Walnut Creek Apartment Portfolio Trades Hands for $64.3 Million

By Alex Girda, Associate Editor

A multifamily portfolio recently traded hands in the city of Walnut Creek after the completion of a deal made between seller JB Matheson and new owner Interstate Equities Corporation. Arranged by Marcus & Millichap’s multifamily brokerage division, Institutional Property Advisors, the deal includes three different apartment buildings located in Walnut Creek—the main business and entertainment hub of Contra Costa County. The fee that IEC paid for the residential portfolio stood at $64.3 million, according to a press statement issued by IPA.

The three apartment complexes were built between 1962 and 1964 and offer a combined total of 358 apartment units. The properties are Carmel House, located at 1756 Carmel Dr.; Cypress Creek, located at 1011 Ygnacio Valley Rd; and Creekside Glen, located at 125 Near Court.

The 283,075 square feet of residential space that Interstate Equities Corp. has acquired benefit from their location in one of the consistent submarkets of the San Francisco Bay Area. The average area of a unit stands at around 788 square feet, while apartments will feature one-, two- and three-bedroom floor plans.

According to IPA Executive Vice President of Investments Stanford Jones, “the investment appeal of these assets is driven by strong employment fundamentals both in Walnut Creek and the Interstate 580/680 corridors, resulting in a high-single-digits existing loss-to-leave.” The representative also pointed out that the portfolio’s overall net potential rent has seen an increase of 12.5 percent between August 2011 and July 2012, exceeding Walnut Creek’s median increase over the same time, which stands at 11.9 percent.  

While the per-unit fee paid for the three apartment complexes, which stands at $180,000 per unit, is far below San Francisco’s strengthening figures, it is actually a solid number when taking into consideration the fact that Walnut Creek is located in the Contra Costa County submarket.

Chart courtesy of Marcus & Millichap Real Estate Investment Services at marcusmillichap.com

For more market data from the San Francisco Bay Area, click here.

Pleasant Hill Retail Property Trades Hands in $100 Million Deal as Retail Rates Make a Comeback

By Alex Girda, Associate Editor

One of the largest retail properties in Pleasant Hill recently traded hands, with Loja Real Estate LLC announcing the sale of one its most important assets. The Downtown Pleasant Hill Shopping Center was acquired by UBS Global Asset Management for a fee of approximately $100 million. Handling the transaction on behalf of Loja Real Estate was a Colliers International team consisting of Kevin van Voorhis, James Kaye, Jay Gomez and Lindsey Lantis.

The Downtown Pleasant Hill retail center offers 345,687 square feet of commercial space in San Francisco’s Pleasant Hill community. The center is the area’s main commercial hub, featuring a 40-strong tenant roster that includes names such as Century Theaters, Lucky Supermarket, Bed Bath & Beyond, Michaels, Ross, Golfsmith, Paul Mitchell the School and Zachary’s Chicago Pizza.

Loja Group LLC, a real estate investment management entity controlling Loja Real Estate LLC, has praised the newly offloaded property in a press statement as being a “strong property.” Katherine Burr, CEO of Loja Group LLC, said that “this was the opportune time to sell and advance other important initiatives at Loja.”

The multi-tenant retail property’s sale illustrates the increase in median prices for retail properties in the San Francisco Bay Area. Data from Marcus & Millichap Real Estate Investment Services points out that over the past five years, average prices decreased considerably in terms of both single-tenant and multi-tenant retail properties, with 2012 being the first year of growth since 2006. Single-tenant properties now charge higher per square foot rates than multi-tenant properties, with considerable growth being clearly visible for the past year.

Chart courtesy of Marcus & Milllichap Real Estate Investment Services at marcusmillichap.com

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Over-Performing San Francisco Office Market Produces Yet Another Office Deal

By Alex Girda, Associate Editor

San Francisco’s improving office market has produced yet another deal after a joint venture created by Hines and Invesco Real Estate moved to acquire an iconic construction located in the city’s South Financial District. The two real estate companies have completed a deal making their joint venture the new owner of the Rialto Building. While official financial terms for the deal were not disclosed, market specialists place the transaction’s value at around $57 million. The entity selling the Rialto Building was Africa Israel USA, or AFI USA.

