THE
Registry
P.O. Box 1184 San Mateo, CA 94403 415.738.6434
Letter from the Publisher
Mission Statement
The Registry is a real estate journal that aspires to fulfill the need of Bay Area professionals for accurate, unbiased and timely news, analysis and information.
Publisher
Vladimir Bosanac vb@theregistrysf.com
President
Heather Bosanac 415.738.6434 heather@theregistrysf.com
Editor-in-Chief
Sharon Simonson 408.334.2512 ssimonson@theregistrysf.com
Design
Jelena Krzanicki Janet Raugust
Photographer
Chad Ziemendorf
Writers
Robert Celaschi, Michael Fitzhugh, Janis Mara Sharon Simonson, Sasha Vasilyuk
Contributors
David Baker, Peter Ingersoll, Rob La Eace, John McNellis
Advertising
Denise Franklin 408.366.1984 denise@theregistrysf.com
News
news@theregistrysf.com
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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. The Registry is a registered trademark of Mighty Dot Media, Inc. ©2011 Mighty Dot Media, Inc. All rights reserved. This publication and/or its contents may not be copied, reproduced or republished in whole or in part without the written consent of Mighty Dot Media, Inc.
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Dear Reader, I happened to catch “Seabiscuit” a couple of weeks ago and was reminded that the thoroughbred was a local hero, stabled at one point at the [in]famous Tanforan Racetrack in San Bruno. While the story is a Hollywood version of history, I still enjoyed the tale (again) of how this little brave horse that should never have been a champion transformed a nation much in need of hope and change. Today, nearly 80 years later, the little tech firms of the Bay Area are again having a similar impact on the world. The industrial muscle of the Bay Area is starting to flex, and its impact is being felt in property markets across the entire region. Millions of commercial square feet are leased by companies large and small, the details of which we cover daily on our Web site. Tech firms are planning campus-style complexes in Silicon Valley and in San Francisco. Job boards are flooded with opportunities. Which brings us to housing and why this month’s feature stories on housing are so relevant. While no other industry is more associated with this past recession than housing, housing is the only sector of the Bay Area real estate industry today that is seeing any significant development activity. It is largely limited to the apartment sector, but for-sale developers are not as quiescent as they may seem. In the high-cost, supply-constrained core market of the Bay Area, housing demand never is really sated. As the magazine went to press, SummerHill Homes sent word that a new 53-unit subdivision where homes are priced in the $1.7 million range drew nearly 1,000 people to see its new models over the preceding weekend. That, by any measure, is amazing. As we all know, housing is a huge industry. It drives employment, moves financial markets globally, affects transportation patterns, and indirectly even defines our environmental policies. Its continued production is also crucial for the long-term economic health of our region. That is why housing has been and remains a cornerstone of The Registry’s coverage. We have maintained our focus on both residential and commercial real estate because they are co-dependent, and understanding one cannot be done without understanding the other. Most importantly, both are affected by employment. By all anecdotal accounts, employment in the Bay Area is starting to grow significantly. A
big sign of this is the tech sector’s confidence in real estate expansion. But, job growth also means more people who need a place to live. Our map on page 13 shows just where the action is, and not surprisingly, it is largely around the tech neighborhoods of San Francisco’s SoMa and North San Jose, proximate to some of the largest (and smallest) tech employers in our region. Which brings us to who is going to be living in all of those new apartments and occupying all of that commercial real estate—the cool kids graduating from college today who every tech company seems to want. There’s a lot of them, number one. But just as important, they want their MTV and they want it green. I moderated a panel in San Francisco recently on tenant engagement and came away believing that we will see a lot more on this topic in the very near future. There is just no possible way for building owners and managers to achieve and sustain their green goals without the help of their tenants. HOK, the architecture firm that hosted the event, already is offering clients help in this regard, a vertical extension that I find interesting. If the recession has taught us all one thing, it is that we can’t rely on a monochromatic revenue stream and survive! One of the panelists mentioned that a design firm in San Francisco recently went to recruit at a wellknown university in California. Nine of 10 potential applicants asked the company what its sustainable practices were! Unsurprisingly, the firm was not prepared. I bet it will be next time. In closing, I would like to acknowledge the feedback that we received from Paul Zeger, the president of Pacific Marketing Associates and an editorial board member of The Registry. He took issue with an April article, “Low Times for High-Rise Condos,” where we reported on the current market for condominiums in San Jose, especially downtown, where there was much new construction in the boom years. We invited him to pen a letter to our editor, so readers could benefit from hearing his ideas, and we have published it on the next page. Paul was not interviewed for the original story. We always welcome feedback from anyone, not just our board members, and we thank Paul for helping to establish a strong standard for such correspondence going forward. Regards, Vladimir Bosanac
Letter to the Editor
Low Times for High-rise Condos Buyer complacency, uncertainty weigh on downtown San Jose condo market. By Michael fitzhugh
S
an Jose’s downtown condominium-construction boom promised to bring thousands of new residents to the city center. The vision helped entice new restaurants, cafes and stores to set up shop. But so far, the promise has failed to deliver the critical mass of new downtown dwellers the city and condo developers hoped to attract. Three of the largest downtown residential high-rises are still on the long road to selling their inventory, approximately three years after sales efforts were begun at all three. A fourth tower, the 23-story Three Sixty Residences, which went on the market in April 2007, is being converted to rentals after the Chicago developer defaulted on a more than $100 million mortgage loan, highlighting just how dramatically expectations for the market have fallen. Axis, a 22-story high-rise tower that hit the downtown San Jose market in November 2007, has closed on fewer than half its 329 units, according to the Polaris Group, a market research company. The 88, which went on the market in April 2008, had closed on just 102 of its 197 units as of March. City Heights, on the northeast edge of Downtown, is still working to sell all of its 124 units, having closed on just 103 condos since the project entered the market in December 2006. New condominium development blossomed across Santa Clara County during the recent housing boom, according to Polaris. Nowhere was that construction more concentrated than downtown: “Greater downtown San Jose experienced one of the largest booms in new condominium construction” in Santa Clara County from 2004 to 2008, the company reports in its March market report. “New home construction was almost nonexistent prior to 2000 [in downtown San Jose] until redevelopment incentives and encouragement boosted supply.” “Thereafter, the pipeline began to fill up with new projects: a total of 4,600 urban-style condominium units were completed between 2000 and 2009,” the report says. Today, the greater downtown San Jose area has the highest concentration of new condominiums available for sale. Despite the struggling economy, people are still buying condos, said The Mark Company President Alan Mark, who has been involved in Bay Area real estate marketing and consulting since 1990. His firm has worked to build sales at Three Sixty Residences, One East Julian and Santana Row, among other developments.
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Interest rates remain low, and a lot of people have cash for down payments, he said. “If we roll back the clock just a few years, there weren’t really any residential high-rises in San Jose,” he said. “But there are a lot of people who have no desire to live in San Francisco, and San Jose has come a long way. It reminds me of SoMa (South of Market) in the early to mid-1990s, in terms of people needing some convincing to live there. I think we’re moving past that. San Jose has really changed in this new millennium.” He notes that downtown has added to the shopping, restaurant and eveningentertainment offerings, which has drawn people in the 18-year-old to 35-yearold demographic as well as empty-nesters, he said. Still, retail vacancy rates do remain high, and some store fronts have remained empty for many years. New condo projects are unlikely to come online soon. Lenders are skittish about new for-sale housing across Bay Area markets generally, including San Jose. “Right now, competition isn’t another building. It’s really complacency,” Mark said. “People often think, ‘Rates are low, I can wait.’ But when there’s job stability and job demand, that’s what’s going to spur it on,” he said. It’s little wonder buyers aren’t feeling particularly confident about entering the market. As of Jan. 1, 2010, approximately 24 percent of all single-family homes and nearly half—46 percent—of all condominiums in Santa Clara County were assessed below their purchase price, according to the 2010-2011 Assessor’s Annual Report. Still, with the Federal Reserve reporting rising wages for informationtechnology workers—San Jose’s core workforce—in its latest survey of regional economic activity, there are signs of hope. Average annual wages for computer and mathematical occupations in San Jose have risen 5.4 percent, from $104,441 during the first quarter of 2009 to $110,110 in the first quarter of 2010, according to the most recent data compiled by the California’s Employment Development Department. Condo resales also are picking up, though probably because prices have fallen so much. “The resale condo market has seen a lot of foreclosures, which has driven down prices,” Keller Williams Realtor Jeff Hansen said. “There are plenty of owners selling, but most of the people who are selling are only selling because they have to.” Between 2007 and 2009, the median sale price of a condo in the San Jose and Santa Clara markets fell 36 percent, according to Polaris. That compares to a 13 percent decline in the Mountain View-Sunnyvale market. At the end of 2010, the median price of a condo in San Jose-Santa Clara was $330,000, nearly $200,000 less than the median in the Sunnyvale-Mountain View submarket, Polaris reports. Renting remains more financially sensible than buying in the current Bay Area housing market, suggests an analysis by the Novato-based real estate research firm RealFacts. And now renters in San Jose are finding even more choice. Conversions like that seen at downtown’s Three Sixty Residences can be a long time in coming as developers and lenders grapple with whether to wait for a better market in which to sell their units or to take on the unplanned burden of becoming property managers instead, said Sarah Bridge, co-founder of RealFacts. “I think that holding pattern has finally broken,” she said. n
“[Downtown San Jose] reminds me of SoMa in the early- to mid-1990s, in terms of people needing some convincing to live there.” Alan Mark, The Mark Company
A P R I L 201 1
The San Jose Glass (Tower) is Half-Full There is a lot more to this story, including the fact that despite the insanity of the economy over the last three years, the latest real estate cycle has brought more than a thousand new homes and 1,500 new owners into downtown San Jose. (“Low Times for High-rise Condos,”
P H OTO BY C H A D Z i e M e N D o R f
RESIDENTIAL MARKET REPORT
April 2011 The Registry). While the developers of those properties were forced to abandon financial plans and rework strategies, they preformed heavy lifting that has brought a rich core of proud new homeowners. Some may say that we fell short of “critical mass,” but there is no question that downtown is a very different place than it was five years ago. The high-tech boom of the last 20 years, the low interest rates beginning in 2002 and government inducements to build created momentum for an urban alternative to San Francisco. In the middle years of the last decade, developers and bankers rushed in to satisfy the demand, producing five high-rise developments (City Heights, The 88, Axis, 360 Residences and Skyline at Tamien Station), a series of mid-rises (The Cannery, The Globe and Villas Fontana) and converted old brick buildings (Plant 51). Then, as bad luck had it, the downturn hit, right on the eve of the delivery of more than 1,200 new homes to market. In the midst of that historic downdraft, hundreds of homebuy-
ers still clearly demonstrated their commitment to downtown. While overall average sold home prices in San Jose have dropped 34 percent1, condominiums in the downtown area are off 29 percent2, and high-rise properties have only adjusted prices down 20 percent3 in the same period. Consumers have paid on average a 32 percent premium over the traditional low-rise alternatives to live in a high-rise setting with a full array of amenities and services such as swimming pools, fitness centers, spas, screening rooms, hobby work spaces, concierges and even a grocery store. The developers and lenders who took the downtown investment risk have involuntarily subsidized new homebuyers. The monthly cost of condominium ownership today is approximately 30 percent less than it was in 2007-2008. However, pioneering properties, regardless of their financial success, frequently become the impetus for thriving new neighborhoods, as has been true in San Francisco’s SoMa, South Beach and Mission Bay areas, as well as
downtown Oakland, Emeryville and downtown Palo Alto. The 1,500 new downtown residents, with their high salaries, good credit and healthy disposable income, are not the final piece of the renewal process, but they have brought San Jose a long way toward becoming the thriving urban core that we all believe it will be. Paul Zeger Paul Zeger is the president of San Francisco’s Pacific Marketing Associates Inc., which represents three San Jose condominium projects discussed in the story, The 88, Axis and City Heights. He is also a member of The Registry’s editorial board.
1 MLS Listings. Weighted average of multifamily and single-family home values in San Jose measured from Q1 2008 to Q1 2011. 2 MLS Listings values for San Jose downtown condos measured from Q1 2008 to Q1 2011. 3 Internal research at Pacific Marketing. High-rise percentage based on average price per square foot from 2008 to 2011.
Media Partners The Registry would like to acknowledge its partnerships with the following organizations:
www.norcal-ai.org
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theregistrysf.com 3
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 makeup reflects the wide readership of the magazine including attorneys, architects, interior designers, residential and commercial real estate brokers, investors, lenders, general contractors and subcontractors, engineers and other professionals.
