massachusetts with 114 companies and research organizations, up from 80 in 2007, and New York at 82, up from 61 two years earlier. In PEN’s latest count, San Francisco tied Boston as the top nano metro, with 48 companies and institutions apiece. San Jose came in second with 46, and the Oakland area, which includes parts of the East Bay, was sixth with 30 entries. Nanotechnology deals with the manufacture of materials and products at the atomic and molecular levels. A nanometer is one billionth of a meter. In comparison, a hair is about 100,000 nanometers wide. Business sectors expected to see the greatest benefits from nanotechnology innovations include manufacturing, electronics, pharmaceuticals, energy, chemical plants and transportation, according to research by the Bay Area Council Economic Institute. “Venture capitalists, industry analysts and other prognosticators see valuable nanotechnology applications in tools, materials, devices, electronics, environmental monitoring and the biomedical fields,” concludes an institute report, “Nanotechnology in the San Francisco Bay Area: Dawn of A New Age.”

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Nanotech by Sector The leading nanotechnology NANOTECH BY STATEsectors

The top states based on number of companies, organizations, universities and government NANOTECH BY STATElaboratories.

based on number of entities involved.

200 150

Materials 25%

100

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Tools & Academic, Govt, Instruments Research 18% 15% Medicine & Health 17%

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Source: Project on Emerging Nanotechnologies. Imaging & Microscopy Imaging & Energy & Microscopy Imaging & Environmental Energy & 4% Microscopy 6% 4% Oakland-based Nano-Tex Environmental Inc., a 6% high-tech fabric designer with reOrganizations Energy & 6% Organizations Environmental Materials search facilities in Hong Kong, is a 6%pioneer in commercializing nanotech 25% Materials Electronics Organizations 25%adoption in 2001(khaki first commercial 9%products. The company had its Electronics 9% Electronics pants for Eddie Bauer) and raised $35 million in Series A funding in 2005. Tools & Academic, Govt, Instruments Research Tools & Academic, Govt, Investors included Partners Instruments and Firelake Capital Man18% Norwest Venture 15% Research Medicine Academic, Govt, 18% 15% Research & Health Medicine agement, both Palo Alto-based, according to a Nano-Tex news release. 17% & Health Medicine & 17% Health

Nano-Tex has remained lean, with 45 employees total and just 10 in its Tools & Oakland headquarters, but its reach is impressive. Its brand partners inInstruments Materials clude the Gap, Eddie Bauer, Old Navy and L.L.Bean. It works directly with mills and its processes transform the fibers in fabrics, creating, for instance, coatings on materials that completely repel liquid or resist static. The fabrics “are a lot different once they’ve gone through our processes,” said Tom Stenzel, marketing director for Nano-Tex. “We have several different technologies now that are applied to fabric depending on the end use, whether it is commercial interiors or home textiles—two new markets that we have broken into and done quite well in.” Computer components are one of the most widespread applications for nanotechnology. Chip makers such as Intel and AMD have been working for years to shrink chips and their components into smaller and smaller sizes to increase energy efficiency and make more-powerful processors and other devices. The Intel Atom processor, for example, holds 47 million transistors on a chip measuring 26 millimeters. Meanwhile, Samsung Electronics has developed a series of home appliances that use nano-sized silver particles to kill germs. These include a washing machine that “releases 400 billion silver ions, which penetrate deep into fabrics,” according to marketing materials for the series, and a refrigerator that has a nanosilver coating aimed at inhibiting the growth of bacteria. Samsung says it invested $10 million in the line and is one of many companies using nanosilver for its antimicrobial properties. n

n 2007

As more nanomaterials are created and used in products touching the public, California’s Department of Toxic Substances is taking note. By John Sailors

f there is a hint of science fiction in the promises of nanotechnology, there is also a hint of sci-fi in the fear of these new materials. Yet, the anxiety is real and may have serious implications not only for consumer products but also the real estate industry, where nanomaterials are increasingly finding their way into construction products such as insulation, water filters, solar cells and paint coatings being designed to minimize heat loss and reduce energy use. Regulatory agencies are beginning to look for potential hazards. A year ago, the California Department of Toxic Substances Control used a new state law, Assembly Bill 289, to begin to gather information on nanomaterials. The agency sent letters to 26 companies and research institutes that might manufacture or import carbon nanotubes. Nanotubes are tiny pipe-like structures made of carbon atoms that scientists believe may be useful in nanotech applications. The department chose to look at the carbon nanotubes because existing literature indicates they may be hazardous. With a 365-day deadline, responses have just begun to come in. “There is a lot that people are still learning about human exposure to nanomaterials,” said Ann Grimaldi, a San Francisco-based partner with law firm McKenna Long & Aldridge LLP and a legal expert on California chemical regulation and the federal Toxic Substances Control Act. “In 20 years, are we going to get claims from contractors or tenants or owners about [exposure to nanomaterials]?” “When we’re talking about nanomaterials, it is far from clear that they should be treated the same as the chemicals in the regular non-nano form,” she said. In 2006 the city of Berkeley became one of the first to adopt a disclosure ordinance requiring nanomaterial manufacturers to disclose known risks in products. A few other governments, including the city of Cambridge, Mass., and the state of Wisconsin, have considered similar steps. A bigger issue for the real estate industry may arise from another new law the state is contemplating, Grimaldi said. The green chemistry law, or AB 1879, signed by Gov. Schwarzenegger last year, will change the way California regulates chemicals in products. The bill expands the authority of the Department of Toxic Substances Control to prioritize chemicals of concern and to adopt appropriate regulations. The broadly defined law covers products that are used, bought or leased and may regulate housing and commercial buildings. That may raise issues for builders and owners about products that contain nanomaterials, as well as chemicals in general. The department is still penning the anticipated regulations. n

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Project FROG’s Crissy Field Center under construction.

INSIDE & OUT Energy efficiency is seeping into construction materials and processes. By Sasha Vasilyuk

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p h oto s c o u r te s y o f project F rog a n d ser i ous mater i als

green

ncouraged by the growing success of green-building companies like Serious Materials, CalStar and Project FROG as well as emerging federal energy efficiency programs, investors are paying closer attention to the world of green-building startups. Last year, venture capitalists invested $532 million in the U.S. green-building sector, which includes companies developing energy-efficient construction products or processes. That was a 28 percent increase from 2008, according to market-tracker Cleantech Group LLC., which is headquartered in San Francisco. And many say that is just the beginning. “I think it’s going to be a huge, growing field,” said Malcolm Lewis, president of consulting firm CTG Energetics Inc. in Irvine and chairman of the LEED Technical Committee at the Green Building Council. “If we really need to reduce the carbon emissions by 80 percent in order to achieve the U.S.’s part of mitigating climate change, there are enormous technical challenges that will require development of major new technologies and processes in construction and operations and retrofit of buildings.” Some companies are already busy. Last month, Silicon Valley-based CalStar Products Inc. opened its first plant (in Wisconsin) to make energy-efficient bricks from fly ash, a process that it says uses 85 percent less energy than traditional clay-brick manufacturing and emits far fewer greenhouse gases. Another local company making big waves is San Francisco-based Project FROG Inc., which just raised $5.2 million to build greener school buildings from prefabricated recycled materials.