Located at 116 New Montgomery St., the Renaissance-style Rialto was initially developed in 1902. The Great Earthquake of 1906 called for an extensive interior rebuilding and renovation process to be undertaken by the Meyer & O’Brien Architects-designed structure. It offers tenants 135,486 square feet of office and retail space.

AFI USA had owned the Rialto since 2007, a time frame in which the company had restoration works focusing on the original design of the structure, with main points of interest being the lobby, the elevator’s ornate metal doors, the painted panel ceiling, marble floor and bronze staircase. The building had an occupancy rate of around 85 percent at the time the transaction was completed. The current tenant roster includes names such as Trulia, Nelson/Nygaard, Walgreens and Chipotle.

According to a press statement issued by Hines Senior Managing Director Cameron Falconer, now that the building is part of the company’s portfolio, “Hines and Invesco will continue to invest in the building to complete its transition to a ‘creative core’ asset that caters to San Francisco’s burgeoning technology and multimedia industry tenants.” AFI USA CEO, Tamir Kazaz, went on to say that the deal “proves that San Francisco is still unmatched as the nation’s top-performing office market.”

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Former Solyndra Factory Given New Life as Seagate Unveils R&D Facility Plan

By Alex Girda, Associate Editor

The former Solyndra solar factory in Fremont is seeing sunshine again as the abandoned facility is set to be re-adapted. The site, previously owned by the failed solar panel manufacturer, will be transformed by Seagate Technology into a new research and development complex to be used by the data storage giant.

As Seagate is looking to the future of disk drives with its successful solid state and hybrid data disks, the company wants to capitalize on its current success and come up with the next big thing in data storage systems.

The old Solyndra site will be given a complete makeover as it morphs into a $180 million state-of-the-art R&D facility. Located on Kato Road in Fremont, the 411,000-square foot complex was bought by Seagate earlier this year for a fee of $90 million, San Jose Mercury News writes. The rest of the $180 million budget will be directed towards acquiring and installing the equipment that will turn the former factory into a Seagate facility that would create up to around 600 jobs in the field.

According to Mercury News, Seagate shopped around the Bay Area and Silicon Valley looking at around 40 potential locations to house the new project.

Solyndra closed down in 2011, a move that resulted in more than 1,000 layoffs. Seagate’s takeover of the facility will be a move welcomed by the local community, one that most likely would have preferred to avoid having an eyesore in the form of the former solar-panel manufacturing plant.

Image courtesy of user DarkSilverR53 via Panoramio

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Essex Property Trust Picks up Fox Plaza Residential Component, Commits to Improvement of New Asset

By Alex Girda, Associate Editor

Essex Property Trust has moved into San Francisco’s multifamily market to acquire a large chunk of housing units—part of a mixed-use building located in the city’s highly publicized Mid-Market district. The fully integrated real estate investment trust has shelled out $135 million for the residential component of Fox Plaza—a 29-story high-rise building located at 1390 Market St.—from Archstone, who was initially looking for a sale price more in the $150 million range.

The 444 units that Essex has acquired, located on floors 14 through 29, offer great views of the city and feature high ceilings and large decks. Three quarters of the units are 450-square foot studio apartments, with the remaining apartments featuring one- and two-bedroom floorplans. Essex Property Trust is also getting a two-level underground parking facility that can accommodate as many as 405 vehicles.

The acquisition deal did not include the lower floors featuring commercial office space. However, an adjacent two-story, 37,800 square-foot commercial building was part of the agreement.

The REIT’s interest in this second building is clearly linked with the fact that there is permitting in place for a 250-unit, 11-story apartment development. While Essex maintains that it has no immediate intentions of activating the entitlement, the entity has confirmed that the possibility of developing the tower will be evaluated in the future.

The new owner is set to commit $27 million over the next couple of years for the renovation and improvement of Fox Plaza. The 1968-built structure will undergo extensive interior and exterior improvement work in order to raise its current profile in one of the main emerging submarkets in the San Francisco Bay Area.    

Photo courtesy of user J. Ash Bowie via Wikimedia Commons

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Hotel Durant Acquired by Gemstone Hotels & Resorts in $27M Deal

By Alex Girda, Associate Editor

Berkeley’s Hotel Durant was the object of Gemstone Hotels & Resorts’ latest move on the hospitality market. The company, a full-service hotel management entity, acquired the property for a reported total of $27.3 million.