NORTH
Marc Cunningham President AllWest
Daniel Myers
Partner, Real Estate Practice Group Leader Wendel, Rosen, Black & Dean LLP
Bruce Dorfman
Principal Thompson | Dorfman Partners, LLC
Jeanne Myerson
President & Chief Executive Officer The Swig Company
Phil Williams, P.E., LEED AP Vice President Webcor Builders
Daniel Huntsman, LEED AP
President & Founding Principal Huntsman Architectural Group
Tim Tosta
Partner Luce Forward
Jesshill E. Love III Partner Ropers, Majeski, Kohn & Bentley
Anton Qiu
Principal TRI Commercial
Paul Zeger
Principal, President & CEO Pacific Marketing Associates
SOUTH
Jennifer Dizon, CPA Audit & Advisory Partner Hood & Strong, LLP
Norman C. Hulberg, MAI
President Hulberg & Associates, Inc.
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Erik W. Doyle
Executive Managing Director Newmark Knight Frank Cornish & Carey Commercial
Jody Quinton
Regional Manager DPR Construction, Inc.
Geoffrey C. Etnire
Co-Chair, Real Estate Group Hoge, Fenton, Jones & Appel, Inc.
Patricia Sausedo
Vice President of Public Policy & Communications San Jose Silicon Valley Chamber of Commerce
Michael W. Field
Director, Commercial Real Estate The Sobrato Organization
Jeffrey A. Weidell
Executive Vice President NorthMarq Capital
Contributors David Baker Pent-Up (Affordable) Housing Demand pg. 17 David Baker founded San Francisco-based David Baker + Partners in 1982. With a focus on sustainable affordable housing, the firm combines social concern with signature design. It has received more than 150 local and national architectural design awards. Baker recently received the Hearthstone Builder Humanitarian Award, which honors the housing industry’s 30 most influential and innovative people of the past 30 years. In early 2009, he was inducted into the Wm. S. Marvin Hall of Fame for Design Excellence and in 2008 was named Housing Hero by the San Francisco Housing Action Committee. He is a board member of the San Francisco Bicycle Coalition and San Francisco Planning + Urban Research Association, known as SPUR.
Peter Ingersoll Same Song, Second Verse pg. 20 Peter Ingersoll is chief executive of East Bay investment advisory Safe Harbour Equity Inc. and a serial entrepreneur. He has an economics degree from the University of Pennsylvania Wharton School and several advanced degrees from the School of Hard Knocks earned while working in the construction, development, site acquisition, private banking & trust, investment banking, securities and, most recently, the Northern California commercial real estate industries.
Rob La Eace The Cup Runneth Over pg. 22 Responding to emergencies as a firefighter in a variety of uncertain situations and diverse neighborhoods taught Rob La Eace a lot about how people should be treated, not only during a crisis, but also everyday. Today, these same skills are an asset to those who work with this San Francisco native in his career as a broker associate with Paragon Real Estate Group. The tools he puts to work as a firefighter are what makes the difference to the clients La Eace works with as an agent. While it may help that La Eace is the type of guy with a warm smile and a friendly attitude, his professionalism, organization and drive to succeed are what make him stand out in his career. Working in his sixth year in the industry, La Eace is in touch with his clients’ needs and with the city—putting a local’s perspective to work.
John McNellis Learn to Love Your Lawyer pg. 24 John McNellis is a Palo Alto-based retail developer and investor. Since its inception nearly 30 years ago, McNellis Partners has developed more than 50 projects in Northern California, primarily shopping centers ranging from 30,000 square feet to 200,000 square feet. McNellis serves on the national board of trustees for the Urban Land Institute and is a ULI governor. He is a member of the International Council of Shopping Centers and serves on the Policy Advisory Board for the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley. He also serves on the national board of directors for Outward Bound USA and the board of Rebuilding Together Peninsula, a volunteer partnership to rehabilitate homes and community facilities. He is a former board member of Lambda Alpha International (Golden Gate Chapter), an honorary society for the discussion of land-use and economics. On occasion, he lectures for the ULI, the ICSC and Stanford University’s schools of business and law. n
News
SENT to us
Desk
Silicon Valley Growing Office Jobs Fast The Silicon Valley technology industry will fuel the strongest office-using job growth in the country this year, according to a new report from Marcus & Millichap Research Services. South Bay employers will add 21,000 jobs in 2011, boosting total employment by 2.5 percent, the company said. Of that, office-using employment will represent 12,500 jobs, a 5.3 percent increase. “Improving global demand for locally produced tech goods will significantly boost local office properties, as manufacturing and technical service firms occupy nearly half of all office space in the South Bay,” according to the report. For the first time in three years, the amount of occupied space at the end of the year will be greater than that at the beginning, the company said. Vacancy will drop more than a percentage point, but “meaningful rent increases” won’t surface until next year. San Francisco will add 20,400 jobs this year, about 9,800 of them office jobs. Oakland will add 13,400 jobs, 4,300 office positions, the company said.
San Mateo Office Market At Full Speed Office leasing activity in San Mateo County hit a five-year high in the first quarter, according to brokerage Colliers International. Gross absorption, a measure of all leasing activity in the market, topped 1.9 million square feet, the company reports. It is the largest quarterly gross absorption total in five years and represents 70 percent of the gross absorption for all of 2011. The quarter was punctuated by Facebook Inc.’s purchase of the former Sun Microsystems campus, with more than a million square feet, and San Mateo County’s decision to buy 1 and 2 Circle Star Way in San Carlos and to occupy all 208,000 square feet. The activity translated into a drop in office vacancy to 15.3 percent from 17.6 percent at the end of last year. San Mateo County has a total of 40.8 million square feet of office inventory.
JLL: Oakland Business District Leads East Bay Recovery The East Bay office market is approaching its bottom, with tenants in the Oakland central business district back in the market in search of value in the city’s Class A properties, according to Jones Lang LaSalle’s latest National Office Occupier Outlook. “Activity in the remainder of the market, from San Ramon to Richmond, remains reserved for those tenants driven by impending lease expirations rather than growth or office upgrades,” the real-estate focused service company said. “Early renewals, a trend that has persisted for nearly two years, continue to be the most common transactions taking place in suburban submarkets.” Though 94 percent of U.S. office markets are tenant-favorable now, only 31 percent will be in 2012.
Old A.F. Evans Apartment Portfolio Sells Bayside Communities LLC has acquired the general partner interests in 20 multifamily properties—half in the San Francisco Bay Area—from the bankruptcy estate of A.F. Evans Development Inc. The 2,135 units are 90 percent affordable properties including senior-housing and are located in California, Washington and Oregon. Bayside also expects to acquire the general partner interests in another 12 properties from the A.F. Evans portfolio in the next few weeks. The assets, which include a property management company previously owned by A.F. Evans, are being acquired all cash and are valued by Bayside at nearly $300 million.
The Bayside companies are owned in partnership by affiliates of Southern California’s Luzzatto Co. Inc., Barker Pacific Group Inc. and Lion Real Estate Group LLC. The property management affiliate, a successor to the property management arm of A.F. Evans that filed for bankruptcy in March 2009, will manage Bayside Communities’ portfolio and provide fee management services to another 47 affordable communities totaling 7,300 housing units and senior living centers in California, Washington, Nevada, Oregon and Texas. Bayside Communities and Bayside Management were formed specifically to acquire and operate the assets of the Evans company. In San Francisco, Barker Pacific Group has developed 100 First Plaza, owns and manages One Sansome Street, 1235 Mission St. and the Leandro Soto Apartments, located in the Mission District. The company has offices in Los Angeles, San Francisco and Marin County. The Luzzatto Co. and its affiliates invest nationwide in real estate and real estate-related debt, with existing investments in California, Texas, Alabama, Georgia, Illinois and Missouri. Lion Real Estate Group is a real estate investment and development firm based in Los Angeles. Over the next five years, Bayside plans to acquire and secure management contracts on more than 20,000 affordable and senior rental units in the Western and Southwestern United States.
Placement Agents to Quit California Public Pensions Global placement agents are discontent over new legislation that requires those working with public pension funds in California to register as lobbyists, and many placement agents surveyed volunteered that they felt they were being punished for the wrongdoing of politicians, according to a study by Preqin, a London-based independent research company that studies private equity and alternative assets. Effective Jan. 1 California law requires placement agents working with CalPERS, CalSTRS, California Judges’ Retirement System and the University of California Regents’ Retirement Fund to adhere to new compensation-reporting procedures and to attend ethics training in Sacramento. It also prevents them from making campaign contributions and outlaws contingency fees, compensation based on the actual amount of securities, including interests in real estate funds, that are sold. The purpose of the legislation is to prevent corruption. The Preqin study showed that 78 percent of firms responding will not be immediately registering placement agents as lobbyists. The prohibition on contingency fees was the most-cited cause of discontent among those surveyed, and 58 percent stated that they would cease doing business with California primarily for this reason. Eighty-four percent said that they would rely less on public funds as a result of the legislation.
Yandle Earns San Francisco Giants Championship Ring John Yandle, a senior vice president and manager of the Santa Clara office for Cornish & Carey Commercial Newmark Knight Frank, has received a 2010 World Series Champion ring for his work as a practice pitcher for the San Francisco Giants. Yandle is best-known in Silicon Valley for work in commercial real estate, having leased or sold more than eight million square feet valued at more than $1 billion. But since 1985, Yandle has also moonlighted as the San Francisco Giants’ batting-practice pitcher. He pitched for Stanford University in college and was drafted in 1977 by the San Diego Padres. He also played a season with the California Angels’ AA team. In the summer of 1985, while visiting a former teammate in the Giants’ locker room, a Giants coach asked Yandle to throw some batting practice pitches, and he has been doing so ever since. continued on page 30
PEOPLE on the move San Jose Names Transportation Department Head Hans Larsen has been appointed director of the Department of Transportation for the city of San Jose. Larsen had served as the acting director since October 2009. A registered civil engineer, Larsen joined San Jose in 1985 as lead project manager for the $1 billion Measure A highway improvement program. He has led the city’s transportation-engineering team and managed financing and development of the $260 million extension of state Highway 87 from Julian Street to U.S. Highway 101. He became deputy director for transportation planning and project delivery in 2001. The city’s Transportation Department has 407 employees, an $80 million annual budget and oversees and maintains 2,400 miles of transportation infrastructure including streets, sidewalks, landscaping, traffic devices, sewers and storm drains.
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Tree-Care Executive Joins Association Board, Company Expands in East Bay Peter Sortwell (left), president and chief executive of Hayward’s Arborwell Inc., has been sworn in as a director for the Tree Care Industry Association, a 73-year-old professional organization for tree-care companies and professional arborists. Doug Hagge (right), an arborist with more than 17 years experience in the tree-care industry, has joined Arborwell as its new-account manager. Sortwell is a certified arborist who began his career at S&S Tree and Landscape, a Sortwell family-owned company in Beverly Farms, Mass. He purchased Arborguard Inc. in 2001, changing the name to Arborwell Inc. Before joining Arborwell, Hagge spent five years with TruGreen and six years with ValleyCrest Tree Service.
Arborwell serves all of California, offering tree pruning, removal, preservation, installation, plant health services and arborist consultations to contractors, commercial property managers, golf courses, municipalities and estates. It has 110 employees and gross annual revenue of about $15 million.
Real Estate Telecom Design Company Promotes Laurel Leigh Taylor has been named an executive vice president for Oakland’s TEECOM Design Group, a specialized engineering firm focused on telecommunications, security and audiovisual systems. As executive vice president, she serves as managing principal in the absence of Chief Executive and Co-Founder David Marks. Taylor has aligned the firm with industry giants such as Microsoft Inc. and Cisco Systems Inc. to better understand the next wave of innovation and the implications of global technology trends within the built environment. She believes that the “soft layer” within the built environment—the space that serves up applications and software—is the most significant opportunity for owners looking to extend the long-term viability of their real estate portfolio while delivering an exceptional user experience. Under her guidance, the firm has expanded to Dallas and Seattle and tapped the federal market.
Contractor Elevates Human Resource Executive Gaye Landau-Leonard has been promoted to vice president, human resources of Santa Clara-based Blach Construction Co. Landau-Leonard has been with the company since 2008 when she joined the general contractor as director of human resources.
Attorneys Rejoin Oakland Law Firm Steven J. Cramer (left) and Matthew F. Graham (right)have rejoined Wendel, Rosen, Black & Dean LLP as partners. Initially joining the firm in 2007 when Wendel Rosen combined with fellow Oakland law firm Aiken, Kramer & Cummings Inc., Cramer and Graham departed for a stint at another regional firm in April 2010. Cramer will serve business clients in commercial and real estate transactional matters. Graham is a construction litigator who represents owners, contractors, subcontractors, design professionals, sureties and public agencies in a wide array of construction litigation throughout California and the Western states.
Engineering Company Adds Three in San Francisco
telecom engineer, respectively.
Brian Lake (left), Jonel Garcia (center) and Blake Forbes (right) have joined the San Francisco office of WSP Flack + Kurtz as senior associate, associate and
Lake has more than 20 years experience as an electrical engineer and lighting designer. Garcia, who is joining from the architectural firm HOK, is an electrical engineer with 22 years of lighting, power and distribution design experience. Forbes joins after serving as a project manager for J&A Engineering in Atlanta.