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Charles McDermott of RockPort Capital Partners, the main investor in Project FROG, said the start-up presented a rare opportunity to invest in a finished building rather than construction materials. “In FROG, every part has a purpose—it’s like an erector set. I think you’ll see more and more designs like that,” he said. In January, Los Gatos-based Calera Corp. started drawing exhaust gas from a Moss Landing power plant to convert it through a chemical process into cement. Backed by Khosla Ventures, Calera aims to make cement in a way that captures carbon-dioxide emissions instead of releasing them into the atmosphere. Cement is a basic ingredient in concrete, perhaps the most ubiquitous building material in the world, and its production involves lots of carbon-dioxide emissions. Meanwhile, in Ithaca, NY, e2e Materials is making a difference for indoor air-quality with petroleum-free, biodegradable composites, an alternative for pressed-wood boards, a significant source of formaldehyde in homes. The startup just raised $3 million in funding. While these inventions are poised to make a huge difference in new construction, investors also are eager to see technologies that help reduce the energy intake of existing buildings. “When you look at low-hanging fruits, the most obvious ones in terms of driving efficiency are windows, lights, the control systems to the lights and, looking ahead, having an intelligent dashboard to monitor information in a way that is actionable,” said James Pettit, cofounder of Navitas Capital, a Berkeley-based venture-capital firm that specializes in the green-building sector. So far, one of the most talked about makers of energy-efficient windows has been Sunnyvale’s Serious Materials Inc. But investors say other companies may make an even bigger impact by developing so-called “smart windows,” which alter their shading or visibility in response to an electric charge or an environmental signal like a change in light. “We think there will be exciting, dramatic change in terms of glass and glazing,” said Phil Williams, vice president of technical systems and sustainability at San Mateo’s Webcor Builders. Williams often receives telephone calls from green-building startups seeking advice. While modifications to glass may not seem as sexy as “biofuel,” he said, in the long run they will have “much greater impact” on reducing energy demand and reliance on fossil fuels. It seems that venture capitalists think so too. In recent months, two smart window developers got millions in funding: Milpitas-based Soladigm Inc. secured $20.7

million from Khosla Ventures and Sigma Partners while Switch Materials, based in Burnaby, Canada, raised $7.5 million in second-round financing. Both companies have yet to release their products, but according to its Web site, Switch is using “proprietary, organic molecules” to develop light-control films for architectural and automotive use. In addition to windows, the second most-talked about area of development is in wireless controls and sensors that will be able to give building owners feedback on inefficiencies and needed adjustments. According to Pike Research, a Colorado-based market research and consulting firm, the market for energy-management systems will be worth $6.8 billion a year by 2020 and will generate $67.6 billion of investment in the next 10 years. “For large portfolios of real estate, if you have the ability with a set of sensors to measure, track and benchmark your inefficiencies, you can bring a whole other level to the financial aspect of real estate management,” said Pettit of Navitas Capital. Wireless controls are particularly adept for use in existing buildings because breaking walls to install new wires is costly and inefficient. In fact, experts said that more startup and innovation companies should target the huge stock of existing buildings, which is in greatest need of improvements and thus presents the greatest opportunity for energy-use reduction. “Given the market shift [away] from new construction, I think we could use more investment in developing technologies applicable to retrofitting existing buildings,” said Lewis. He also pointed out that there are relatively few innovations in air-conditioning and plumbing to reduce water use. “Air-conditioning systems are inherently more complicated than lighting systems, and they’re harder to replace because they’re embedded in the building,” Lewis said. “Techniques that would break through some of those barriers would be really valuable.” While many see the potential of green-building technologies, some warned the rather conservative real estate industry doesn’t just jump on every novelty. “You can’t just jam it down the throat of the industry. Just because it represents innovation doesn’t mean it will be embraced,” said Petit, who opened his investment firm in 2008. “A lot of this change needs to be coupled with education and contextual influence.” Windows offer a particularly enlightening example, he said: “It is going to take a whole new level of education in terms of installation.” n

“You can’t just jam it down the throat of the industry. Just because it represents innovation doesn’t mean it will be embraced.” James Pettit, co-founder, Navitas Capital, a Berkeley-based venture-capital firm

Above: Serious Materials manufacturing plant in Sunnyvale. Opposite page: SeriousWindows installed in a Colorado residence.

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theregistrysf.com 21

Up Your Alley San Francisco planners want to re-create the commercial vitality of alleyway Belden Place.

“We needed plenty of space but at an attractive price.” Jan Wiginton, co-owner, the Press Club, on locating on San Francisco alleyway Yerba Buena Lane

22 theregistrysf.com

ou have to ask a local or know where to look, but when you discover the hidden gems of San Francisco, they are often in alleyways. Cities, particularly very dense cities, create engaging, interesting and exciting spatial experiences. Alleys can be one of the most fascinating components of that urban fabric. In San Francisco, the density and proliferation of alleys has allowed development, both planned and unplanned, to occur in ways that have alternately been described as “quaint” and “hip.” Some alleys evolve organically, without much oversight or planning. Belden Place, in the Financial District, is one of the best-known and most successful. With six to eight restaurants (the number varies with the economic cycle), outdoor seating and exuberant lighting, this alley has become a highly popular meeting and dining destination in the city. Belden Place emerged organically as restaurateurs, one by one, opened establishments on what was a service alley for businesses fronting the much-busier Kearney Street to the west. These restaurants, harkening to an earlier time when this section of San Francisco was populated by the French, initially catered to those seeking French cuisine. Other establishments eventually filled in and the overall effect is of a small, tight passageway packed with tables—a slice of alfresco Europe in the Financial District. Yerba Buena Lane, in contrast, is part of the Yerba Buena Redevelopment District, a decades-long effort of the San Francisco

m a r c h 201 0

Redevelopment Agency. Formulated in the 1980s, the redevelopment district encompasses public and private projects centered on the Yerba Buena Gardens, an urban park. Anchored by the Metreon, a privately developed and owned retail mall on public land, the district is home to arts and cultural organizations and houses several performance spaces. Jessie Plaza, immediately north of the gardens across Mission Street, was developed as a hard-space foil to the lush, open lawn of the gardens. Serving as a public entryway to the Contemporary Jewish Museum and the proposed Mexican Museum, Jessie Plaza is actually the roof of the Jessie Square garage. Early in the planning for the Yerba Buena Redevelopment District, it became clear that a pedestrian connector between Market and Mission streets would be desirable, in part to allow pedestrians on Market Street more direct access to the Yerba Buena Gardens. The redevelopment agency tapped Metreon developer Millennium Partners to create this connector, to be called Yerba Buena Lane. Millennium has much experience in the neighborhood, also developing Jessie Plaza and the Jessie Square garage. The redevelopment agency believed retail would enhance the proposed passageway. Accordingly, Millennium’s charge was to essentially create a retail alley from scratch when it built Yerba Buena Lane. Sean Jeffries, a principal with Millennium Partners, said the development was unique in the company’s experience. “As a de-