Gemstone is a hospitality company based in Park City, Utah that specializes in owning and operating urban upscale assets and chose the San Francisco Bay Area’s hospitality market for its current track record. The area has seen its hospitality figures increase in recent years, spurring a number of hotel deals.

The 144-key hotel is located at 2600 Durant Dr. in the immediate proximity of the University of California–Berkeley campus. The boutique hotel offers a great location within walking distance of Cal Bears Stadium and the Lawrence Hall of Science. The in-room amenities include high thread-count linens, hypo-allergenic pillows, ceiling fans, black-out shades, iPod docking stations, organic robes and laptop safes.

Additionally, graduate floor rooms benefit from a concierge-style service with daily complimentary breakfast servings and wine hour events. The on-site dining option is Harry’s, the hotel’s signature restaurant, with breakfast, lunch and dinner menus, craft-brewed beer, and California wines. The investment is seen by Thomas Prins, Gemstone principal, as “a great way to start the new year.”

“When this hotel became available, we knew it was perfect for Gemstone,” the official stated. The company was reportedly convinced by the fact that the Durant has its own niche market in Berkeley, making it a good addition to the company’s existing assets. Gemstone’s current portfolio also includes venues such as Maison 140 in Beverly Hills, the Mosaic in Los Angeles, the Copley Square Hotel in Boston and The Carlton in New York.

For more market data from the San Francisco Bay Area, click here.

Boston Properties Acquires In-Development High-Rise in South Financial Submarket, Sets Sights on Mixed-Use Opportunity in Virginia

By Alex Girda, Associate Editor

Another major San Francisco office project is the object of a large commercial real estate transaction, after Boston Properties recently announced the purchase of 535 Mission Street. The project, located in the city’s South Financial submarket, was previously owned by Beacon Capital Partners. The company is set to revive the development process halted back in 2008, as construction is set to re-commence by the end of the month.

The overall cost of the acquisition is clocked in at around $71 million, with Boston Properties now owning not only the development site, but all materials purchased up to the point of the deal and the existing construction at the site.

535 Mission Street is a project for a 27-story building with a massive height of 378 feet. The building will offer 307,000 square feet of leasable Class A office and retail space in a LEED Gold certified environment. The property is set to cater to tech tenants looking to relocate or expand in the booming tech-oriented office market of the San Francisco Bay Area.

Design-wise, the building will feature a glass front, column-free floor plates, and will offer residents views of San Francisco and the neighboring bay. The development process could take the company’s overall investment in the office property to around $215 million, a recently issued company statement shows. A completion date is set for the fall of 2014.

Apart from being the new owner of the in-development office project at 535 Mission Street, Boston Properties has also secured the last available land parcel at the Reston Town Center. The company shelled out approximately $27 million for the property, which is currently zoned for a possible development of 250,000 square feet of office space. Boston reportedly has its sights set for a mixed-use development that could see a residential component take shape at the Reston Town Center.

For more market data from the San Francisco Bay Area, click here.

Image courtesy of Google Maps

San Jose Power Retail Center Sparks $200 Million Acquisition Deal

By Alex Girda, Associate Editor

One of the largest retail power centers in Silicon Valley recently traded hands for a substantial fee. The Plant retail center was recently acquired by Phoenix-based Cole Credit Property Trust IV for the staggering amount of $205 million. The transaction is one of the largest the real estate investment trust has ever shelled out for an asset.

According to the Phoenix Business Journal, news of the transaction surfaced after Cole Credit filed its 8-K with the Securities and Exchange Commission. A final closing date for the deal is set for March 1.

The Plant is one of the largest properties of its kind in the entire region, offering a total of 650,500 square feet of retail space in the city of San Jose, only 510,000 of which were included in the actual deal. This is a result of the fact that a number of retailers have acquired the space they inhabit at The Plant.

Big names amongst the residents of the power retail center include Best Buy, Home Depot and Target. The facility sports a strong occupancy rate, with only five percent of the available space currently vacant.

Cole Credit Property Trust IV is one of the six real estate investment trusts managed by Cole Real Estate Investments, and this recent purchase represents a landmark buy for the entity—which was also responsible for the acquisition of the Canarsie Plaza in Brooklyn, N.Y. for $124 million in 2012.