Commercial Property Consultant Promotes, Expands BuildingWise LLC, an energy performance and sustainability consultant to the commercial property industry, has promoted Jordan Daniels to senior partner. The Seaside, Calif., company also has hired Laurie Dickson and Robert Gordon as project manager and project coordinator, respectively. Daniels, most recently director of business development for the company, brings more than nine years experience in the built environment and is an adjunct instructor at Hartnell College in Salinas, where he teaches fundamental principles and practices of green building. Dickson, formerly of Colorado, was chief executive and founder of Eco Home Center, a green-building store. She also worked as a consultant in New York and has led numerous workshops on indoor air quality and green-building practices. Gordon is a recent graduate of Hartnell College’s Center for Sustainable Construction program.
Tenant Brokerage Promotes in San Francisco Matt Hart has been named senior managing director by international commercial tenant advisory firm Studley. Hart had been a corporate managing director. Hart began his career with Studley in 1995. He has represented tenants totaling more than three million square feet in downtown San Francisco, including investment banking and asset manager JMP Group Inc., the University of California, Berkeley, and French gaming company Ubisoft Entertainment. He also has completed work throughout the Bay Area for clients including the University of California Regents and Shutterfly Inc.
General Contractor Scales Project Management Eric Flores has joined San Jose-based Iron Construction, Inc. as a project manager where he will oversee a variety of projects including commercial interiors and life science development. Before joining Iron Construction, Flores worked with Orchard Commercial in business development and construction management. Flores also served in the US Army 82nd Airborne Division and Special Operations. continued on page 31
COMMERCIAL MARKET REPORT
Rebuilding Redevelopment The governor’s proposed overhaul to redevelopment agencies and the tough economy reveal financial weakness and questionable efficacy. By Doug Caldwell
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alifornia’s embattled redevelopment agencies are doing all they can to fend off raiding parties sent by Gov. Jerry Brown. Their first line of defense? A moat of debt. Brown’s raiders seek to eliminate all 399 active California redevelopment agencies, claiming their demise would free $1.7 billion a year in revenue for the beleaguered state. But while Brown has struggled to implement his plan, RDAs have been busy undermining it. Since the beginning of 2011, redevelopment agencies statewide have borrowed more than $775 million, according to the state. That is more than half of the $1.2 billion in debt taken on by RDAs in all of last year and adds to the nearly $90 billion in debt the agencies already have. Should RDAs be eliminated, every dollar of additional debt limits the cash that would flow to the state until the debt is repaid. Whatever the contest ultimately yields, there seems little doubt that California is on the cusp of change to a controversial source of government spending that has fueled housing and commercial property development for decades. Those affected—agencies themselves, affordable housing advocates and development companies—are speaking loud and often about the damage they believe elimination would do, while acknowledging that reform is necessary. At stake in communities around the region are public improvements such as San Francisco’s Ferry Building and San Jose’s Tech Museum. “It’s critically important,” said Sean Charpentier, redevelopment project coordinator for the city of East Palo Alto. “It has developed much of our commercial projects, which generate about 900 retail jobs and another 200 hotel jobs. It goes a long way toward reducing our astronomical unemployment rate, which last time I checked was like 20 percent.” Redevelopment agencies also finance thousands of new units of affordable housing each year, many situated near public transit and reviving urban centers. San Jose’s housing department spends $35 million a year or
more building affordable housing with redevelopment money. In the last 23 years, the department has produced and rehabilitated 21,000 homes and apartments. “It affects the Transbay project, work in Mission Bay, and we will never get work off the ground at Hunter’s Point Shipyard,” Fred Blackwell, executive director of the San Francisco Redevelopment Agency, told a gathering of the Urban Land Institute this spring, itemizing some of the city’s largest initiatives. His agency spends half its annual revenue building affordable housing, he said, producing more than 10,000 new units in the last several decades. It also owns and manages about 11,000 units of affordable housing itself. It is doubtful that the state envisions any successor to the RDA taking on that task, he said. “Most of the cranes you see in the sky today are a result of work by the RDA because of the drying up of credit in private markets,” he said. “Anyone who thinks that things that happen out there would happen anyway—that is not true at Mission Bay and Transbay.” Yet, Blackwell is the first to say that agencies need reform. He is far from alone in his assessment. A recent investigation by the office of state Controller John Chiang found no reliable means to measure the impacts of redevelopment activity on job growth. The report, which audited 18 redevelopment agencies statewide as part of a fact-finding mission, identified missed payments to school districts, widespread accounting and reporting deficiencies, questionable payroll practices, substandard audits, faulty loans and inappropriate use of affordable-housing money. Among the 18 agencies included in the audit were San Jose, Fremont, Richmond and Hercules. “For a government activity, which consumes more than $5.5 billion of public resources annually, we should be troubled that there are no objective performance measures demonstrating that taxpayers are receiving
Bay Area Redevelopment State Controller John Chiang audited 18 California RDAs over five weeks in the early part of the year to provide information to the Legislature as it took up the agencies’ futures. The cities were selected to provide a cross section of sizes and urban and suburban locations, a spokesman for the controller said. Key metrics reported for Bay Area agencies:
City
RDA Inception
2009-2010 tax-increment revenue
Outstanding debt
Estimated repayment
City of San Jose
1956
$202.4 million
$3.6 billion
18 years
City of Fremont
1976
$37.3 million
$184.4 million
5 years
City of Hercules
1982
$10.4 million
$241 million
23 years
City of Pittsburg
1958
$34.8 million
$855 million
25 years
Source: Selected Redevelopment Agencies Review: Analysis of Administrative, Financial, and Reporting Practices, July 1, 2009, through June 30, 2010, John Chiang, California State Controller, March 2011
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optimal return for each invested dollar,” Chiang said. “Locally-controlled economic development is vital to California’s long-term prosperity. However, the existing approach—born in the 1940s—is not how anyone concerned with performance, efficiency and accountability would draw it up today.” The California Redevelopment Association, a statewide advocacy group, called Chiang’s efforts politically motivated and his findings flawed. The 18 agencies, which the Controller’s office says were selected at random, are not representative of agencies statewide, the association said. Neither the Legislature nor the controller has suggested or required agencies to adopt particular job-count measures, it concludes. Fitch Ratings issued a special report in March saying that it had downgraded the credit quality of various California redevelopment agencies in the preceding years and expected more such downgrades. In January, the bond-rating company lowered its ratings on $1.77 billion in San Jose Redevelopment Agency debt to one notch above junk.
Fitch Ratings issued a special report in March saying that it had downgraded the credit quality of various California redevelopment agencies in the preceding years and expected more such downgrades. Fitch concludes that an end to redevelopment agencies could enhance or degrade their credit quality. If agencies funnel RDA assets to other government agencies, there is less left to back the credit, it says. At the same time, credit quality could be enhanced because the agencies could not continue to leverage their assets. Too much debt is a significant reason for San Jose’s weak position in Fitch’s view. State Sen. Bob Huff, a Republican from Walnut, Calif., just outside of L.A., and vice chairman of the Senate Budget Committee, is among lawmakers who say they see value in keeping RDAs alive, at least in some form. The agencies give local government a rare tool to build their economic base. If they are destroyed, he said, “First, I think there are immediate lawsuits … because they have laid out an economic groundwork that would have to be undone. I think there are contractual obligations there that would be in some question.” Huff has tried to gather support for a compromise that would maintain the practice of RDAs funneling revenue to schools. He says his plan, which has gone nowhere fast in the legislature, would raise more money for the state and education than the governor’s. Lewis Gale, an economist and dean of the Eberhardt School of Business at the University of the Pacific, says the importance of economic development work all depends on a basic real estate adage: location, location, location. While an RDA and perhaps an enterprise zone might be the tipping point for a small community, a large city such as San Jose or Santa Clara should have plenty of mojo on its own, without RDA help. “If you are looking at San Francisco, firms will locate there for a whole bunch of other reasons,” he said. “If firms just went where they have the best deals, you’d have certain states like Nevada having all the main companies.” That, Gale says, obviously is not true. n
FINANCE
Same Song, Second Verse Proposed rules for residential and commercial mortgage-backed securities sound much the same as the old: off-key. By Peter Ingersoll
U
p ahead there must be water; I can see it on the horizon! My fellow real estate practitioners and I have been trudging through a Sahara of deal flow for a number of years. Small, private investors trudge along beside us, all looking for any deal with some meat on the bones. We read about large private-equity funds acquiring enormous portfolios at fifty cents on the dollar and REITs with coffers full of cash (raised with the sale of public stock) acquiring trophy assets at astronomical prices. Surely these events indicate a coming bull market in commercial real estate. The water up ahead looks like it could be the cool, clear wellspring of revised CMBS lending. If only we can make it to that oasis of financing abundance and calm. Surely, Secretary of the Treasury Timothy Geithner will be there, as the chairman of the Financial Stability Oversight Council, the newly-created uber-regulator. He will be waiting at a table set with new rules for mortgage origination and securitization that will restore reason, prudence and order to real estate markets. Throughout the land, mortgage originators and securitizers will set about bringing capital to starved real estate investors; prices will stabilize and transactions will begin anew. Chairman Bernanke of the Federal Reserve and FDIC Chairwoman Sheila Bair will be in attendance. Securities and Exchange Commission Chair Mary Schapiro and acting Comptroller of the Currency John Walsh will be there with HUD Secretary Shaun Donovan, finalizing the place settings. Edward DeMarco, acting Director of the Federal Housing Finance Agency, will be present as the conservator of Fannie Mae and Freddie Mac and will conduct a ceremony blessing the healing powers of transparent markets. Or is it a cruel mirage? Financial regulators on March 31 released a draft of proposed rules governing creation of asset-backed securities; they are sure to please no one. Most importantly, the wellspring of financing, which shimmered so clearly on the horizon, likely will not materialize. The rules for residential mortgages seem certain to send those markets into tailspin because only those with perfect credit and a 20 percent down payment will be able to qualify. No doubt the rules will create a safer residential lending
The argument put forth is that if securitizers are forced to take responsibility for the loans they originate, then no bank or investment bank will be willing to play, leaving the commercial markets to fend for themselves. 20 theregistrysf.com
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environment for many, but anyone below this proposed threshold will be left to the wolves of the free market. The proposal also is foreboding news for a residential market still struggling for gasps of air. Part of me completely agrees with the need for conservative rules on residential mortgages. The other part knows the further price declines they will induce. Now the real bottom of the market will be explored. On the commercial side, things are just as insane. There are nine separate proposals to handle the “risk retention” aspect of commercial-mortgage securitization, including one that once again allows loan securitizers to offload all risk. From the first hint of financial reform, the CRE Finance Council, the lobbying group for investment bankers involved in the securitization process, has been fighting any hint or suggestion that securitizers should have any liability in the process whatsoever, and they have been largely successful in getting their way. In testimony before Congress in May 2010, Kent Born, a senior managing director for investment advisor PPM America and a spokesperson for the CRE Finance Council, said, “Any regulatory-reform law should ensure that regulators can permit CMBS securitizers to transfer risk to B-piece buyers who—in the CMBS context at least—act as ‘securitizers’ to satisfy any retention obligation.” A B-piece buyer is an investor who purchases the most junior tranche of a securitization, the riskiest slice of the pie. The theory behind this practice is that these savvy investors will hold the others involved in the transactions accountable. Never mind that this mechanism did nothing but accelerate sloppy underwriting and left those B-piece investors holding an empty bag during the boom. Unrestrained free-market securitization is being touted as the cure for unrestrained free-market securitization. Hair of the dog to cure our financial hangover! Born’s testimony was persuasive enough to eliminate the inclusion of any risk-retention language for CMBS in the Financial Reform Act and now regulators are actually considering alternatives not requiring any retained liability at all. The strategy of the CRE Finance Council is to bury the regulators in mind-numbing complexity and simultaneously proclaim that without robust securitization the commercial real estate markets are doomed. The argument put forth is that if securitizers are forced to take responsibility for the loans they originate, then no bank or investment bank will be willing to play, leaving the commercial markets to fend for themselves. This threatened boycott seems to have persuaded the impressive array of regulatory powers to consider legitimate this farcical proposal. To understand why, we need look no further than the motivation of two of the most influential members of the Financial Stability Oversight Council: the Federal Reserve and the FDIC. These two organizations hold more commercial real estate debt than any other organization in the world. If anyone needs the ability to offload a warehouse of inventory, it’s these two shops.