p h oto s by C had Z i emendorf

By George Calys

development veloper, you normally do a private project on private property. Yerba Buena Lane is a public right of way, and that makes for a challenging planning process.” Millennium also developed the Four Seasons Hotel and Residences on Market Street at what became the north opening to Yerba Buena Lane, and several retail slots that already existed. The remaining retail spaces were developed at ground level on the eastern side of the existing Marriott Hotel. Once leased to retailers, the spots were supposed to help Yerba Buena Lane acquire the dense, vibrant feel of Belden Place. When Yerba Buena Lane opened in 2007, none of the retail spaces were tenanted. Today, only two remain available and both are the subject of lease negotiations. How did this happen during the worst two years for retailers in memory? Yerba Buena Lane offered two attractive features: proximity to Union Square and extremely affordable rents. For Jan Wiginton and Andrew Chun these features proved the tipping point for locating their business, the Press Club, on Yerba Buena Lane. Originally, Wiginton and Chun sought a Union Square presence for their urban tasting room, but they couldn’t make the rents fit their business model. “We needed plenty of space but at an attractive price. Yerba Buena Lane offered the proximity to hotels, restaurants and museums. The ability to co-locate with those venues made Yerba Buena Lane a good marriage for us,” Wiginton says. The fact that the space they ultimately chose was a “tenth of the price of Union Square” made a big difference as well. The response from consumers to the Press Club has been overwhelmingly positive, Wiginton says, so much so that weekend hours have been expanded. Their retail formula—a slice of wine country experience without the travel—fits the passersby, often a tourist or convention-goer, perfectly. Small, independent retailers like the Press Club find that prime locations such as Union Square often continue to be out of reach. “Landlords in Union Square are very cognizant of the luxury perception that certain high-end retailers bring to a property,” said Sheldon Pont, retail leasing expert at GVA Kidder Matthews. “In contrast, the lesser-known, locally based retailer doesn’t have a lot of leverage when it comes to negotiating rents.” With rents on Union Square or along prestigious Post Street sometimes exceeding $200 a square foot annually two years ago

(at the height of the recent boom), startup retailers like the Press Club were simply priced out of these locations, he said. Rents today are difficult to pin down, he added, because so few retail leases are being written; the consensus is that they have fallen but by how much is unclear. Efforts to revitalize alleys continue in San Francisco. The redevelopment agency’s South of Market Alley Improvement initiative is scheduled to begin in March. Comprising the area between Sixth, Folsom, Seventh and Howard streets, the project will focus on streetscape upgrades and traffic calming as part of overall economic development. “Fifty years ago, alleys South of Market were mostly industrial and unfriendly to pedestrians. Today, they contain abandoned store fronts and substandard infrastructure,” said SFRA project manager Mike Grisso. Until now, they have largely been a forgotten resource. These alleys, with colorful names like Russ and Minna, don’t share the proximity to high-value real estate like Union Square or the Financial District. So, whether they can attract businesses remains to be seen. Grisso, however, is hopeful. “We completed a number of upgrades to Sixth Street a couple of years ago and have seen businesses there stabilized. We think something similar can happen on the alleys,” he said. Further in the future, the new Transbay District, home to the proposed Transbay Transit Center, includes land where the Embarcadero Freeway once sat. The district, comprised of large, block-sized parcels owned by the state and San Francisco Redevelopment Agency, will be gridded to include alleys to break up the large expanses into more pedestrian friendly chunks. Grisso posits that these new alleys will present development opportunities that can enliven the neighborhood. When we think of vibrant urban spaces, alleys are often a part of the mix, whether we realize it or not. Much of the charm and attraction of European metropolitan areas lies in the narrow and crooked streets of old cities, passageways barely wide enough to accommodate autos, but quite amenable to the hidden bistro or boutique hotel. San Francisco, long-known for its picturesque hilly streets, possesses an abundance of alleys. As we are learning, those pockets can attract shoppers and tourists and, as the economy turns, may be poised for new development. n

Opposite page: Preparing for the lunch crowd at Belden Place. Below (l-r): Overview of Yerba Buena Lane with the Jewish Contemporary Museum off to the right. Painted art on Claude Lane building. Lunch time relaxation along Yerba Buena Lane.

Should I Stay or Should I Go? By Rob La Eace

e R s ob’

es AR

24 theregistrysf.com

y t i al

ide

l l Co ntia

m a r c h 201 0

arch is upon us. In a matter of weeks, we’ll be boiling corned beef, donning our “Kiss Me I’m Irish” t-shirts and miscounting how many green beers we’ve had. This is all for good reason, no doubt. St. Patrick is worthy of praise. Any man who could drive the snakes from Ireland deserves a day of recognition. But, while we celebrate, millions of Americans are being driven from their homes—some without a choice in the matter, but others quite willingly. The strategic foreclosure (where an owner walks away from a property though he/she can afford to remain in it) is becoming more and more common. According to the Mortgage Bankers Association, for January, the combined percentage of loans in foreclosure, or at least with one payment past due, was 15.02 percent on a non-seasonally adjusted basis. This is the highest percentage ever recorded since inception of the MBA delinquency survey history. According to Realtytrac.com, foreclosure filings are up 15 percent from a year ago. Four million homes are in the foreclosure pipeline currently. More than 20 percent of all homes are now under water, and many owners are finding little reason to stay aboard their sinking ship. Luckily, these are national statistics, and our market in San Francisco, though still struggling, is showing more positive signs. With all the bad news, it’s easy to see why some are calling it quits on home ownership. For some, there can be a long list of reasons to go and a very short list of reasons to stay. Beyond pride of home ownership, it seems there are really two compelling reasons not to strategically foreclose: credit rating preservation and (depending where you live) avoiding a deficiency judgment. Interestingly, the reduction in credit scores is not the same for all. People with higher credit scores are dinged more than those with lower scores. According to www.myfico. com a foreclosure will knock your score down by 85 points to 160 points. These are ballpark estimates however, and each case is handled individually. For $15.95, prospective foreclosure candidates can even run a customized credit scenario to see how their FICO will be impacted. How convenient. Though California is a non-recourse state, in some situations lenders can still pursue borrowers after foreclose for a deficiency judgment. Lenders have caught on to the strategic foreclosure and are now taking a broader look at owners’ financial pictures. For example, if the only bill an owner stopped

paying was the mortgage, the lender may be more likely to go after him for a deficiency judgment. Also, depending on the state laws, lenders have varying amounts of time to seek a judgment. Sometimes, they wait until the borrower has financially recovered from the foreclosure before they pursue them. Though you haven’t heard much about deficiency judgments yet, stay tuned. As evidenced by those pesky $3 ATM service fees, banks do like to nickel and dime, and they certainly aren’t likely to forget about thousands of dollars of debt. Some banks have sold off their foreclosed accounts to collection agencies for pennies on the dollar. These agencies will eventually exercise their right to pursue those who stopped paying their loan but had the means. So, what about the reasons to go? Most bankruptcy attorneys are recommending that if an owner is more than 20 percent under water, it would make sense to walk away from a home. For those in this situation, it’s simply easier to start over. Some have even been as bold as to purchase a new home and then let their existing home slide into foreclosure! For some owners, it has nothing to do with affordability. They have monthly payments they can comfortably make. It has come down to an equity issue. When there is none, there is no motivation to continue to own. Furthermore, due to an abundance of rental properties entering many markets, renting has become an even cheaper option than it once was. Objectively, walking away can appear to be a prudent business decision in some cases. So is there anything stopping them? Is there financial morality? In these times, is an every-manfor-himself mentality justified? Is intentionally failing to fulfill an obligation to repay a debt to a bank any different than failing to repay a debt to a close friend? I think we know the answer. A debt is a debt. But somehow, it is much easier to justify not paying a bank. In years past, a foreclosure was an embarrassment. There was a stigma attached to the event. Today, it seems people’s opinions have changed. In my personal life, I know of four individuals who have allowed their homes to fall into foreclosure. A sign of the times? Perhaps. All of them are college-educated, employed and earning $150,000 or more a year. All could afford their payment. They all walked and never looked back. So far, they have no regrets. So far. n Rob La Eace can be reached at 415-290-7228 or rob@roblaeace.com.