According to data provided by Marcus & Millichap Real Estate Investment Services, The Plant’s strong vacancy figures are perfectly in tune with the surrounding area. San Jose has been under the national average when it comes to retail vacancies for a considerable amount of time, illustrating that the demand is well in place for such properties.

For more market data from San Jose, click here.

Chart courtesy of Marcus & Millichap Real Estate Investment Services at marcusmillichap.com

Recent Transactions in Bay Area and Silicon Valley Cement Area’s Appeal

By Alex Girda, Associate Editor

One of the largest contemporary commercial real estate transactions in the Bay Area was recently completed in Oakland. The building, serving as Clorox’ headquarters in the city’s downtown area, was reportedly acquired for a total of $110 million, InsideBayArea.com reports. The buyer was active real estate investment company Westcore Properties.

The new owner has already announced its intentions to renovate portions of the office building and upgrade the value of the property by bolstering its tenant roster. The 520,000-square foot building located at 1221 Broadway has served as Clorox’ headquarters since 1988 and will continue to be used by the household item manufacturer as per the terms of the sale.

The company has opted to sell its 24-story office tower due to an ongoing process of moving a large chunk of its workforce to its new office and research campus in Pleasanton. Clorox will stay on as the building’s anchor tenant, a long-term lease being agreed to for around 300,000 square feet of space in the 1976-built highrise.

Also in recent San Francisco Bay Area office market news, a Mountain View building was recently acquired by Peninsula Land & Capital for a total of $17.75 million. This particular transaction attracted interest due to the profit the seller generated through the sale, Seagate Properties Inc. having previously acquired the asset for only $9.5 million. The 1989-built, 42,622-square foot facility had an occupancy rate of 66 percent, and its tenant roster included names such as Guardian Analytics, LyLife.com and Infor Systems.

The transaction illustrates the increasing interest in office assets not only for Silicon Valley in particular—but for the Bay Area as a whole. The positive influence of tech giants such as Facebook, Google and Apple that have, during the past couple of years, committed to Silicon Valley continues to attract real estate investment companies.

Image courtesy of user Coolcaesar via Wikimedia Commons

For more market data from the San Francisco Bay Area, click here.

Forest City Enterprises Offloads Coveted Office Property in Downtown San Jose

By Alex Girda, Associate Editor

One of San Jose’s largest office buildings recently traded hands after Forest City Enterprises Inc. agreed to the terms with CBRE Global Investors for sale of Fairmont Plaza. CBRE Global Investors paid $93.1 million for the Bay Area asset.

The property, also known as the Knight-Ridder building, was sold in order to generate net cash proceeds for the Cleveland-based owner. Also part of this strategy was the recent sale of the company’s Emerald Palms apartment community in southwest Miami.

Fairmont Plaza is a 17-story office building located in San Jose’s downtown area. It offers 405,000 square feet of quality office space in the emerging San Francisco Bay Area. Built in the late 1980s, the property is one of the most coveted Class A office properties in the downtown area.

Its tenant roster currently includes names such as Accenture and KQED, as well as the members-only Capital Club.  The $93-million sale has earned Forest City approximately $28 million in net cash proceeds, according to data provided by the company.

The sale of Fairmont Plaza, along with the aforementioned southwest Miami apartment complex, marks the company’s focus on core markets, with assets in non-core markets being traded away in order to generate cash. In fact, the company’s 12 recent sales have, until now, provided Forest City Enterprises with more than $125 million in net cash proceeds. The company currently handles $10.7 billion worth of commercial and residential real estate assets which it owns, develops and manages.

For more market data from the San Francisco Bay Area, click here.

Image courtesy of HarshLight via Wikimedia Commons 

TMG Partners Acquires Recently Vacated Office Property, Seeks to Improve Existing Space

By Alex Girda, Associate Editor

A vacant North San Jose office building was recently acquired by San Francisco-based real estate company TMG Partners. The buyer acquired the Class A property with the aid of equity partner Alcion Ventures LP. The seller was real estate investment company Kaufman Jacobs, based in Chicago.

The deal was perfected for an undisclosed amount, with the buyers representing themselves and Kaufman Jacobs employing Mark Ziemendorf—a representative of Cornish & Carey Commercial Newmark Knight Frank.