They need a way to sell their scratched, dented and remanufactured appliances, and a securitization machine without retained liability has been a proven method to sell stale and moldy inventory. If CMBS is reborn without any liability to the securitizers, essentially it means that the fraternity brothers who drove the CMBS Lamborghini and crashed it while intoxicated will be allowed to get behind the wheel of a brand-new Lamborghini, without a breathalyzer test, and be able to drive as fast as they want without regard to speed limits or consequences, again. The only limit to reckless lending behavior will be scrutiny from the third-party investor—hardly the reassurance needed to support sound sleep. The other argument put forth by the CRE Finance Council is that requiring 5 percent risk retention will increase costs so much as to cause the securitization process to grind to a halt. (There is that implied boycott again!) At its core, banking is simple: Take lower-cost deposits and lend the money at a higher rate. The system works fine as long as the money is repaid, and the banks don’t suffer losses. The argument that the cost of loans will increase by requiring the lenders and securitizers to take responsibility completely ignores the staggering costs of the recent financial crisis from just such defaults and losses. Imagine insurance companies refusing to pay claims after a hurricane because they contend that the government is responsible to pay for the losses, and then demanding that they simultaneously be granted an increase in premiums to counterbalance the risk. No one would stand for it, but that is exactly what is being requested by the CRE Finance Council. We really can’t be upset with the investment bankers because in their world the cost of default is being borne by taxpayers. Their skewed perceptions are actually correct: Recent experience proves them accurate in this expectation. Daddy Treasury will indeed buy them a new Lamborghini. The cause of the financial crisis is not mysterious. It was not caused by Fannie Mae giving loans to unqualified buyers as free-market fundamentalists
have been touting at every available opportunity, although that did happen. The financial crisis was caused by unregulated private lending. With the help of the rating agencies stamping “AAA” on any piece of litter presented to them, the shadow banking system became so good at selling loans regardless of asset or credit quality, it single-handedly created unprecedented liquidity in the residential and commercial real estate markets, which created the asset bubble. Without the ability to obtain non-recourse debt at unsustainably high levels and at glaringly loose terms, the price run-up between 2004 and 2007 could never have occurred. A recent publication by world-renowned economist Susan Wachter proves this conclusion. The Richard B. Worley Professor of Financial Management at the Wharton Business School and Adam J. Levitin, an associate professor of law at Georgetown University Law Center, have unequivocally documented the cause of the financial crisis: unregulated, private-label securitization. For those readers ambitious enough to read their extensive research and irrefutable findings, the paper can be found at: http://bit.ly/hXE5ip. If investment banks were too big to fail before, today they are too big to fail and also too big to regulate. In the meantime, commercial brokers, small investors and Main Street owners are still trudging through the desert hoping for a drink of water. Whatever form CMBS takes upon its return, will it be enough to quench their thirst? Will the small investor be invited to the table of plenty? Or like the Little Match Girl in Hans Christian Andersen’s tale, will small investors have to be content with peering through the window and merely watch as the financial titans of our age feast on the carcasses of distressed deals? If the hoped-for financial water is not available, the owners of Main Street commercial real estate will be left in the desert to fend for themselves as the vultures bide their time, watch and wait. The Financial Stability Oversight Council takes public comment on the proposals for risk retention surrounding asset-backed securities until June 10. n
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The Cup Runneth Over Property prices should be buoyed. By Rob La Eace
W
hen the defending yacht and her worthy adversary cross the start on San Francisco Bay in September 2013, to many it will seem the crescendo to yachting’s greatest opus: The America’s Cup. As exciting as the final races may be, there will be much ado long before 2013, however. The blessing of the America’s Cup is that it’s the event that keeps on giving— before and after the final match race. Third in magnitude to the Olympic Games and the World Cup for soccer, an America’s Cup is a fouryear event in planning and execution. Since before the U.S. Civil War, the world’s greatest yachtsmen and their teams (known as syndicates) have fixed their eyes on this oldest of trophies. There will be one winner on the water, yet so many more on shore. The biggest winner will be the Bay Area economy. Even before the first races of the Louis Vuitton Cup (where they thin the herd) in July 2013, much will have taken place. Several billion dollars in infrastructure upgrades are planned. Dilapidated piers along The Embarcadero will be returned to life, and additional structures will be added to act as home base for the syndicates. By expert calculations, as many as 200,000 spectators will jam San Francisco’s waterfront daily to watch the contests. Yacht racing typically takes place 20 miles to 30 miles offshore. The bay creates a natural amphitheater that will bring the race much closer, drawing race devotees and the merely curious alike.
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An economic impact report drafted by the Bay Area Council Economic Institute and Beacon Economics notes that a typical Super Bowl dumps $300 million to $500 million into the host city’s economy. The America’s Cup is estimated to bring more than three times this to San Francisco and create more than 8,000 jobs. Mind you, these numbers do not include collateral benefits to nearby counties, the state of California and the nation—which are also measured in billions of dollars and thousands of additional jobs. It’s literally hard to measure how far the benefits reach. For example, racing does not occur every day during a series. On non-race days, visitors could be expected to fan out to Golden Gate Park, the Monterey Bay Aquarium and Napa. Yacht-racing fans also are a high-net-worth bunch. NASCAR sponsors have included the U.S. Army and Little Debbie snack cakes. Yachting sponsors include BMW and Rolex. Forget that whole walk-softly-and-carry-a-big-stick thing, this crowd carries a big wallet (or European man-satchel). This is huge. Data from a post-event study of the 2007 America’s Cup by Spain’s Instituto Valenciano de Investigaciones Economicas illuminate how the cup impacts real property. In Valencia, 42 percent of visitors stayed in hotels, and nearly all were three- , four- and five-star properties. Another 43 percent of visitors moved in with family or friends, 6 percent rented apartments and 6 percent stayed on boats. San Francisco has roughly 33,000 hotel rooms, of which about 80 percent are typically occupied. Add in the cup and perhaps a convention or two, and demand will exceed supply. The overflow will almost certainly spill down the Peninsula and perhaps even to the East Bay. But room rates in San Francisco proper will still spike. The syndicates often move to race locations two years in advance of the competition. With staff and family members (and the press to tell the stories), we are talking about hundreds of new residents. The Bay Area Council Economic Institute concludes that these syndicates account for the largest share of spending during a cup, representing 27 percent of the total, or $216 million. Apartments near the syndicates’ setup areas will experience at least a 10 percent increase in rental rates when the staff and crew begin to move to town, Paragon Real Estate Group leasing agent Laura McNabb Gray estimates. Short-term, furnished rentals could enjoy a 15 percent premium. “These landlords will be lucky because I don’t expect their new tenants would be home that much (so minimal wear and tear), and the rental would probably be very secure for at least two years,” she said.
The biggest winner will be the Bay Area economy. Leasing agent James Wavro of J. Wavro & Assoc., says he anticipates a modest increase in demand for rentals in the next year, but after that, the market will change rapidly: “Expect dot com-like conditions beginning in the spring of 2012, which will result in a temporary spike in rental rates lasting through the fall of 2013.” Spanish real estate had thrived since 2000, but starting in 2007 prices were falling in the country’s major markets. The city of Valencia hosted the ’07 America’s Cup, had just confirmed that an annual Formula One Grand Prix would be coming to town and also announced that it would host the 2010 America’s Cup. Interestingly, while Madrid and Barcelona saw drops in home prices, Valencia saw an annual increase of 3.7 percent. In 2008 Spain’s economy followed the rest of the industrialized world into the dumpster. Dermot Quinn, founder of Valencia Property Hound, a sales and leasing company, said, “We got more people interested in buying because of the F1 [than from the America’s Cup], with a mixture of those buying for their own use or looking to rent out the property short term so that they could use it themselves also.” This made sense to me. There is no guarantee that a Cup event will ever return twice to a city. The F1 Grand Prix, on the other hand, had a seven year minimum contract. With this in mind, it’s not so obvious that condominium sales will see quite the same benefit that rentals may. San Francisco rent-control ordinances, for instance, limit the upside for some landlords. Vacant units with views of the racecourse may sell more briskly in the coming years, and for a small premium. But a second cup, or the creation of a large-scale annual event, could really make a difference for property on the north side of town. Barring this, it looks that the rental market has much more to gain than the sales market. So the cup, one might say, is the gift that will keep on giving. The infrastructure built for the race activities will likely become a permanent maritime installation. No doubt new restaurants and shops will sprout up in the area. Increased tourism will continue for months and years before and after the event. And a victory for the BMW Oracle team could mean another cup down the road. All of which might be described as one smooth sail. n Rob La Eace can be reached at 415.290.7228 or rob@roblaeace.com.
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Right: Renel Brooks-Moon, SF Giants Public Address Announcer accepting the check for the Giants Community Fund from Steve Mayer, CEO Burr Pilger Mayer Right (l-r): Mariane Buenviaje; Laura Davis & Janet Lieu (Burr Pilger Mayer)
BURR PILGER MAYER Celebrates the Giants On April 9th, Burr Pilger Mayer celebrated their Giants opening day party and fundraiser with a record crowd of 650 at Delancey Street Foundation. Now in its 25th year, this longstanding tradition is a testament to BPM’s commitment to the community. This year’s beneficiary was the Giants Community Fund. Renel Brooks-Moon, the voice of the SF Giants, accepted the $25,000 check on behalf of the Fund.
Below left: Andrew Duff (Burr Pilger Mayer) and his Mom, Grace Duff
Above right: Nick Riley (Burr Pilger Mayer); Bernice Chee (Vista Wealth Management); Jimmy Ly, Researcher, UCLA & Michele Luong (Burr Pilger Mayer)
Left (l-r): Matthew Dumlao (Hilton Garden Inn); Catherine Apigo (Burr Pilger Mayer) Robert Lucas (Catholic Healthcare West); Jessie Holland (Wells Fargo Bank); Bradley Apigo (General Electric) & Brandon Carrera (Sacramento Job Corps)
Below left: Steve Heitel, President and CEO Presidio Bank and family Below: Vanessa Ramirez (Burr Pilger Mayer) and Balloon Tim Lincecum
P hotos by L inda X iao
Above: Burr Pilger Mayer Marketing team: David Chong, Linda Xiao, Vanessa Ramirez, Annette Kaminsky (Event Planner) & Pedro Paredes
Left: Jordan Pashby & Hannah Tenney
Right: SF Giants receiving their World Series Championship rings
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retail
Learn to Love Your Lawyer Despite the fact that your lawyer might hate you. By John McNellis
Getting an 800 on the LSAT requires a breathtaking level of analytical skills, the mental horsepower that gives one the luxury— or curse— of overthinking everything.
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H
ere’s a small secret everyone should know— lawyers hate lawyer jokes. For good reason. Every punch line centers on their purported dishonesty, arrogance, greed or lechery. Clever lawyers gamely chuckle at cocktail parties while their clients toss around these tired insults. More clever lawyers—the rainmakers—humble themselves by trading in these jokes like baseball cards, amusing all (save their partners) with their latest story lampooning legal integrity. When you next feel impelled to tell a lawyer yet another joke desecrating his chosen profession, ask yourself first: Would you tell a priest a joke that begins, “A priest, a minister and a rabbi are standing in front of a brothel...” It’s time now to neither praise nor bury lawyers but perhaps to explain what makes a few of them difficult. (A personal aside: Once upon a time in a land not so far away, your correspondent was a lawyer whose early departure from the practice went unmourned.) The jokes are wrong of course; lawyers aren’t particularly dishonest or arrogant. No, it’s that they’re smarter than their clients, and everyone knows it. But the apparently notso-bright clients earn a breathtaking multiple of their lawyers’ income, and everyone knows that too. Because accepted business wisdom has it that the smarter you are, the more money you make, the smart lawyer has a big problem, bordering on an identity crisis. If he were to apply the Aristotelian syllogism to himself, he could never accept its only conclusion—namely, that he’s not that smart. Thus, he is forced to seek comfort in a rationalization—one thing brains are really good for—but his choices are bleak: a) his dumb client is just lucky; b) the lawyer’s not in it for the money (unless he’s on crack, this is a particularly tough self-delusion); c) he’s in the wrong profession; or d) despite its economic drawbacks, he just loves the law—this last one, by the way, hasn’t worked since the Eisenhower administration. The dumb-but-lucky-client rationale is the hands-down favorite. And because many clients do in fact make less money than their lawyers, this explanation—a few clients are lottery lucky—has enough curb appeal for even experienced lawyers to embrace like a sailor on shore-leave. The problem is, it doesn’t wash. A developer may catch a break once in a while, but someone running on pure luck—say, the guy who invented the Pet Rock—will always go broke. Sooner or later, a guy on a streak will mistake luck for brains and do something fatal.