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activity

Reports commercial leases

City

Lease Sq. Ft.

Tenant/Rep/Brokerage

Landlord/Rep/Brokerage

Dal-Tile, 2303-2311 Merced St

San Leandro

57,862

Dal-Tile Distribution, Inc/Jay Hagglund (Cassidy Turley BT, Oakland)

Charter Properties/Jay Hagglund (Cassidy Turley BT, Oakland)

Renewal, Warehouse Lease Transaction, 84M

Mowry Business Center, 38875-38995 Cherry St, Bldg 3

Newark

30,216

Elliott Laboratories/Kalil Jenab (Cassidy Turley BT, Palo Alto)

ProLogis/Brian Erlanson (ProLogis)

Industrial Lease Transaction, 72M

Pacific Industrial Center, 40999 Boyce Rd

Fremont

26,171

Elliott Laboratories/Kalil Jenab (Cassidy Turley BT, Palo Alto)

ProLogis/Brian Erlanson (ProLogis)

Renewal, Warehouse Lease Transaction, 39M

295 S Vasco Rd

Livermore

24,240

Monaco Pacific/High Summit LLC/ Mark Triska, SIOR; Ned Wood (Colliers International, Pleasanton) & Todd Severson, SIOR (Colliers International, Oakland)

Ellis Partners

Renewal, Whse/ Distribution

Hayward Industrial Park, 23271-23285 Eichler St, Bldg 10

Hayward

24,000

Rinco International Inc/Adan Martinez & Eddie Shuai (Cassidy Turley BT, Oakland)

UBS Realty Investors/Jay Hagglund & Joe Fabian (Cassidy Turley BT, Oakland)

Renewal, Warehouse Lease Transaction, 48M

4569 Las Positas Rd

Livermore

20,000

Enray Inc/Lee & Associates, Pleasanton

Arroyo/Livermore Business Park LP/Michael Lloyd, SIOR (Colliers International, Pleasanton)

Lt Industrial

2155-2159 Research Dr

Livermore

19,764

Ms Carita Inc/Mark Triska, SIOR & Ned Wood (Colliers International, Pleasanton)

Gerald M Eschen and Bernal Investment Inc; L One/ Michael Lloyd, SIOR & George Wineinger (Colliers International, Pleasanton)

R&D/Flex

448 Kato Ter

Fremont

16,756

Hanaps Enterprises/Paul Griffiths & Todd Shaffer (Cornish & Carey Commercial)

Walton CWCA Scott Creek 28, LLC

R&D

P&C Bakery, 2885 Adeline St

Oakland

16,285

R & L Brosamer/Gary Fracchia & Brandon Hsu (Cassidy Turley BT, Oakland)

2923 Adeline Associates, LLC/Gary Fracchia & Brian Collins (Cassidy Turley BT, Oakland)

Industrial Lease Transaction

5717 Brisa St

Livermore

15,600

Yamaha Golf Cars of CA

RPM Holdings/Michael Lloyd, SIOR (Colliers International, Pleasanton) & Lee & Associates, Pleasanton

Lt Industrial

2424 Clement Ave

Alameda

14,975

Energy Brands, Inc./Sean-Michael Callahan (Loh Realty & Investments)

Leonard Goode/Michael Karp (Cassidy Turley BT, Oakland)

Industrial Lease Transaction, 12M

6727 Preston Ave

Livermore

12,672

LACO Inc/Lee & Associates, Pleasanton

Mission Road Business Park Ltd/George Wineinger (Colliers International, Pleasanton)

Whse/Distribution

Hayward Industrial Park, 23663-23669 Eichler St, Bldg 5

Hayward

12,000

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

UBS Realty Investors/Jay Hagglund & Joe Fabian (Cassidy Turley BT, Oakland)

Warehouse Lease Transaction, 12M

Diablo Industrial Park Bldg Hayward 11, 3151 Diablo Ave

12,000

Itouchless Houseware & Products, Inc.

RREEF America REIT II Corp/Sam Higgins & Mark Maguire (Cassidy Turley BT, Oakland)

Renewal, Industrial Lease Transaction, 12M

Address

Notes

Alameda County

Contra Costa County 1631 Challenge Dr

Concord

24,000

Sky High Sports Concord LLC/Loren Honda, CCIM Rosewood Villa Apartments LLC/Bayside Realty (Colliers International, Pleasanton)

Lt Industrial

4589 Pacheo Blvd

Martinez

20,736

Shields, Harper & Co. Inc./Rick Steffens & Knute Bucklew (Grubb & Ellis)

Pacheco Properties/Graden Travis (Cornish & Carey Commercial)

N/A

3160 Crow Canyon Rd

San Ramon

US Investment Corporation/Justin Moore (Pacific Commercial Realty)

Gavello Family Trust/Rick Steffens & Knute Bucklew (Grubb & Ellis)

N/A

Haggin

Equity Office Properties/Whitney Strotz (Cassidy Turley BT, San Rafael)

Renewal, Office Lease Transaction, 18M

6,130

Marin County 100 Shoreline Hwy (A)

Mill Valley

32,672

120 Corte Madera Town Center Dr

Corte Madera

6,097

TD Ameritrade, Inc/Rhonda Diaz Caldewey (Terranomics)

Madison Marquette Realty Services/Hedy Veverka (Madison Marquette Realty Services)

Retail Lease Transaction, 120M

900 Front St

San Francisco

23,199

Bartko Zankel Tarrant and Miller/Meade Boutwell (CB Richard Ellis)

Disney/ABC

Renewal, Class A Office

Bancroft Building, 731 Market St

San Francisco

12,267

Garfield Beach CVS LLC/Julie Taylor (Cornish & Carey Commercial, San Francisco)

Bancroft SF Properties/Rhonda Diaz Caldewey & Jennifer Hibbitts (Terranomics)

Retail Lease Transaction, 240M

956 Folsom St

San Francisco

9,000

European Motor Works, LLC/Self-Represented

Minh Ly Trust/Jennifer Horn Essner & David Klein (Cassidy Turley BT, San Francisco)

Warehouse Lease Transaction, 120M

131-141 Steuart St

San Francisco

6,865

Public Advocates, Inc./Bryan Courson & David Klein (Cassidy Turley BT, San Francisco)

JCF Properties, LLC/Ken Hoffman (Colliers International, San Francisco)

Renewal, Office Lease Transaction, 60M

Willow Park, 1394 Willow Rd

Menlo Park

29,371

Pacific Biosciences (Cornish & Carey Commercial, Palo Alto)

AMB Property Corporation/Randy Arrillaga (Cassidy Turley BT, Palo Alto)

Industrial Lease Transaction, 65M

1394 Willow Rd

Menlo Park

29,371

Pacific Bioscience of CA, Inc.