The Montague Park-located office building stands at 2851 Junction Ave. in the northern part of San Jose and offers potential tenants 153,000 square feet of Class A office space. The building was completed in 2002 and has housed offices of the county of Santa Clara.

The building is now empty, a situation that will help the new owner with its plans to renovate quite a bit of the property while completely rethinking the lobby, common areas, restrooms and outdoor eating areas. Additionally, brand new sustainable landscaping and electric vehicle-charging stations will also be introduced.

Upcoming works at the site were confirmed by TMG Partners CEO Michael Covarrubias, who stated that the company “will have the opportunity to further renovate and improve in order to continue to take advantage of the strong tenant demand for institutional quality buildings.”

Active for the past 28 years, TMG was founded and headquartered in San Francisco. The company is a full-service real estate developer and property manager that has had a hand in developing around 20 million square feet of commercial real estate throughout the Bay Area.

Image courtesy of loopnet.com

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North Financial District Office Building Sold to Multi-Employer Property Trust

By Alex Girda, Associate Editor

475 Sansome is San Francisco’s latest office property to be traded after Multi-Employer Property Trust and Bentall Kennedy, MEPT’s real estate advisor, acquired the property for an undisclosed amount. The deal for the building—located at the corner of Sansome Street and Clay Street in the North Financial District—was brokered by representatives from Holiday Fenoglio Fowler’s local office.

The 21-story, 353,269-square-foot office tower is part of a growing submarket in close proximity to the well-known Transamerica Pyramid Center and the Embarcadero Center—part of one of the most active office markets in the country.

The trust’s investment was made due to its presence in a market that meets the criteria listed by Executive Vice President and MEPT Portofolio Manager at Bentall Kennedy, David Antonelli.

“[The market] has high barriers to entry, supply constraints and solid fundamentals driven by a diverse economic base,” noted Antonelli.

475 Sansome is a building that currently has a 90 percent occupancy rate and tenant roster that includes high-profile technology companies and national and regional professional services firms. The building meets high environmental standards, offers high quality parking and features large floor plates. It currently holds two green distinctions, having been awarded the Leadership in Energy and Environmental Design (LEED) for Existing Buildings Gold certification, as well as the Environmental Protection Agency’s Energy Star designation.

Multi-Employer Property Trust is currently in the market for high-end office properties located in central business districts of major cities across the U.S. The fund is also looking for grocery-anchored retail centers and multifamily assets in urban markets serving the “Echo-Boom generation.”

Image courtesy of loopnet.com

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Berkeley Center Trades Hands as Downtown May See Development Increase

By Alex Girda, Associate Editor

A retail and office complex in downtown Berkeley was recently acquired by a Los Angeles-based investor. Hill Street Realty LLC paid around $20 million for the property, a per-square-foot rate of $217.

The complex is made up of a number of buildings located in an area bordered by Shattuck Avenue, Aliston Way and Harold Way, the San Francisco Business Times reports. The former owner is Marin County businessman Roy Nee, who held the property through a private family trust.

Berkeley Center is a 92,000-square foot property that sits on a 1.75 acre site, where it is joined by The Hotel Shattuck—a property that was not included in the transaction. Newmark Grubb Knight Frank representatives Joshua Levy and Matthew Dobson arranged the transaction on behalf of the buyer. With new zoning in place for downtown Berkeley, the area is set to see a development increase. This means the purchase could prove itself even more profitable over the coming years.

The office and retail complex houses Shattuck Cinemas as a main tenant, while other names housed include Starbucks, Habitot Children’s Museum and the United Auto Workers Union Local 2865. The property currently has an occupancy rate of 98 percent. The new owner, Hill Street Realty, was founded back in 2001 by its current principal, Joseph Penner, and has since bought assets worth more than $100 million. The company buys, sells and manages real estate properties.

Image courtesy of myaptportal.com

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Santa Teresa Village Shopping Center Acquired by Maryland-based REIT

By Alex Girda, Associate Editor

The Santa Teresa Village Shopping Center in San Jose recently traded hands in one of the largest transactions involving neighborhood shopping centers in the Bay Area this year. Maryland-based Retail Opportunity Investments Corp. was the buyer, while the former owner is Santa Teresa Village LLC—an entity created by local contractor Barry Swenson Builder. The value of the transaction was a reported $31.6 million, according to the San Jose Business Journal.