It’s not that the client is lucky—rather, he has a skill most lawyers lack: He can swing the bat. He can consider the myriad risks in a deal, weigh and discount them and still swing away. It is a knack few lawyers possess, especially when it concerns their own risk. (You may have noticed how lawyers fight harder and longer about their idiotic opinion letters than anything else.) Getting an 800 on the LSAT requires a breathtaking level of analytical skills, the mental horsepower that gives one the luxury—or curse—of overthinking everything. No one ever hit a 95 mile-an-hour fastball by analyzing it. Yet, you can only take the too-smart-to-hit-it-big argument so far before you smack into the notable exceptions— basically the self-made branch of the Forbes 400. Sure, those guys exist, but like NBA stars who can dunk over Dwight Howard, you’re unlikely ever to meet one. To paraphrase Dirty Harry, a lawyer’s got to know his limitations. Too often, he doesn’t. Too often he doesn’t recognize that his special talent—analyzing the hell out of a deal and thinking through every possible risk—comes with its own evil-twin downside: a palpable aversion to risk that will forever keep him working by the hour. His ego—another by-product of that superior intelligence—prevents him from realizing what a lousy business guy he would be and thereby mires him in a career-long pout over what might have been. Often, then, we end up with unhappy lawyers who fail to grasp that they’re exactly where they should be, making more money than they should be (all of us do). Instead, they see themselves as working for someone who, in their view, is wildly overcompensated somehow to their personal detriment. How do you compensate for your client’s overcompensation? By overcompensating. By showing everyone in the conference room that, if not the richest, you’re the smartest guy there, by conjuring up the most ridiculously unrealistic scenario of doom and then setting it off like a tear-gas canister, forcing the deal by gunpoint to the precipice. Then, after the appropriate wailing, ululations and gnashing of teeth on all sides, when the hour is at its very darkest, you bring forth the brilliant solution to your own entirely hypothetical doomsday scenario. Lawyers are far too complex for a one-page care-andfeeding manual, but as with so many troubles, prevention is a lot easier than a cure. Find a lawyer who is truly content practicing law. One who doesn’t want to be a developer or run a bookstore or write a novel or teach underprivileged kids. One who understands that the law, for all its faults, is still a noble profession. n
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Below: The final table! Starting from the dealer in black (center at bottom) clockwise. Dan Poritzky of Hines, Grant Traub of Colliers International, Jeff Rogers of Colliers International, Marty Morici of Colliers International, Clint Van Ostrand of Colliers International, Paul Monaco of First American, Kevin Moul of Colliers International, Kelly Simcox of Studio G Architects, and Tom de Jong of Colliers International.
Left: Kelly Simcox of Studio G Architects, this year’s tournament winner, is shown holding her trophy.
Commercial Real Estate Firm Colliers International Hosts Charity Poker Tournament
Below: Kelly Simcox of Studio G Architects, Grant Traub of Colliers International, and Paul Monaco of First American
Colliers’ brokers and clients show off their poker skills for this popular fundraiser. The event was held on April 5th and raised over $55,000 for Colliers Links for Life Foundation, which provides grants to help local organizations that make a difference in the lives of Bay Area children. Since its inception in 2007, Links for Life California has raised over $500,000 for the charities it supports.
Above right: Jeff Fredericks, Managing Partner of Colliers International’s Silicon Valley Office
Left: Leah Toeniskoetter of Toeniskoetter Development
Above left: Dan Poritzky of Hines and Alice Teng of Colliers International
P hotos by DAV I D L U U
Left: Kelly Simcox of Studio G Architects and Paul Siedschlag, CFO of Colliers International Above: André Walewski of Colliers International, Claudia Folzman and Stephanie Kirk of Iron Construction Left: Broker Tom de Jong of Colliers International’s Silicon Valley office in the middle of the action!
Right: Colliers International brokers (at table from left) Alice Teng, Jeff Rogers, Clint Van Ostrand, Rick Knauf, and Brian Mason celebrate a winning hand.
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activity
Reports
commercial leaseS
City
Lease Size Sq. Ft.
Name of Tenant/Rep (Brokerage)
Name of Landlord/Rep (Brokerage)
Notes (ie. Lease type and/or lease longevity)
7200 Edgewater Dr
Oakland
100,800
OneSource Distributors Holdings, Inc
AMB Property Corporation/Greig Lagomarsino, SIOR; Todd Severson, SIOR & Mark Maguire (Colliers International Oakland)
Warehouse/Distribution, New Lease
48664 - 48668 Milmont Dr
Fremont
64,597
NovaSolar/Unknown
Arden Realty/Vince Machado & Sherman Chan (CB Richard Ellis)
Class B R&D/Flex, New Lease
44901 - 44951 Industrial Dr
Fremont
50,200
DW Morgan/Chrys Gerontides (The Gerontides Company)
Investment Building Group/Joe Kelly (CB Richard Ellis)
Warehouse/Distribution, New Lease
Young’s Holdings Inc./Greig Lagomarsino, SIOR & Rick Keely (Colliers International Oakland)
Warehouse/Distribution, Renewal/Expansion
Address Alameda County
1745-1779 Atlantic Ct
Union City
44,786
Container Consulting Services/Jeff Barnes (Colliers International San Jose) & Greig Lagomarsino, SIOR (Colliers International Oakland)
Thornton Business Center, 8602-8624 Thornton Ave. Bldg C
Newark
42,000
Spiraledge, Inc/Sam Wright (Cassidy Turley BT Palo Alto)
ProLogis/ProLogis/Bob Bisnette/
6M Term, Warehouse Lease Transaction
Hayward Business Center 4, 30776 Huntwood Ave
Hayward
41,200
American Blinds And Draperies, Inc./ Kate Webster & Jay Hagglund (Cassidy Turley BT Oakland)
East Group/Mike Schonenberg (WP Investments)
65M Term, Warehouse Lease Transaction
21050 Forbes St
Hayward
39,360
American Food Equipment, Inc/ Cassidy Turley BT Commercial
GSI Realty Company/Sean Sabarese (Colliers International Oakland)
Warehouse/Distribution, Renewal
Hayward Industrial Park, 23751-23759 Eichler St, Bldg 2
Hayward
36,000
My Office Products/Tom Damaschino & Randy Keller (Cassidy Turley BT Oakland)
UBS Realty Investors/Jay Hagglund & Joe Fabian (Cassidy Turley BT Oakland)
36M Term, Warehouse Lease Transaction
Hayward Industrial Park, 23783-23787 Eichler St, Bldg 3
Hayward
35,901
Mon Chong Loong Trading Corporation/ Direct
UBS Realty Investors/Cassidy Turley BT, Oakland/ Jay Hagglund/Joe Fabian
Renewal, 36M Term, Warehouse Lease Transaction
46420 - 46430 Fremont Blvd
Fremont
34,876
Intematix/Direct
Equity Office/Joe Kelly (CB Richard Ellis)
Class B R&D/Flex, Expansion
Stevenson Point TechPark II, 39700 Eureka Drive
Newark
32,128
Dow Corning Corporation/ Michael Karp & Eddie Shuai (Cassidy Turley BT Oakland)
Newark Eureka Industrial Capital LLC/Direct
Renewal, 76M Term, R&D Lease Transaction
6230 Stoneridge Mall Rd
Pleasanton
30,772
Workday Inc/Griggs Resource Group Lafayette
UBS Realty Investors/Brian Lagomarsino (Colliers International Pleasanton)
Class A Office, Expansion
East Bay Industrial Ctr, 21040-21056 Forbes St
Hayward
29,520
Golden Gate Baldor, Inc./ Chris Van Keulen & Sam Higgins (Cassidy Turley BT Oakland)
GSI Realty Co LLC
Renewal, 37M Term, Warehouse Lease Transaction
21056 Forbes St
Hayward
29,520
Golden Gate Baldor/Cassidy Turley BT Commercial
GSI Realty Company/Joe Yamin & Sean Sabarese (Colliers International Oakland)
Warehouse/Distribution, Renewal
Davis Distribution Center, 1955-1977 Davis St
San Leandro
25,960
Specialty Sports/Tom Damaschino (Cassidy Turley BT Oakland)
AMB/Sam Higgins & Jeff Starkovich (Cassidy Turley BT Oakland)
77M Term, Warehouse Lease Transaction
Davis Distribution Center, 1955-1977 Davis St
San Leandro
25,955
SSI Venture LLC/Tom Damaschino (Cassidy Turley BT Oakland)
AMB/Sam Higgins & Jeff Starkovich (Cassidy Turley BT Oakland)
77M Term, Warehouse Lease Transaction
Alvarado Business Center, 30108 Eigenbrodt Way, Bldg 10
Union City
25,600
Grand J K & C, Ltd./Eddie Shuai (Cassidy Turley BT Oakland)
ProLogis/Direct
Renewal, 44M Term, Warehouse Lease Transaction
27403 Industrial, 27403 Industrial Blvd
Hayward
23,320
Full Gospel Mission Ministries/Chris Van Keulen (Cassidy Turley BT Oakland)
Vico Partners/Jay Hagglund & Kate Webster (Cassidy Turley BT Oakland)
36M Term, Industrial Lease Transaction
EmeryStation North, 5980 Horton St
Emeryville
22,056
Novartis/Ryan Hattersley (Cushman & Wakefield Oakland)
Wareham Development/Michael Raffetto & Marc Ward (Cassidy Turley BT Oakland)
60M Term, Office Lease Transaction
1256-1260 San Luis Obispo Ave
Hayward
21,466
Ajax Technology International, Inc./Rick Keely (Colliers International Oakland)
RREEF/Mark Maguire; Kevin Hatcher & Greig Lagomarsino, SIOR (Colliers International Oakland)
Light Industrial, New Lease
2359 - 2369 Lincoln Ave
Hayward
19,500
RICOH Lanier/Bob Ferraro and Mike Barry (CB Richard Ellis)
ProLogis/Bob Bisnette (ProLogis)
Warehouse/Distribution, New Lease
5875 Arnold Rd
Dublin
19,426
Rockin’ Jump Inc/Mike Donnelly, Brian Lagomarsino (Colliers International Pleasanton)
Glenborough LLC/Cornish & Carey Newmark Knight Frank Pleasanton
Office/Flex
Hayward Bridge Bus Center, 3374 Enterprise Ave
Hayward
16,036
Sukhi’s Quick And Eazy Indian Food/Tom Damaschino (Cassidy Turley BT Oakland)
SPI Holdings, LLC/Colliers International, Oak/ Kevin Hatcher/Mark Maguire
63M Term, Industrial Lease Transaction
3374 Enterprise Ave
Hayward
16,036
Sukhi’s
SPI Holdings LLC/Kevin Hatcher; Mark Maguire & Greig Lagomarsino, SIOR (Colliers International Oakland)
Light Industrial, New Lease
1752 Sabre, 1752 Sabre St
Hayward
16,000
Best Express Foods, Inc/Adan Martinez & Jay Hagglund (Casidy Turley BT Oakland)
Hector Villalba/Craig Hagglund & Chris Schofield (Lee & Associates Oakland)
46M Term, Industrial Lease Transaction
Hayward Business Park, 3067530695 Huntwood Ave (L)
Hayward
14,784
Dust Networks, Inc./Tom Damaschino & David Englert (Cassidy Turley BT Oakland)
RREEF
Renewal, 18M Term, R&D Lease Transaction
3441 Louise St, 3441 Louise St
Oakland
14,000
Crawford Grimsley/Brian Collins & Adam Peterson (Cassidy Turley BT Oakland)
Hunt Family Living Trust
63M Term, Industrial Lease Transaction
7901 Stoneridge Dr
Pleasanton
12,892
Bay East Association of Realtors/Cornish & Carey Newmark Knight Frank Pleasanton
Hacienda MD, 7901 Delaware, LLC/Ian Thomas (Colliers International Pleasanton)
Class A Office, Renewal
Hayward Industrial Park, 23663-23669 Eichler St, Bldg 5
Hayward
12,000
Windsor Republic Door, Inc/Sam Higgins & Kate Webster (Cassidy Turley BT Oakland)
UBS Realty Investors/Jay Hagglund & Joe Fabian (Cassidy Turley BT Oakland)
36M Term, Warehouse Lease Transaction
26 theregistrysf.com
M ay 2 0 1 1
commercial Leases Continued Address
City
Lease Size Sq. Ft.
Name of Tenant/Rep (Brokerage)
Name of Landlord/Rep (Brokerage)
Notes (ie. Lease type and/or lease longevity)
23669 Eichler St
Hayward
12,000
Republic Doors/Mark Maguire (Colliers International Oakland) & Cassidy Turley BT Commercial
UBS Realty Investors/Cornish & Carey NKF; Cassidy Turley BT Commercial
Warehouse/Distribution, New Lease
6161 Industrial Way
Livermore
10,216
J Orr Molding & Chop/Cassidy Turley Pleasanton
Jorge Freitas/Mark Triska SIOR, & Ned Wood (Colliers International Pleasanton)
Warehouse Lease
6210 Stoneridge Mall Rd
Pleasanton
10,155
State Farm Mutual Automobile Insurance/ Cushman & Wakefield Walnut Creek
UBS Realty Investors/Brian Lagomarsino (Colliers International Pleasanton)
Class A Office
100 Wood Hollow Dr
Novato
21,540
Biomarin Pharmaceutical, Inc.