AMB Property/Kristoph Lodge & Randy Scott (Cornish & Carey Commercial)

R&D

344-352 Shaw Rd

S San Francisco

Royal Laundry/Marshall Hydorn & Jason Cranston (Cassidy Turley BT, Burlingame)

George Mitchell /Jeff Jaffe Prtnrsp/Marshall Hydorn & Jason Cranston (Cassidy Turley BT, Burlingame)

Warehouse Lease Transaction

1204 Middlefield Rd

Redwood City

11,635

Yume, Inc/Colliers International, San Jose

ANAGNOSTOU INVESTMENT I LLC/Bill Sawyer & Marcus Wood (Cassidy Turley BT, Palo Alto)

Office Lease Transaction, 53M

Bayhill Office Park VII, 999-1001 Bayhill Dr

San Bruno

6,026

Agile Energy/Mike Moran & Clarke Funkhouser (Cassidy Turley BT, Burlingame)

Equity Office, Peninsula/Mark Rosen (Rosen Realty Group, San Francisco)

Office Lease Transaction, 33M

Sunnyvale

57,310

Alpha & Omega Semiconductors Inc/ Tom Sweeney & Lori Sweeney (Cornish & Carey Commercial)

OA Oakmead II, LLC

R&D

San Francisco County

San Mateo County

15,000

Santa Clara County 475 Oakmead Pkwy

26 theregistrysf.com

m a r c h 201 0

commercial Leases City

Lease Sq. Ft.

Tenant/Rep/Brokerage

Landlord/Rep/Brokerage

5353 Almaden Expy

San Jose

37,849

Buybuybaby Inc/Don Krieger & Drew Greenspan (Terranomics)

Almaden Plaza Shopping Center Inc

Retail Lease Transaction, 180M

2495 Leghorn St

Mountain View

34,519

Alvarion, Inc/Jones Lang LaSalle, Palo Alto

Stoesser Enterprises/Ted Eyre (Cassidy Turley BT, Palo Alto)

R&D Lease Transaction, 11M

2495 Leghorn St

Mountain View

34,519

Space Systems Loral/Renault & Handley

Stoesser Enterprises/Ted Eyre (Cassidy Turley BT, Palo Alto)

R&D Lease Transaction, 120M

2440 West El Camino

Mountain View

21,084

Intellectual Ventures Management LLC

2440 El Camino, LP/Randy Gabrielson, Chase Lyman & Phil Mahoney (Cornish & Carey Commercial)

Office

90 Karina Ct

San Jose

20,613

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

MP Partnership/Keith Claxton & Nick Lazzarini (Cassidy Turley BT, San Jose)

Industrial Lease Transaction, 38.5M

10131 Bubb Rd

Cupertino

18,000

Apple, Inc/Mike Connor (Cassidy Turley BT, Palo Alto)

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

The Landmark Office Center, 1861 Landings Dr

Mountain View

8,797

Adaptive Planning/Rob Schwartz (Colliers International, Redwood City)

Broadreach Capital Partners/Clark Heppberger & David Hiebert (Cassidy Turley BT, Palo Alto)

Renewal, R&D Lease Transaction, 47M Renewal, Office Lease Transaction, 26M Renewal, Office Lease Transaction, 12M

2700 Garcia Ave

Mountain View

7,883

Violin-Memory, Inc/Mark Courson (Cassidy Turley BT, Palo Alto)

Garcia Avenue Associates/Howie Dallmar & Wayne Kumagai (Cornish & Carey Commercial)

R&D Lease Transaction, 6M

Sonoma County

R&D Lease Transaction, 6M

5900 Pruitt Avenue, Space 164

Windsor

17,800

Wine Wood Products/Rhonda Deringer (Keegan & Coppin Co, Inc)

Shiloh Oaks Co, LLC/Jim Sartain & Shawn Johnson (Keegan & Coppin Co, Inc)

Gross Lease

255/257 Sutton Place

Santa Rosa

11,000

Bimbo Bakeries USA, Inc/Tanya Pratt (Mohr Partners)

MTA Company, LLC/Shawn Johnson (Keegan & Coppin Co, Inc)

NNN Lease

1993 Santa Rosa Avenue

Santa Rosa

9,380

Bitech, Inc dba Performance Bicycle/Steve Cutter (Lockhouse Retail Group)

Fox Partners, LP/Tom Laugero (Keegan & Coppin Co, Inc)

NNN Lease

801 4th Street

Santa Rosa

9,300

Sterling Savings Bank/Shawn Johnson (Keegan & Coppin Co, Inc)

Kinslow Investments, LLC

Lease Renewal, Gross

131 Stony Circle, Suite 300 Santa Rosa

8,719

Community Child Care Council of Sonoma County/Shawn Johnson & Brian Keegan (Keegan & Coppin Co, Inc)

Stony Point West LP/Jennifer Turner (Simons & Woodard)

Full Service Lease

Address

Notes

commercial sales Address

City

Property Size

Buyer

Seller

Price

Product Type

Brokers

Alameda County 44235 Nobel Dr

Fremont

74,168

JAC Technology/Rico Ting

Intel Corp

$4,050,000 (Reported by CoStar)

Industrial

Michael Spiro (Cornish and Carey Commercial)

1775 Sabre St

Hayward

35,305

Betty P H Lim

Takiahiro Tamura, Azuma Food International, Inc.

$3,100,000

Industrial

Jay Hagglund (Cassidy Turley BT)

Steve Oliver (Oliver and Company)

Gary Robert & Judith Grossman

$2,700,000

Office

Cherie Huillade (Grubb and Ellis)

Homestead Ranch LLC/ Mike Green

Borello J M 1998 Trust

$4,000,000

Development

N/A

Contra Costa County 2735 North Main St

Walnut Creek

8,020

Marin County Homestead Ranch

Dillon Beach

N/A

San Francisco County 500 Terry Francois St

San Francisco

276,226

SP4 Mission Bay LP

Ml Mission Bay LLC

$149 Million (Reported by LoopNet)

Office

N/A

1000 Van Ness Ave

San Francisco

154,056

1000 VN Garage LLC

Next Van Ness Garage LLC

$10,800,000

Misc

Catherine House (CB Richard Ellis)

2140 Hyde St

San Francisco

12,883

2140 Hyde Street LLC/ Laura Rogers

Zief A C & D M Trust

$5,000,000

Multi-Family

N/A

567-569 Vallejo St

San Francisco

N/A

Dworsky William A & D A Trust

567 Vallejo Street LLC

$2,350,000

Misc

N/A

David Spreng

Hobart Rawson

$2,125,000

Industrial

N/A

Woonsocket

Longs Drug Stores CA LLC

Undisclosed

Retail

N/A

San Mateo County 1540 Newlands Ave

Burlingame

5,823

Santa Clara County 2514 Berryessa Rd 916 Story Rd

San Jose San Jose

25,000 12,000

Tri Valley Properties, LLC

Story & King Properties, LLC

3,765,000

Retail

Andrew Reeder (Trade Commercial Group, Inc.)

Maher Family 1988 Trust

Maher J V & C A Trust

$4,500,000

Industrial

N/A

Petaluma Marina Office Investors

Marina Office Park Associates

$3,406,000

Office

N/A

Solano County 1320 Lemon St

Vallejo

N/A

Sonoma County 775 Baywood Dr

Petaluma

35,880

For-Sale Transaction Data provided by:

10 Calendar

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

NAIOP San Francisco Bay Area Chapter will host a bus tour called Street-Level Perspective of the Commercial Real Estate Market. Visit www.naiopsfba.org for more information.

IFMA Silicon Valley will host a roundtable luncheon called Laws and Regulatory Impacts on FM - Title 24 from 11:30 a.m. - 1 p.m. at NetApp, 1345 Crossman, Bldg 7, Sunnyvale. Members $20 and non-members $30. Contact Joy Dunn at admin@ifmasv.org with questions.