Santa Teresa Village Shopping Center is a 124,792-square-foot retail property currently anchored by a Nob Hill Foods and Ace Hardware. The shopping venue has a low vacancy rate of around five percent.

Cassidy Turley, along with Kidder Matthews representatives, arranged the transaction on the buyer’s behalf, while the seller was advised by Prime Commercial. The per-square-foot rate that Retail Opportunity Corp. paid for the complex is approximately $250. The Maryland REIT’s offer immediately convinced Barry Swenson Builder executives to finalize the sale.

The San Jose area is set to benefit from the housing market’s recovery, as this will have immediate effects in the demand for retail space. The deal in question is a perfect example of new investors being attracted to the commercial market in order to make sure that they can be part of the upward trend.

Retail Opportunity Investment Corp. chose the Santa Teresa Village Shopping Center in concordance with its criteria for new acquisitions. The REIT seeks properties mainly in large metro areas of the Western and Eastern U.S. that are mostly neighborhood and community shopping spots, anchored by a major grocer and located in areas where the average household income rests in the upper percentile of the market.

Image courtesy of loopnet.com

Emeryville Public Market Trades Hands, Set for Massive Expansion

By Alex Girda, Associate Editor

The Emeryville Public Market is the latest major San Francisco Bay Area property to trade hands, after former owners TMG Partners and Rockwood Capital announced the sale of the mixed-use asset. The buyer is a partnership between Angelo Gordon and City Center Realty Partners. Financial terms for the acquisition deal were not disclosed, but the investors reportedly paid around $60 to $70 million for the development, according to industry specialists. Holiday Fenoglio Fowler represented the seller in the deal.

The Emeryville Public Market is a 270,000-square-foot mixed-use property that was developed by TMG Partners during the late 1980s. The owner recapitalized on the 5959 Shellmound St. property in 2003 when it began its collaboration on the project with current partner Rockwood Capital. The office and retail development underwent renovations and improvements of about $4 million that would increase the Market’s walkability factor and create an integrated community in which working, dining and shopping could be done in a concentrated spot.

Leasing at the facility also kicked into a higher gear with retailers such as Urban Outfitters, Guitar Center and Hot Italian rounding out the existing tenant roster during the past year. The San Francisco Exploratorium contributed with exhibits of arts and sciences to the development’s plate.

The aforementioned initiatives led to the awarding of a number of distinctions to the Emeryville Public Market. These include a 2010 California Catalyst Communities Pilot Gold Level Designation, as well as the US Green Building Council’s LEED Neighborhood Design Platinum Designation.

Additionally, the development has entitlements in place for approximately 830,000 square feet of office, retail and multifamily space. The new owner is set to act in that direction and consolidate the mixed-use community into an urban village in the growing submarket of Emeryville.

Image courtesy of Emeryville Public Market’s Facebook page at facebook.com/PublicMarketEmeryville

Last Hotel in Larkspur-Farallon Capital Portfolio Trades Hands in San Francisco

By Alex Girda, Associate Editor

San Francisco’s hot hospitality market continues to heat up, as another hotel transaction joins an already packed roster of deals. It was recently reported that the last remaining property in the Larkspur portfolio was traded to a group of Canadian investors for a total of approximately $16.6 million. The Larkspur Hotel Union Square, the property in question, will now undergo a re-branding process that will see it return to its original identity—the Cartwright Hotel.

Located in San Francisco’s downtown area at 524 Sutter St., the hotel is a 114-key, upscale boutique property that is the last of 11 properties Larkspur has sold in a short frame of time.

The sale of the hotel marks the end of the portfolio that Larkspur Hotels owned in a joint venture with Farallon Capital Management. The property has had a troubled history, having fallen out of contract a number of times before its acquisition by Canadian investors. The transaction was arranged by Richard Ehmer of The Ehmer Group on behalf of the buyer and Eastdil Secured on the seller’s behalf.