Lexington Lion Wood Hollow LP/Brian Eisberg, Haden Ongaro & Mark Carrington (Cornish & Carey Commercial Newmark Knight Frank)
Office
San Rafael Corporate Center, 790 Lindaro St
San Rafael
12,792
Wells Fargo Advisors
Seagate Properties, Inc./Steven Leonard & Trevor Buck (Cassidy Turley BT San Rafael)
60M Term, Office Lease Transaction
Rowland Plaza II, 75 Rowland Wy
Novato
11,552
Marin IPA / Prima/Stephen Easley (Cassidy Turley BT San Rafael)
Barker Pacific Group/Haden Ongaro & Mark Carrington (Cornish & Carey Commercial Newmark Knight Frank Larkspur)
120M Term, Office Lease Transaction
201 Spear St
San Francisco
71,484
Verizon/Kristin Liening (CB Richard Ellis)
Massachusetts Mutual Life Ins./Steve Anderson (CAC Group)
Class A Office, Renewal
150 Green, 150 Green St
San Francisco
11,500
Heat Ventures/Cornish & Carey Newmark Knight Frank San Francisco
150 Green Street Associates LP/Jason Burch & David Hiebert (Cassidy Turley BT San Francisco)
36M Term, Office Lease Transaction
1100 Sansome St
San Francisco
11,500
Heat Ventures/Bill Scovill & Nick Slonek (Cornish & Carey Commercial Newmark Knight Frank)
Linden Labs
Office
Two Embarcadero Center, 2 Embarcadero Ctr
San Francisco
11,284
Helios AMC, LLC/Frank Fudem (Cassidy Turley BT Oakland)
Boston Properties, SF/Rod Diehl & Christine Ching (Boston Properties, San Francisco)
60M Term, Office Lease Transaction
Adam Grant Building, 114 Sansome St
San Francisco
11,259
Reliance Globalcom Services, Inc./Frank Fudem (Cassidy Turley BT San Francisco)
Seagate Properties San Francisco
Renewal, 60M Term, Office Lease Transaction
139 Townsend St
San Francisco
10,925
Hutchison WhampoaAmericas/Donnette Clarens & Jon Mackey (Cornish & Carey Commercial Newmark Knight Frank)
Breevast US, Inc.
Office
139 Townsend Street
San Francisco
10,925
Cornish and Carey Newmark Knight Frank
Colliers International
New Lease
1630 Tennessee, 1630 Tennessee St
San Francisco
10,800
Kilimanjaro Energy, Inc.
630 Tennessee, LLC/Scott Mason & Tom Niu (Cassidy Turley BT Burlingame)
24M Term, Warehouse Lease Transaction
444 De Haro Plaza, 444 De Haro St
San Francisco
10,291
InsideView/Kevin Waldman (Cassidy Turley BT Burlingame) & Bryan Courson (Cornish Carey Commercial Newmark Knight Frank San Francisco)
Apollo Real Estate Advisors/John Jensen (Grubb & Ellis San Francisco)
36M Term, Office Lease Transaction
Peninsula Office Park II, 2855 Campus Dr
San Mateo
25,093
Konica Minolta/Colliers International San Jose
Pell Development/Clarke Funkhouser & Mike Moran (Cassidy Turley BT Burlingame)
60M Term, Office Lease Transaction
University Circle, 1900 University Circle - Bldg B
Palo Alto
24,532
Greenberg Traurig, LLP/George Fox (Studley Palo Alto)
Wells Real Estate Investment Trust II/Mike Courson & Marcus Wood (Cassidy Turley BT Palo Alto)
Renewal, 128M Term, Office Lease Transaction
Cabot, Cabot & Forbes, 312-322 Grand Ave, E.
S San Francisco
24,500
Cosentino North America/Matt Squires & Jason Cranston (Cassidy Turley BT Burlingame)
Rabih Ballout/Marshall Hydorn (Cassidy Turley BT Burlingame)
60M Term, Warehouse Lease Transaction
275 Shoreline Dr
Redwood Shores
20,198
Enecsys, LLC
Equity Office Properties/Craig Kalinowski, Matt inters & Graham Woodall (Cornish & Carey Commercial Newmark Knight Frank
Office
1728-1730 Gilbreth, 1728-1730 Gilbreth Rd
Burlingame
20,000
Spot Bagel Bakery, LLC/Jason Cranston (Cassidy Turley BT Burlingame)
Steven A & Marcia G Barkoff/Marshall Hydorn (Cassidy Turley BT Burlingame)
60M Term, Warehouse Lease Transaction
Utah Industrial Park, 299 Lawrence Ave
S San Francisco
19,247
A&B Produce Inc//Matt Squires & Randy Keller (Cassidy Turley BT Burlingame)
Terreno Realty Corp/Matt Squires & Randy Keller (Cassidy Turley BT Burlingame)
120M Term, Warehouse Lease Transaction
City Plaza, 1900 O’Farrell St
San Mateo
16,856
Alpha Omega Pain Medicine Associates/ Ben Stern (Cornish & Carey Newmark Knight Frank Palo Alto)
Woodstock Development/Clarke Funkhouser & William Syme (Cassidy Turley BT Burlingame)
84M Term, Office Lease Transaction
Pacific Shores Center, 1600 Seaport Blvd, Bldg 6
Redwood City
15,250
Zenprise Inc/Kalil Jenab (Cassidy Turley BT Palo Alto)
Starwood Capital Group/Mike Connor & Mike Courson (Cassidy Turley BT Palo Alto)
39M Term, Office Lease Transaction
Bayshore Technology Park, 1000 Bridge Pkwy
Redwood Shores
12,000
Storm8/Craig Kalinowski (Cornish & Carey Commercial Newmark Knight Frank San Mateo)
Prudential Investment Mgmt./Erich Sollman & Marc Pope (Cassidy Turley BT Burlingame)
19M Term, Office Lease Transaction
1980 Concourse Dr
San Jose
85,367
Altierre/Unknown
Fox Creek Fund LLC/Mark Christierson (CB Richard Ellis)
Class C R&D/Flex, Renewal
1688 Richard Ave.
Santa Clara
52,800
NWE Technology, Inc./Tenny Tsai (Cassidy Turley BT San Jose)
Mission West Properties/Ray Marino (Mission West Properties)
Renewal, 36M Term, Industrial Lease Transaction
Marin County
San Francisco County
San Mateo County
Santa Clara County
M AY 2 0 1 1
theregistrysf.com 27
commercial LEASES CONTINUED Address
City
Lease Size Sq. Ft.
Name of Tenant/Rep (Brokerage)
Name of Landlord/Rep (Brokerage)
Notes (ie. Lease type and/or lease longevity)
Princeton Plaza Mall, 1375 Blossom Hill Rd
San Jose
53,477
Orchard Supply Hardware/Retail West, Inc.
Pan Cal Princeton Plaza LLC/Jon Stansbury & James Gaglione (Terranomics)
180M Term, Retail Lease Transaction
212 Gibralter, 212 Gibraltar Dr
Sunnyvale
32,544
Cloudshield
Leslie Kessler, Et Al/Mike Connor & Ron Himes (Cassidy Turley BT Palo Alto)
Renewal, 48M Term, R&D Lease Transaction
San Tomas Industrial Park, 2000-2016 Martin Ave
Santa Clara
28,000
Infiniti Solutions USA, Inc./Jim Kovaleski (Cassidy Turley BT San Jose)
AMB Property Corporation/Cassidy Turley BT, San Jose/Jim Kovaleski/
Renewal, 24M Term, Industrial Lease Transaction
North First Corporate Center, 71-81 Daggett Dr, E.
San Jose
20,073
Cell Biosciences/Cresa Partners San Jose
South Bay Development Company/Kalil Jenab & Aaron Fritz, CCIM (Cassidy Turley BT Palo Alto)
69M Term, R&D Lease Transaction
2205-2213 Ringwood Ave, 2205-2213 Ringwood Ave
San Jose
16,188
Bonds Forever/Ed Hofer & Jim Beeger (Colliers International San Jose)
2205-2213 Ringwood, LLC/Danny Yu & Craig Kovaleski (Cassidy Turley BT San Jose)
49M Term, Warehouse Lease Transaction
Little Orchard Bus Park, 170-198 Barnard Ave
San Jose
15,383
HCA Realty/Cassidy Turley BT, San Jose/ Keith Claxton/Drew Arvay
CSHV Little Orchard, LLC/Chip Sutherland (CB Richard Ellis San Jose)
Renewal, 39M Term, Warehouse Lease Transaction
Shoreline Research Park, 2171 Landings Dr
Mountain View
14,350
Google, Inc./CB Richard Ellis, SJ/ Jeff Houston
Westamerica Kozy Associates/Keith Claxton & Lisa Lam (Cassidy Turley BT San Jose)
Term, R&D Lease Transaction
188 Martinvale Ln
San Jose
14,140
Bittel Technology Inc/Unknown
TLTS LLC/Scott Prosser (CB Richard Ellis)
R & D, Renewal
3000 Dutton Ave
Santa Rosa
109,498
Amy’s Kitchen, Inc./Michael Flitner (Keegan & Coppin Co., Inc.)
3000 Dutton Ave., Inc.
Industrial Lease; NNN
Oakmead Northbay Business Park, 3810 Cypress Dr
Petaluma
30,000
Torn Ranch
Mrs.Grossmans Paper Co/Trevor Buck & Steven Leonard (Cassidy Turley BT San Rafael)
60M Term, Warehouse Lease Transaction
3725 Westwind Blvd
Santa Rosa
23,722
County of Sonoma - DCSS/Kevin Doran (Keegan & Coppin Co., Inc.)
Westwind Business Park/Jeffrey Wilmore & Dave Peterson (Keegan & Coppin Co., Inc.)
Office Lease; Gross
Oakmead Northbay Business Park, 3810 Cypress Dr
Petaluma
20,000
Torn Ranch
Mrs.Grossmans Paper Co/Trevor Buck & Steven Leonard (Cassidy Turley BT San Rafael)
60M Term, Warehouse Lease Transaction
1460 Cader Ln
Petaluma
18,000
Rotork Controls/Karren Bell Newman (Remax Marina Commercial)
Dianne Anderso/Tony Sarno (Keegan & Coppin Co., Inc.)
Industrial Lease; NNN
141 Stony Cir
Santa Rosa
12,754
Santa Rosa Memorial Hospital/Joel Jaman (Keegan & Coppin Co., Inc.)
Berg Holdings/Alan Maciel (Berg Holdings)
Office Lease Extension; Full Service
Sonoma County
commercial SALES City
Property Size
Buyer
Seller
Sale Price
Price/ Sq. Ft.
Project Type
Brokers
3266 Investment Blvd
Hayward
44,467
Quad Express Printing Inc.
Mr. Sal Perez
$2,675,000
$60
Warehouse/ Distribution
Buyer: Bob Ferraro & Mike Barry (CB Richard Ellis); Seller: Bob Ferraro & Mike Barry (CB Richard Ellis)
230 Grand Ave
Oakland
13,659
Balco Properties
Western Graphic Arts Union Local No. 14
Office/ Medical
Benjamin F. Harrison (Colliers International Oakland); Lee & Associates; Cassidy Turley BT Commercial
1001 24th St
Oakland
11,312
Sanges Kubiak, LLC
Goodman Frydman, LLC
Light Industrial
Greig Lagomarsino, SIOR; Mark Maguire; Kevin Hatcher; Brennan Carpenter (Colliers International Oakland); Cornish & Carey NKF Emeryville
7800 Edgewater Dr
Oakland
10,400
Mr. Richard Weinstein
Enzo and Lara Giambastiani
$1,225,000
$118
Warehouse/ Distribution
Buyer: Mike Barry & Bob Ferraro (CB Richard Ellis); Seller: Mike Barry & Bob Ferraro (CB Richard Ellis)
Concord
30,000
Elwood Investments
Speed O Tach Inc.
N/A
N/A
Industrial
Tyler Epting, Mike Zylstra, Sean Cooley, Graden Travis & Forrest Gherlone (Cornish & Carey Commercial Newmark Knight Frank)
Colfax
2,300
P. Beckwith
J. Payne
$995,000
Starbucks Coffee
Barry Bram (TRI Commercial)
San Carlos
207,893
County of San Mateo
Circle Star Investors LLC
$39,950,000
$192
Office
Josh Rowell (Cornish & Carey Commercial Newmark Knight Frank)
6401 Stony Point Rd
Cotati
248,292 (5.7 acres)
Bob Giannecchini
North Coast Bank
$130,000
$0.52
Residential Development Land Sale
Buyer: Cindy Roberts (Pacific Union); Seller: Ken O’Farrell & Ken Bizzell (Keegan & Coppin Co., Inc.)
2727 Dutton Meadow
Santa Rosa
233,482 (5.36 acres)
Cambridge Palm Investments, LLC
North Valley Bancorp
$525,000
$2.25
Residential Development Land Sale
Buyer: Chris Pellascini (Tombe Realty); Seller: Ken Bizzell (Keegan & Coppin Co., Inc.)
1360 Redwood Wy
Petaluma
23,893
SMK Investment Co.
CSFB 2002-CKS4 Redwood Way
$1,218,543
$51.00
Industrial Sale
Buyer: Chris Castellucci (Keegan & Coppin Co., Inc.); Seller: ony Sarno (Keegan & Coppin Co., Inc.)