USGBC Northern California Chapter announces the Seventh Annual Water Conservation Showcase at PG&E Pacific Energy Center. Visit www.usgbc-ncc.org for more information.

2 CREW Silicon Valley will host a luncheon featuring KLIV’s “CEO Show” starting at 11:30 a.m. at The Silicon Valley Capital Club, Knight Ridder Building, 50 W. San Fernando, Ste. 1700, San Jose. Strict dress code required; no jeans please. Members $50 and non-members $80. Register online at www.crewsv.org.

3 USGBC Northern California Chapter will host a Green Finance Series, Part One: Investment Analysis of Green Building from 9 a.m. - 4:30 p.m. at Hanson Bridgett, LLP, 425 Market St., 26th floor, San Francisco. Members $395 and non-members $445. Email info@usgbc-ncc. org for more information or visit www.usgbc-ncc.org to register online.

3 USGBC Northern California Chapter will host an event called BAyLUG: All Your Questions about LEED Answered from 5:30 p.m. - 8:30 p.m. at USGBC-NCC/AIA SF Offices, 130 Sutter St., Ste. 600, San Francisco. Members $0 and non-members $10. For more information contact Ryan Potvin at ryan@ebsconsultants. net or visit www.usgbc-ncc.org to register online. ULI San Francisco will host a luncheon called Techniques for Negotiating Successful Public Private Partnerships from 12 p.m. - 1:15 p.m. at Sheppard Mullin Richter & Hampton LLP, 4 Embarcadero Center, 17th floor, San Francisco. This is a members-only free event. Feel free to bring your lunch. Register online at www.ulisf.org or call 800.321.5011.

4 BOMA Silicon Valley will host an Advanced Blueprint Reading Seminar from 8 a.m. 11:30 a.m. at San Jose Holiday Inn, Granada Meeting Room, Mediterranean Center, 1740 North First St., San Jose. Register online at www.boma-sv.org. BOMA Silicon Valley will host a membership luncheon from 11:30 a.m. - 1 p.m. Visit www.boma-sv.org for more information.

5 IFMA Silicon Valley will host a Day with a Facilities Professional starting at 11 a.m. at NetApp, 1240 Crossman, Bldg 11, Sunnyvale. Contact dgary@apt4power.com with questions.

8 AIA San Francisco will host a Career Strategy Roundtable: Informal Peer to Peer Discussion on Weathering the Economic Downturn from 12 p.m. -1 p.m. at AIA San Francisco, 130 Sutter St., Ste. 600, San Francisco. This is a free event. Please RSVP to rsvp@aiasf.org. USGBC Northern California Chapter will host a LEED AP Building Design & Construction Exam Prep workshop from 8:30 a.m. 5 p.m. at StopWaste, 1537 Webster St., Oakland. Email info@usgbc-ncc.org for more information.

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11 BOMA Young Professionals will host a St. Paddy’s Day Networking Mixer from 5:30 p.m. - 8:30 p.m. Admission includes appetizers, two drink tickets and door prizes. Register online at www.bomasf.org or contact Wendy de Lara at 415.362.2662 ext. 110 with questions.

11 ULI San Francisco will host a discussion called Capital Markets 2010 Part II: Asset Advisory from 4:30 p.m. - 6 p.m. at Hotel Nikko, 222 Mason St., San Francisco. Register online at www.ulisf.org or call 800.321.5011 BOMA Oakland/East Bay will host a luncheon in Walnut Creek. Visit www.bomaoeb.org for more information. BOMA Oakland/East Bay will host a Pre-Game Mixer for the Golden State Warriors vs. Portland Trailblazers game starting at 5 p.m. at Club 200 at the Oakland Oracle Arena. The cost is $40 per ticket. Register online at www.bomaoeb.org or call Robert at 510.893.8780 with questions. NAIOP San Francisco Bay Area Chapter will host a webinar called Risk Management Strategies for Successful Real Estate Development Projects from 10 a.m. - 11:30 a.m. at Marcus & Millichap, 750 Battery, Fifth Floor, San Francisco. This is a members-only free event. Visit www.naiopsfba.org for more information.

12 CREW East Bay will host a brown bag luncheon called “Short Sale, Foreclosure, Abandonment, Bankruptcy - How Are Your Taxes Affected?” from 12 p.m. - 1 p.m. at Old Republic Exchange Facilitator Company (OREXCO), Conference Room, 555 12th St., Ste. 1970, Oakland. This is a free event for members-only. Please RSVP to Nancy Douglas at ndouglas@orexco1031.com or 1.800.481.1031.

17 USGBC Northern California Chapter will host a LEED Green Associate Exam Prep workshop from 8:30 a.m. - 5 p.m. at Bishop Ranch, 2623 Camino Ramon, Ste. 175, San Ramon. Email info@usgbc-ncc.org for more information.

18 CREW East Bay will host a Strategic Networking for Business Development luncheon. Visit www.eastbaycrew.org for more information.

19 AIA San Francisco will host a seminar called Energy by Design: Dr. Fred Alan Wolf & Joey Yap from 10 a.m. - 11:30 a.m. at Herbst Theatre, 401 Van Ness Ave., San Francisco. This event is part of a two part series. The cost is $95. Contact 415.255.6703 with questions.

SPUR’s Young Urbanists will host an event called ART in the Public Realm at 6 p.m. at Electric Works Gallery, 130 8th St., San Francisco. Members $0 and non-members $20. Visit www.spur.org for more information.

24 SPUR will host a Tour of the new EcoCenter at Heron’s Head Park at 12 p.m. Members $0 and non-members $5. Feel free to bring your lunch. Visit www.spur.org for more information. BOMA San Francisco will host The Best of BEEP from 8:30 a.m. - 12:30 p.m. at Pacific Gas & Electric Company’s Pacific Energy Center, 851 Howard St., San Francisco. This is a free event for both members and nonmembers and includes breakfast. Register online at www.bomasf.org. IFMA Silicon Valley will host a monthly meeting called SVLG - State of Silicon Valley from 5-8 p.m. Members $0 and non-members $60. Contact Joy Dunn at admin@ifmasv.org with questions.

25 International Interior Design Association Northern California Chapter will host the 2010 Honor Awards. Visit www.iida-nc.org for more information. ULI San Francisco will host an event called Tri-Valley Development Projects: Vision for a New Decade from 5:30 p.m. - 7 p.m. at Four Points by Sheraton Hotel, 5115 Hopyard Rd., Pleasanton. Register online at www.ulisf.org or call 800.321.5011. 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 www.bomasf.org. BOMA Silicon Valley will host an Emerging Leaders in Commercial Real Estate Council March NCAA Basketball Countdown mixer. Visit www.boma-sv.org for more information.

25 NAIOP San Francisco Bay Area Chapter will host a webinar called ROI Analysis on LEED Building Components from 10 a.m. - 11:30 a.m. at Marcus & Millichap, 750 Battery, Fifth Floor, San Francisco. This is a members-only free event. Visit www.naiopsfba.org for more information.

31 NAIOP Silicon Valley Chapter will host a Capital Markets Panel luncheon from 11:30 a.m. - 1:30 p.m. Visit www.naiopsv.org for more information.