21707 8th St East
Sonoma
21,552
Helge Bruckner/Sue Nelson et al
Sterling Savings Bank
$1,320,000
$61.25
Industrial Sale
Buyer: Joe Cunningham (Pacific Union); Seller: Rhonda Deringer & Jim Sartain (Keegan & Coppin Co., Inc.)
Address Alameda County
Contra Costa County 4090 Pike Lane
Placer County 424 S Auburn
San Mateo County 1 Circle Star Way
Sonoma County
28 theregistrysf.com
M AY 2 0 1 1
05Calendar
january february march april may june july august september october november december
1 2
IIDA Northern California Chapter will host a Forestiere Historical Center Underground Gardens Tour at 5021 W. Shaw Ave., Fresno. Visit www.iida-nc.org for more information. CREW Silicon Valley will host an annual golf tournament called Mulligans and Margaritas at La Rinconada Country Club, 14595 Clear View Drive, Los Gatos. Visit www.crewsv.org for more information.
2-5
Appraisal Institute Northern California Chapter will host a General Appraiser Income Approach Part I course at University of Phoenix, Fairfield. Members $575 and non-members $675. Visit www.norcal-ai.org for more information.
3
USGBC Northern California Chapter will host a LEED Professional Project Experience Program. The program takes places over 4 weeks, every Tuesday evening from 6 p.m. – 7:30 p.m. via Web conferencing. Members $375 and non-members $400. Visit www.usgbc-ncc.org for more information. CCIM Northern California Chapter will host a Sacramento district meeting. Visit http://chapters. ccim.com/northerncalifornia for more information.
4
ULI San Francisco will host an event called SF Housing Action Coalition: 5th Annual Housing Forum from 7:30 a.m. – 10 a.m. at PG&E Auditorium, 77 Beale St., San Francisco. Visit www.ulisf.org for more information. NAIOP San Francisco Bay Area Chapter will host the 22nd Annual Real Estate Challenge from 11 a.m. – 1:30 p.m. at Four Seasons Hotel, 757 Market St., San Francisco. Visit www.naiopsfba.org for more information.
5
NAIOP Silicon Valley Chapter will host the Developer Hall of Fame Dinner starting at 5:30 p.m. at Hyatt Regency Hotel, 5101 Great America Pkwy., Santa Clara. The cost is $175 per person. Visit www.naiopsv.org for more information. BOMA Silicon Valley will host a High Performance Buildings workshop from 8:30 a.m. – 11:30 a.m. at Crowne Plaza San Jose – Downtown, 282 Almaden Blvd., San Jose. Visit www.boma-sv.org for more information. BOMA Silicon Valley will host a membership luncheon called Energy and Water Best Practices starting at 11:30 a.m. at Crowne Plaza San Jose – Downtown, 282 Almaden Blvd., San Jose. Visit www.boma-sv.org for more information.
CCIM Northern California Chapter will host a Sacramento District Meeting called “How Will Our Real Estate Market Recover?” from 5:30 p.m. – 7:30 p.m. at Downey Brand, 621 Capital Mall, 18th Floor, Sacramento. Members $15 and nonmembers $25. Contact NCalCCIM@ccim.net or 866.588.CCIM for questions.
USGBC Northern California Chapter will host the Silicon Valley Branch Green Building Expo from 5:30 p.m. – 8 p.m. at Santa Clara University, 500 El Camino Real, Paul L. Locatelli Student Activity Center, Santa Clara. Members $30 and nonmembers $45. Visit www.usgbc-ncc.org for more information.
11 12
IFMA Silicon Valley Chapter will host a roundtable luncheon called Green Leasing and Real Estate Negotiations from 11:30 a.m. – 1 p.m. Visit www.ifmasv.org for more information.
USGBC Northern California Chapter will host a class called Part Three: Financial Considerations of Energy Efficiency Retrofits from 8:30 a.m. – 5 p.m. at Hanson Bridgett, LLP, 425 Market St., 26th Floor, San Francisco. Members $395 and non-members $445. Visit www.usgbc-ncc.org for more information.
BOMA San Francisco will host a Centennial Gala from 6 p.m. – 11 p.m. at The Palace Hotel, 2 New Montgomery at Market St., San Francisco. This is a members-only event and the cost is $100 per person. Visit www.bomasf.org for more information. BOMA Silicon Valley will host a TOBY Award workshop from 11:15 a.m. – 12 p.m. at BOMA Silicon Valley Office, 63 Metro Drive, San Jose. This is a free workshop, but participants must register at www.boma-sv.org to attend. Appraisal Institute Northern California Chapter will host a workshop, chapter meeting and networking social. Visit www.norcal-ai.org for more information.
23
USGBC Northern California Chapter will host Understanding Energy Modeling from 5:30 p.m. – 7:30 p.m. at SMUD Energy & Technology Center, 6301 S. Street, Sacramento. Members $15 and non-members $30. Visit www.usgbc-ncc.org for more information.
USGBC Northern California Chapter will host a LEED AP Interior Design and Construction Exam Prep workshop from 8:30 a.m. – 5 p.m. at StopWaste.org, 1537 Webster St., Oakland. Members $295 and non-members $345. Visit www.usgbc-ncc.org for more information.
BOMA Oakland/East Bay will host an Engineer Appreciation luncheon in Walnut Creek. Visit www.bomaoeb.org for more information.
Appraisal Institute Northern California Chapter will host an event in which the Fresno area appraisers gather at Fort Washington Country Club in Fresno. For more information, call 559.433.9257.
BOMA Silicon Valley will host a Benchmarking Your Building in Energy Star workshop from 8:30 a.m. - 11 a.m. at Club Auto Sport (Conference Room), 521 Charcot Ave., San Jose. Members $35 and non-members $55. Visit www.boma-sv.org for more information.
13
BOMA San Francisco will host a Ethics is Good Business Short Course from 8 a.m. – 4 p.m. at 44 Montgomery Street, Lower Level Conference Center, San Francisco. The cost is $400 for both members and non-members. Visit www.bomasf.org for more information.
16
IIDA Northern California Chapter will host Silicon Valley City Center: eBay Tour from 4 p.m. – 6 p.m. at eBay Whitman Campus, 2065 Hamilton Ave., San Jose. Members $0 and non-members $5. Contact mharbert@ maharam.com to attend this event.
16-17
Appraisal Institute Northern California Chapter will host a National USPAP 15-Hour course at University of Phoenix, Fairfield. Members $320 and non-members $420. Visit www.norcal-ai.org for more information.
18
BOMA San Francisco will host a free Emergency Preparedness Committee workshop from 12 p.m. – 1 p.m. at The Pyramid Center, 600 Montgomery St., 48th Floor, San Francisco. Visit www.bomasf.org for more information.
18-19
Appraisal Institute Northern California Chapter will host a General Appraiser Report Writing and Case Study course at University of Phoenix, Oakland. Members $575 and non-members $675. Visit www.norcal-ai.org for more information.
9-12
Appraisal Institute Northern California Chapter will host the Residential Market Analysis and Highest and Best Use course at University of Phoenix, Fairfield. Members $320 and non-members $420. Visit www.norcal-ai.org for more information.
10
19
USGBC Northern California Chapter will host a luncheon called Toxicity in the Workplace from 11:45 a.m. – 1 p.m. at Wendel, Rosen, Black & Dean, LLP, 1111 Broadway, 19th Floor Conference Center, Oakland. Members $0 and non-members $15. Visit www.usgbc-ncc. org for more information.
CREW East Bay will host a luncheon from 11:30 a.m. – 1:30 p.m. at Military Base Reuse, Jack London Square at Cocina Poblana, Oakland. Visit www.eastbaycrew.org for more information.
IIDA Northern California Chapter will host the Eighth Annual Culinary Challenge called Feeding the Imagination from 5:30 p.m. – 7:30 p.m. at One Workplace, 1057 Montague Expressway, Milpitas. Members $0 and non-members $20. Contact lbisbee@oneworkplace.com or 408.719.3386 to RSVP.
24
CCIM Northern California Chapter will host a Silicon Valley district meeting. Visit http://chapters.ccim. com/northerncalifornia for more information.
25
BOMA Oakland/East Bay will host a Green Building Tour of 1300 Clay and 555 12 Street followed by a mixer. The tour starts at 3 p.m. at 1300 Clay, Oakland. Members $10 and non-members $30. Visit www.bomaoeb.org for more information. IFMA Silicon Valley Chapter will host an event called Rethink, Recharge, Return from 5 p.m. – 8 p.m. Visit www.ifmasv.org for more information.
IIDA Northern California Chapter will host IIDA’s Makeover of St Vincent de Paul Homeless Shelter from 5:30 p.m. – 7:30 p.m. at Teknion Showroom, 88 Kearny St., 15th floor, San Francisco. Please RSVP to Tony Smith at tony_smith@tekus.com. ULI San Francisco will host a course called A Primer on California Land Use Entitlements from 12 p.m. – 1:15 p.m. at Farella Braun + Martel LLP, 235 Montgomery St., 17th Floor, San Francisco. Visit www.ulisf.org for more information.
26
Appraisal Institute Northern California Chapter will host the 2011 Annual Spring Litigation Conference at Filoli Gardens in Woodside. Visit www.norcal-ai.org for more information.
29
CoreNet Global Northern California Chapter will host a chapter meeting called “Coming Out of the Economic Recession: Shifting Strategies from Consolidation to Growth” from 3:30 p.m. – 7 p.m. at Google HQ in Mountain View. Visit http://nocal.corenetglobal. org/CORENETGLOBAL/NorthernCalifornia/Home for more information.
31
SPUR will host an evening forum called The Cityscapes of San Francisco starting at 6 p.m. at 654 Mission St., San Francisco. Members $0 and non-members $5. Visit www.spur.org for more information.
MAY 2 0 1 1
theregistrysf.com 29
SENT to us
(continued from page 6)
Mortgage Banker Dies in Plane Crash Bruce Krall, a managing director in capital markets for Cohen Financial, died unexpectedly March 16 in a Long Beach, Calif., plane crash. He was 51-years-old. Krall worked nationally to arrange financing for properties of all types. He ran the San Francisco office of Fremont Investment & Loan for several years in the 1990s and early 2000s. Krall’s memorial service was held March 22 at Saddleback Church in Lake Forest, Calif. His family has requested that gifts in his memory be made to Building Blocks Foundation Fund and Friends of El Faro, two charities in which he was active.
Mayes Oyster Building Sells Coast Capital Income Fund LLC has sold 1233 Polk St., a San Francisco mixed-use hotel and retail property, for $2.25 million to an undisclosed investor. Clayton Jew and Morgan Thomas of brokerage Kidder Mathews represented the seller in the transaction. The property is leased to Mayes Oyster House, one of the oldest restaurants in the city. Broker Jew predicted that the area around the restaurant would be “one of the next San Francisco neighborhoods that will experience a surge in gentrification and growth.”
Apartments Near Lake Merritt Sell
Telemedicine Teaching Center at UCSF Completed General contractor McCarthy Building Cos. Inc. has finished a $12 million, 25,000-square-foot renovation of the Teaching and Learning Center at the University of California, San Francisco. The interactive teaching facility offers students and faculty from a variety of health care disciplines the opportunity to work sideby-side to develop skills to deliver patient care. Harley Ellis Devereaux was the project architect. Cammisa & Wipf Consulting Engineers served as the mechanical, electrical and plumbing engineers. Security company SafirRosetti served as the data and audio-visual systems engineer.
Kabam Expands Redwood Shores Headquarters Kabam, a leading developer of multiplayer social games, has expanded its Redwood Shores headquarters for the second time in six months. According to brokerage Cornish & Carey Commercial Newmark Knight Frank, Kabam established its headquarters at 101 Redwood Shores Parkway in March 2010 in 15,000 square feet.
The Fontana Lee East Apartments at 290 Lee St. in Oakland’s Adam’s Point neighborhood have sold for $3.1 million, or $139,773 a unit, according to Bay Apartment Advisors of Oakland. The sales price represented a 6.24 percent capitalization rate on current Income and expenses.
It expanded in October, leasing an additional 10,000 square feet. In March it agreed to lease another 15,000 square feet, bringing its total to 40,000 square feet.
The property, built in 1968, has 22 units and was fully occupied at the time of sale. It has been substantially upgraded.
Kristoph Lodge and Matt Winters of Cornish & Carey represented landlord Diamond Investment Properties.
Bay Apartment Advisor’s Kris Lamont brokered the sale. The property is a block-and-a-half from Lake Merritt and two blocks from a Whole Foods Market that has become a bellwether for Oakland’s uptown revitalization.
Jon Mackey and Liz Hart, both of Cornish & Carey, represent Kabam in all of its lease requirements.
Silicon Valley Brokers Honor ‘Developer of the Year’
Innovation Accelerator Expands San Jose Headquarters
Equity Office, the largest commercial office landlord in Northern California with more than 18 million square feet, has been named the Association of Silicon Valley Brokers’ “Developer of the Year.”
Intermolecular Inc., a supplier of equipment and services to speed semiconductor and clean-energy product development, has expanded at a new headquarters campus at 3011 N. First St. in San Jose. The company was previously located on Zanker Road, also in San Jose.
“This award was made possible by everyone at EOP, in all departments, who work hard every day helping to lease space, build space and provide superior property management services for our tenants,” John Moe, EOP market managing director, said in prepared statement.
Intermolecular has invested more than $3 million in improvements, including state-of-the-art processing and test equipment, in the 146,000 square-foot space. The property includes clean-rooms, laboratories and office space. Intermolecular plans to double its full-time San Jose employee base to about 250. It also plans multi-million dollar investments in equipment and software in each of the next two years.
“When we perform at a high level of service, we believe it makes the broker’s job that much easier in directing new tenants to our portfolio and helping us earn the support for our tenancy-retention goals,” Moe said.
Intermolecular’s equipment purchases have been aided by the San Jose Redevelopment Agency, which provided $400,000 in Capital Equipment Assistance last summer, and the San Jose Office of Economic Development, which provided $200,000 in Community Development Block Grant funds.
Commercial Services Firm Awarded for Sustainable Performance
Luxury Apartments in Berkeley Snag Mortgage The Capital Markets Debt & Equity Finance division of CB Richard Ellis Group Inc. has arranged $33 million in mortgage financing for the New Californian Apartments, a 148-unit mid-rise Berkeley apartment property. The mortgage was funded by a major life insurance company. It is non-recourse and carries a fixed-note rate of less than 4 percent over the term of the loan, according to CBRE. The New Californian was developed in 2010 and is located approximately five blocks from the University of California and the Berkeley central business district. It is three blocks from BART. The borrower is 1950 MLK LLC.
San Francisco Building Earns Perfect Energy Score The Swig Company’s 501 Second St., a seven-story office building South of Market, has earned the U.S. Environmental Protection Agency’s Energy Star rating. The property is the first in the city to secure a perfect rating and one of only a handful of buildings to do so in Northern California, according to the company. Commercial buildings that earn the Energy Star designation use an average of 35 percent less energy than typical buildings and release 35 percent less carbon dioxide into the atmosphere.
Engineering Services Firm Earns Recognition The San Francisco office of WSP Flack + Kurtz has received four design awards from the National Park Service, the California Preservation Foundation and the California Council of the American Institute of Architects for its work on The Walt Disney Family Museum in San Francisco, the University of California, Berkeley’s C.V. Starr East Asian Library, Apple Inc.’s flagship store in Boston and Cavallo Point Lodge at Fort Baker near Sausalito.
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The Association of Silicon Valley Brokers, or ASVB, is an organization of real estate brokers and salespeople in the industrial and commercial property business.
Smith-Wagle Commercial Management, Inc. was awarded the 2011 Environmental Excellence Award in the small business category from the Morgan Hill Chamber of Commerce. This award honors organizations that engage in practices that demonstrate their stewardship to the natural environment.
New App for Commercial Real Estate Research Jones Lang LaSalle has unveiled a new application for the Apple Inc. iPhone to provide easily searchable access to global commercial real estate research, as well as a range of social media channels for users to interact with Jones Lang LaSalle experts locally or around the world. The app, also available for iPad, is free to download from the App Store. Users can customize the Jones Lang LaSalle app for iPhone to their geographic area of interest. The app allows access to a full inventory of the firm’s latest global research and a blog that highlights the latest developments in commercial real estate sustainability.
E-commerce Company Expands Near Union Square San Francisco-based Fluid Inc., an e-commerce and social commerce agency that advises retail brands on such things as web design, has signed a lease for approximately 14,200 square feet at 222 Sutter St. in San Francisco. The new space, near San Francisco’s most-famous retail district, Union Square, is roughly double the size of the firm’s previous location, said Tony Zucker of Jones Lang LaSalle, who represented the tenant in lease negotiations together with colleague Travis James.
Sunnyvale Office Market Gains Big Traction Hewlett-Packard Co. has leased nearly 400,000 square feet at Moffett Towers in Sunnyvale, according to brokerage Cornish & Carey Commercial Newmark Knight Frank.
The lease was signed less than a month after Motorola Mobility committed to leasing nearly 236,500 square feet at the same campus at 1000 Enterprise Way. Moffett Towers were developed by San Francisco’s Jay Paul Co. They are certified LEED Gold and have 1.8 million square feet of offices and research and development space. Cornish & Carey Executive Vice President Phil Mahoney represents Moffett Towers in all leasing engagements. HP plans a state-of-the-art software-innovation center at 1140 Enterprise Way and 1160 Enterprise Way. The world’s largest technology company will consolidate multiple Bay Area offices into its Moffett Towers space to create a single community. It intends to begin occupancy in early 2012. Ken Gilbert and Alex Somerville of CBRE represented HP in the transaction.
Cities Ordered to Address Sewage Flow Into Bay The U.S. Environmental Protection Agency, Justice Department, California Water boards and San Francisco Baykeeper, an advocacy group, have lodged a stipulated order to settle a Clean Water Act enforcement action against seven municipalities in the East Bay Municipal Utility District. The settlement is part of a broader enforcement strategy to address sewage overflows to the San Francisco Bay. During the rainy season that began in October 2010, nearly 125 million gallons of untreated or partially treated sewage from the East Bay MUD overflowed into the San Francisco Bay. The seven municipalities listed as defendants in the order have agreed to update aging infrastructure and collection systems that have been major contributors to the overflows. As part of the order, Oakland, Emeryville, Piedmont, Berkeley, Alameda, Albany, and the Stege Sanitary District will make substantial improvements to their wastewater collection systems.
Northern California Mines New Superfund Sites The U.S. Environmental Protection Agency proposes to add two abandoned mines that discharge toxic pollutants to California waterways to the Superfund National Priorities List. The New Idria mercury mine site located in San Benito County, affects waterways leading to the San Joaquin River and San Francisco Bay. Blue Ledge Mine in Siskiyou County discharges into streams in the Rogue RiverSiskiyou National Forest and ultimately the Applegate Reservoir, a popular recreation area. n
PEOPLE on the move
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Property Managers Move to Grubb Dennis Henry (pictured) and Debra Galon have joined brokerage Grubb & Ellis Co. as vice president, senior portfolio manager and assistant property manager, respectively. The team joins from Colliers International. A 31-year veteran of property management, Henry spent four years as a senior property manager at Colliers, overseeing four office and retail properties in the East Bay totaling nearly 450,000 square feet. Previously, he spent 26 years with CB Richard Ellis in the Bay Area, where he began his career in 1981. Galon began her career as a property administrator in 2001. She held a similar position with Opus West Management Corp. and most recently spent nearly three years with Colliers as a property assistant.
Palo Alto Multifamily Company Names VP of Acquisitions Pacific Urban Residential, a multifamily developer and owner, has named Scott Youdall a vice president for acquisitions for its development division. Youdall will focus on expanding Pacific Urban’s multifamily development pipeline in Northern California and Seattle. He is based in the company’s Palo Alto headquarters. Youdall joins Pacific Urban from SummerHill Homes, where he served as director of land acquisitions. He brings a decade of real estate experience to Pacific Urban and has spent the last seven years acquiring and entitling Bay Area properties for residential development.
Pivot Interior’s Leader Honored by CoreNet Barbara Carlyle, a co-founder of Pivot Interiors, has been honored by the Northern California Chapter of CoreNet Global as Corporate Real Estate Service Provider of the Year. Since the company’s inception in 1987, and under Carlyle’s leadership, Pivot Interiors has grown into a $75 million business with a focus on the commercial, education and health care industries.
Architect Hires Marketing and Public Relations Professional Diana Banh has joined San Francisco’s Heller Manus Architects as marketing and public relations coordinator. n
FINAL OFFER A Family Tradition By Sharon Simonson A fourth generation developer, Alastair Mactaggart earned his stripes working in his family’s real estate business in Edmonton, Canada. “My father was a real estate developer in western Canada, and I grew up listening to him talk about development. I always thought it was a good blend of creativity and practicality, and noticed that he loved what he did,” Mactaggart said. “Funnily enough, his father and grandfather had been developers in Scotland, so while not that original, I did have a lot of precedent pushing me into this field.” After attending Harvard College for undergraduate studies and graduate business school, he moved to the Bay Area in 1997 and, at age 45, is now president of San Francisco’s Emerald Fund. Emerald Fund has primarily built housing and in recent years has focused on repositioning projects. Asked what sets the company apart, Mactaggart cites its ability to master the thorny San Francisco entitlement process: “Development anywhere in California is difficult, but especially so in San Francisco, which has so many smart (and wellorganized) voices who aren’t always singing your tune,” he said. “To develop real estate here, you really have to learn how to compromise— and be willing to do so. Often.” It is hard to name a favorite project because you spend so much time with each one—as long as eight years—you grow more and more attached, he says. While seeing the industry slowly improve through 2011, Mactaggart believes that the cost of doing business in the Bay Area is only as sustainable as companies’ desire to be here. “My sense is 2011 will continue to be slow, but in 2012 and definitely in 2013, you’ll see new residential starts,” he said. Emerald Fund hopes to go forward with development of a very dense, urban infill apartment project in San Francisco with significant affordability baked in. It will be done only with the help of government. Is there a time in the economic and real estate cycle when you can complete these kinds of projects without government subsidy? AM❯ That’s a great question. At 333 Harrison, 15 percent of the units (49) will be affordable to people earning 30 percent of median income. That means that today a studio would rent for a bit over $500, a rent that barely covers operating costs, and makes no contribution to the capital cost of building that unit. So with each unit costing close to $325,000 all-in, we are looking at around $16 million in extra costs for the 49 affordable units. Fortunately, we were lucky enough to receive a state Infill Infrastructure Grant of $11.6 million and a San Francisco city grant of $2.7 million. Without those grants, we would never have been able to build this project and deliver those deeply affordable units. Overall, I think providing quality affordable housing is a vital goal for the Bay Area. But the cost of providing that housing is astronomical, so the market-rate housing you build ends up having to bear the bulk of the cost of the affordable housing—and that makes the market-rate housing even more expensive. It’s a bit of a circle.
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❯
Alastair Mactaggart President, Emerald Fund
If you eliminated the affordable requirements, certainly the overall cost of housing would come down, though obviously not for those lucky enough to secure an affordable unit. I suppose in the end I’m a market guy and believe that if we built more housing, then on average, prices would come down. Lots of people disagree—they think there’s unlimited demand here—but I have more faith in the supply-and-demand relationship. I think in the end the only way we solve our housing problems is to house more people. This kind of infill, dense urban housing development near transit is a lynchpin of California environmental policy. Yet, these projects are difficult to complete. Is there a better way to achieve these ends? AM ❯ I think dense, infill housing is a major component of an environmentally sustainable future. But, density does run smack into many people’s perception of how California cities should look. In San Francisco, much of South of Market has a 40-foot height limit; many areas of the city are off-limits to residential housing. This results in low population density; which means you don’t have the riders necessary to support great public transit; which means you end up with too many people still relying on cars. The problem is, many people like the status quo, and as a result, support hurdles to additional development. I actually think we have the planning our citizens want. How has the process of raising funds evolved in the last 36 months, and will it stay the same? AM ❯ In the first part of the last decade we did a lot of deals with mezzanine lenders, which are very expensive, so we were forced to build condominiums, because we couldn’t make apartments pencil when using mezz debt. Then towards the height of the bubble we got into condo conversions (we confused ‘bubble’ with ‘we’re smart’), and it was in retrospect scarily easy to raise equity. In the last three years, as the new residential construction market totally disappeared, we didn’t even try to raise money, and the only reason our current apartment project is moving ahead is because of the grants we’re getting from the California Department of Housing and Community Development and the City of San Francisco. However I will say that there is just a ton of money out there on the sidelines waiting to invest in ‘broken’ deals. Actually so much money that we have walked away from many deals where we haven’t been able to get comfortable with the prices that some buyers are willing to pay. The cost of doing business and living in San Francisco and the Bay Area in general remains high compared to other parts of the country. How will this impact development, and will it slow down or mute the economic rebound that we are experiencing now? AM ❯ My sense is that as long as the Facebooks, Twitters, Zyngas and Apples continue to feel that the Bay Area and Silicon Valley are where they need to be, then this will stay a high-cost area. It’s incredibly difficult to build housing in the Bay Area, and you have starting software engineers out of college earning six figures. That’s a recipe for high-cost living. Unless something changes to dramatically open the floodgates and allow huge amounts of new housing, this will always be a high cost area to live. There is still a communications revolution going on around us, and we are in the middle of it, though we don’t necessarily reflect on it every day. But think of the Palm Pilot, and you’ll know what I mean. At some point our kids are going to ask questions like ‘what’s a keyboard?’ n