CHAPTER SPONSORS

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by the

Numbers

Delinquency Rises Across the Board Perhaps no other subject is more discussed in commercial real estate today than what is happening to property loans on the books of the nation’s 8,000 banks. While the commercial mortgage-backed securities market is fairly transparent, how banks are handling stressed borrowers and how regulators are handling banks are less obvious. The subject is of deep interest to a lot of people. Banks hold half of the $3.3 trillion of commercial mortgage debt in this country. As the chart below illustrates, rising numbers of commercial property borrowers are falling behind on their mortgage loans. Public real estate companies and private equity firms have raised roughly $75 billion in equity in anticipation of the day when at least some of those borrowers default, Toby Cobb, co-head of U.S. Commercial Real Estate at Deutsche Bank Securities, told a San Francisco crowd Feb. 17. But it is by no means obvious when that will occur, at what scale and what quality the offered assets will be. So far, quality and quantity have been a big disappointment. Kurt Altvater, the senior vice president of the National Loan Sale Advisory Group for CB Richard Ellis in San Francisco, and Andy Zighelboim, a senior vice president in the Investment Services Group for brokerage Colliers International in San Jose, both say the distressed assets they have seen thus far have largely been second- and third-tier properties in second- and third-tier cities and locations. The chop-licking is mostly in expectation of much higher-quality properties, not unlike Emeryville’s Watergate office complex, which U.S.

Bank finally foreclosed on Feb. 18. Eyeballs will be peeled to see how eager the bank is to sell or if it intends to hold the offices in expectation of price recovery. Pundits have said that banks, with regulator blessing, are holding off on foreclosures and extending loans for troubled borrowers to avoid owning more real estate and facing massive write-downs of their assets. The practice will elongate the downturn, they argue, and perhaps not coincidentally, could deprive the bottom-fishing investors of some juicy morsels. But, Tim Mahoney, a senior vice president in Middle Market Real Estate for Wells Fargo Bank, says the practice, derisively called “pretend and extend,” is “overstated.” Still, he says, at Wells, the bank’s preference is not to own real estate. Borrowers with money and a plan are viewed as favorable partners even if it involves short-term pain. “At Wells we take a longer point of view, the next two or three years. We are not naïve about how difficult the market is, but I don’t think you mark to market at the worst point in time,” he told a meeting of CoreNet Global’s Northern California Chapter and ULI San Francisco on Feb. 18. “A phased, multi-year solution” would be best. That approach seems to favor stressed banks right now because it gives commercial properties and landlords time to recover. But delay and better days are not an assured outcome. Commercial property values may not rise for some time and the severity of losses is expected to be great. That may leave banks and regulators (and the rest of us) wishing they had acted sooner, not later. n

Commercial vs. Consumer

Accounts 30 days past or more

9.81 (Q309) 8.74 (Q309)

6 4.76 (Q309) 4.40 (Q309)

‘87

‘88

‘89

‘90

‘91

‘92

‘93

‘94

‘95

‘96

‘97

‘98

‘99

‘00

‘01

‘02

‘03

‘04

‘05

‘06

‘07

‘08

‘09

n Single-Family Mortgages n All Commercial Real Estate n All Consumer Loans n Commercial & & Home Equity

Industrial Loans

Sources: Sandler O’Neill+Partners; Federal Reserve

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Sent to us

New Appointee to CoreNet Global Committee

continued from page 6

Jones Lang Reports Fourth-Quarter, Annual Results Business and real estate services company Jones Lang LaSalle Inc. reported net income of $52 million on a U.S. GAAP basis for the fourth quarter compared with $41 million for the fourth quarter 2008. Adjusting for restructuring and certain non-cash co-investment charges in the quarter, fourth-quarter 2009 net income would have been $63 million. Revenue for the fourth quarter was $815 million, a 2 percent increase from $797 million in 2008 although down 3 percent in local currency. The net loss for the year ended Dec. 31 was $4 million compared with net income of $84 million for the year ended Dec. 31, 2008.

Oakland Seeks Business Input on Commercial Needs Oakland business people eager to give their two cents about what it takes to make a buck in the port-side community can respond at www.OaklandBusinessSurvey.com or by sending an e-mail to info@OaklandBusinessSurvey.com. The annual survey, in its 17th year, poses questions about the challenges that Oakland-based businesses have faced over the last 12 months surrounding employee attraction, retention and training, regulatory barriers and other factors. The survey is aimed especially at the commercial-industrial sector and seeks to identify business retention opportunities. It is conducted by the city’s Community and Economic Development Agency in conjunction with contractor Purple Lynx, a local consulting firm.

Oakland City Center Earns Designation Shorenstein’s 1300 Clay St. in Oakland City Center has been recognized for exceptional operations and management by the Building Owners and Managers Association International. The BOMA 360 Performance Program evaluates properties in six major areas: operations and management; life safety, security and risk management; training and education; energy; environmental sustainability; and tenant relations and community involvement.

Santa Clara County Home-Sales Pace Rises Sellers and buyers closed escrow on 825 homes in January, a 15.06 percent rise over the 717 in the same period last year, according to data from MLS Listings Inc. “Multiple offers appear to be spreading into most price ranges and neighborhoods,” said Karl Lee, president of the Santa Clara County Association of Realtors. “We expect buying activity to continue intensifying because interest rates remain historically low and the April 30 expiration date for the federal home-buyer tax credit is approaching.” In January, 4,234 homes were posted for sale, a 35 percent drop from 6,530 in the first month of 2009 but up more than 12 percent from December.

Grubb Gets Property Management Assignment Commercial brokerage Grubb & Ellis Co. has been awarded the property management of 49 Stevenson St., a 126,110-square-foot, Class A office building in San Francisco’s financial district. Owned by Pacific Resources Stevenson, the 15-story building was completed in 1989. The property is anchored by multiple office tenants, including M+W Zander and Hitachi Consulting, as well as retail tenant Yank Sing Restaurant. Dan Cressman, an executive vice president in Grubb & Ellis’ San Francisco office, represented Pacific Resources Stevenson in its recent purchase of the property.

Construction Industry Statewide Safety Conference Coming Up The 2010 Safety Expo will be held March 30 through April 1 at Cosumnes River College in Sacramento. The annual conference provides construction industry safety and construction management education and training. n

Michelle Lagos, marketing manager at FME Architecture + Design, has been named to the Young Leaders Committee of CoreNet Global. She will serve as the Web site and communications chair of the 16-member committee. Lagos also co-chairs the Young Leaders Group of the Northern California Chapter of CoreNet Global and co-founded the Young Leaders’ Mentorship Program in 2009.

Premier Apartment Advisors Join Cornish & Carey Cornish & Carey Commercial/ONCOR International has expanded its multi-family investment services group. Richard Knutson (top), John Leyvas (bottom), Jay Cross, Stephen Pagones, Mike Pagones and Anthony Pappageorge, a brokerage team formerly affiliated with Premier Apartment Advisors, will be based in Cornish’s Oakland office, and Vince McCarrie will be based in its Santa Clara office. They join industry veteran Keith Suddjian, a senior vice president in C&C’s Palo Alto office. Knutson and Leyvas co-founded Moison Investment Co.’s East Bay Group in 1997. The company became Premier Apartment Advisors in 2006. The group has serviced private equity clients, institutional investors, real estate investment trusts, developers and others.

HOK names San Francisco Director Marc H. Flax has been promoted to senior vice president and director of HOK’s San Francisco’s Corporate/Commercial Business Unit. Flax has been with HOK for more than seven years and previously led the Interiors practice in San Francisco. He will assume leadership of the company’s San Francisco private-sector practice, including management, project and program delivery, marketing, business development and client relations.

Cassidy Turley BT Commercial Crowns Top Producer for 2009 Michael Maffia, a managing director and partner in Cassidy Turley BT’s Leased Investment Group based in its San Francisco office, has been named the Top Producer for 2009. This was Maffia’s third year in a row to receive the honor. Maffia specializes in representing institutional and private buyers and sellers of both multi- and single-tenant leased investments throughout the United States. Maffia completed 33 transactions in 2009 totaling more than $148 million in value and more than 1.2 million square feet.

Blach Promotes in Pre-construction Services Santa Clara contractor and construction manager Blach Construction Co. has promoted Juan G. Barroso to vice president of preconstruction services. Barroso will oversee a staff of 13, lead the company’s growing photovoltaic services and participate in an expanded business development capacity. Barroso was Blach’s chief estimator for five years. He and his team provided estimating and other pre-construction services for more than $500 million in projects annually.

Long-Time Zephyr Partner Retires Ilse Cordoni, sales manager at Zephyr Real Estate’s SOMA/ South Beach office and a partner in the Zephyr ownership group, will retire from real estate sales management. Cordoni began managing the company’s Noe Valley office in 1990 and was instrumental in building both the Noe Valley and SOMA offices. She is a former president of the San Francisco Association of Realtors.

Dome Announces New Chief Financial Officer

PEOPLE on the move

continued from page 7

San Francisco Broker Announces 2009 Top Producers Zephyr Real Estate, the largest independent residential brokerage in San Francisco, says Mollie Poe was its top 2009 producer. Following Poe are William Kitchen, Michael Ackerman, Robin Hubinsky, Bonnie Spindler, Richard Meyerson, Christine Doud, Debbie Dells and Britton Jackson. Zephyr has six San Francisco offices and had $1 billion in 2009 gross sales.

San Francisco-based Dome Construction Corp., a pre-construction and construction services company that specializes in tenant improvements including health care and biotech, has named Andrew Maurer its chief financial officer. Maurer is a certified public accountant and holds a degree from the University of California, Berkeley, Haas School of Business.

IFMA Silicon Valley Seats 2010 Board The Silicon Valley Chapter of the International Facility Management Association has seated a new board of directors: Ed Novak of CFM Works is the new president; Vice President is Larry Morgan of SAP Labs Inc.; Secretary is Claudia Folzman, Iron Construction Inc.; Treasurer is Terry Riecken, CMD Builders Inc. New board directors include Kevin Klink of Grubb & Ellis; and Eric Lee and Judith Sayler of Marketing Spheres. n m a r c h 201 0

theregistrysf.com 31

FinalOffeR High Hopes

By Sharon Simonson

Hamid Moghadam, chairman and chief executive officer of AMB Property Corp., headquartered in San Francisco, is the 2010 honoree for the Spirit of Life Award from the City of Hope, an independent research, treatment and educational institution focused on cancer, diabetes, HIV/AIDS and other life-threatening diseases. It is one of forty Comprehensive Cancer Centers nationwide. The award recognizes Moghadam’s achievements as an entrepreneur and as a contributor to his community. Moghadam came to Northern California in the late 1970s to attend the Stanford Graduate School of Business. Today he is a Stanford University trustee and chair of the Stanford Management Company. Moghadam co-founded AMB, an industrial real estate company, in 1983. The company closed its initial public offering in 1997. AMB owns and manages more than 155 million square feet of operating and development properties in the Americas, Europe and Asia. Its San Francisco Bay Area portfolio measures nearly 11 million square feet, second in size in the Americas only to Southern California. The company’s East Bay holdings are typical of its global logistics business with occupancy driven by the movement of goods. Its South Bay properties are atypical in that they are driven by the technology business. AMB faced adverse conditions in 2009 along with the rest of real estate, even experiencing layoffs (a first in the company’s 26-year history) and a significant dip with some recovery in its stock price. However, Moghadam was upbeat on the most recent conference call. AMB’s internal research is calling for positive net absorption in its U.S. industrial markets in the third quarter and a rise in AMB occupancy in the fourth. “For the first time since mid-2008 we find that our large global customers are talking about growth,” Moghadam said. He expects investment opportunities to increase with rising interest rates. He also said AMB plans to grow by creating new co-investment vehicles. “The trend we are seeing in the private-capital business is major investors around the world, after the experience of the last cycle, really want significant coinvestment,” he said. “They want to invest with operators, and we are hearing an increased interest in working with specialists as opposed to just capital allocators. We think we check all of those boxes.” AMB is traded on the New York Stock Exchange. How did you wind up in Northern California in the real estate business? HM I grew up in Iran. My father was in the real-estate development business, and I grew up walking sites and smelling concrete. I knew from a very early age I wanted to be an entrepreneur, a principal and in the real estate business. Would I have imagined 27 years ago that I would be where I am? I don’t know. It has been a combination of good luck and adjustment. I came to the United States to get an engineering degree [at the Massachusetts Institute of Technology] and afterward I was ready to go back to Iran. But that was around 1978 and there was the Iranian revolution, which made it difficult for me to return. So I went to business school at Stanford. San Francisco is where we have maintained our

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Hamid Moghadam

headquarters even as we have grown into a global company and there has been no reason to move. We now have 29 offices on four continents, but we still have about 200 people in the Bay Area. What led you to start AMB? HM I didn’t start with a focus on industrial real estate. Initially our focus was on offices and then on shopping centers. We didn’t get into the industrial space until after seven or eight years in the business. We exited the office business because we didn’t see the demographic support for demand continuing at the same rate. We took that capital and put it into industrial and groceryanchored shopping centers. So we were two-thirds industrial and one-third retail, and we refined our investment strategy in 1999 to focus solely on industrial real estate. Since then the company has done quite well. We were doing better in late 2007, but along with everyone else we were impacted by the global economic crisis that began in 2008. What do you see as the future of institutional money management? HM A lot of businesses tied to financial services are going to go through a lot of change because of the last 24 months. It is an inflection point. There has been a huge downturn and on the other side are going to be winners and losers. Remember, your average institutional investor has a variety of managers and strategies. No one makes money every year all of the time. But there are going to be companies that have been careless with investor capital, and they are going to go out of business. Or conversely, there are going to be companies that might have lost money but who acted prudently, limited losses and made money on the upside. They communicated well during the downturn, and these companies will survive. I think we (AMB) are going to have one of our best years in our capital-management business. The company has a long-standing focus on converting infill locations to other uses to create value. How does that apply to your properties in the Bay Area? HM Industrial real estate is lowest on the food chain in any neighborhood. No one likes trucks, diesel fumes and warehouses, so to the extent that you covert to office campuses, retail or apartments, you can enhance value. For example, we sometimes invest in industrial sites and move them up the food chain. It’s a huge opportunity in the San Francisco Bay Area. Not in a market such as today’s, but over the years we expect that these properties will prove to be very good investments; municipalities also like the results. For example, our headquarters in San Francisco was once a dilapidated warehouse where people parked cars and now it’s one of the most beautiful properties on the waterfront. Why do you support City of Hope? HM Our industry has traditionally supported City of Hope. When I was asked by Mike Covarrubias (chairman and chief executive of San Francisco’s TMG Partners) to accept this honor and help out, I did a little research. I knew City of Hope, but not in-depth. The more research I did the more I liked them. They do something that is unusual other than in a university setting: world-class clinical care and world-class research. n