The San Francisco Business Times reports that the buyer was intent on acquiring a downtown hotel for quite some time and mandated The Ehmer Group to that effect. A number of for-sale hospitality properties in the city include the Clift Hotel, Harbor Court, Holiday Inn at Fisherman’s Wharf, Hotel Rex, Hotel Triton and Hotel Kabuki. However, the fact that Larkspur’s property charged a per-room fee of $145,614 in a market that normally charges around $300,00 was too good a deal to be passed up.

Image courtesy of tripadvisor.com

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City of San Francisco to Complete 100K-square-foot Lease Agreement with Laurus

By Alex Girda, Associate Editor

The Laurus Coporation is cashing in on one of its earlier San Francisco Bay Area investments. The company has recently announced it is negotiating a leasing agreement for a large chunk of space at its 1155 Market St. property.

The L.A.-based investment company is currently holding talks with the City and County of San Francisco for approximately 75 percent of the available office space at the building. The city’s Board of Supervisors must first sign off on the move before local authorities are able to move in to 103,000 square feet of space, leaving only three floors open out of the available 11.

Bought for $27 million, the Mid-Market office property will now bear a solid occupancy rate, with the agreement signing imminent. City authorities would benefit from a preferential, below-market rent rate of $31.67 per square foot for the first year of contract. The second year’s rate will record a bump that will bring it to $39.14 per square foot, followed by a further increase of 3 percent during the third year of contract. The negotiated agreement would secure the space for the next 10 years, although the city would have the option of leaving the premises after five years.

According to the San Francisco Business Times, city agencies that would be moving into the new Mid-Market facility would include: treasury, tax collecting, assessor-recorder and public works. Those entities are currently located in a Shorenstein-owned office property at 875 Stevenson. However, the owner’s intention is to get extensive renovations underway at the property and has offered the city $3.25 million for early termination on that agreement. Once the facility is vacated and renovated, Shorenstein Properties intends to re-brand it as One 10th Street, SFBT noted.

As previously mentioned, the City of San Francisco will benefit from a hefty rent rate cut, as 2012 has seen rates surge by as much as 9 percent. Data provided by Marcus & Millichap Real Estate Investment Services shows that the end of the year should see median rates reach as much as $43.05 per square foot, meaning that even after the increases mentioned in the contract, local authorities would still lease the facility at a substantial discount.

Chart provided by Marcus & Millichap Real Estate Investment Services at www.marcusmillichap.com

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Pebblebrook Hotel Trust Continues Bay Area Expansion with Hotel Palomar

By Alex Girda, Associate Editor

At a time when San Francisco hotels are catching everyone’s fancy and room rates are going strong, it is to be expected that a number of hospitality transactions are being thrown around in the excitement. A case in point would be the recent acquisition of the Hotel Palomar San Francisco by Pebblebrook Hotel Trust. The AAA, four-diamond venue is branded by Kimpton Hotels & Restaurants, and it will continue to be managed by them.

The 196-room boutique hotel is located in the city’s downtown area at the corner of Fourth and Market Streets in close proximity to one of Pebblebrook’s other recent acquisitions—the Hotel Milano. Also nearby is the Moscone Convention Center, one of the city’s largest attractions, as well as the financial district, Union Square and the now famous SoMa office haven.

San Francisco’s Westfield Shopping Centre—home of Bloomingdale’s most representative branch on the West Coast—is also in the immediate vicinity, as well as the second-largest Nordstrom in the country.

Hotel Palomar was built in 1907 and opened under the name of Palomar San Francisco in 1999. The four-diamond, full-service upscale boutique hotel is a 196-key venue offering visitors high-speed WiFi, an honor bar and 37” flat screen TV’s in all of the rooms, while in-room baths feature Etro amenities and Kimpton signature brand bathrobes. 3,000 square feet of space divided into four rooms are designed for meeting purposes. Fitness facilities, hosted evening wine receptions and valet parking are also part of the hotel’s package.

Pebblebrook moved to acquire a hotel that, in 2011, operated at 81 percent occupancy with an average daily rate of $222 and room revenue per available room of $178. Part of the deal for Hotel Palomar is that the company will have to assume a $27.2 million non-recourse secured loan with a fixed annual interest rate of 5.94 percent.

For a more in-depth take on the acquisition of the Hotel Palomar San Fancisco, click here.

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Owners Looking to Charge Premiums for Bay Area Residential Complexes

By Alex Girda, Associate Editor

San Francisco is living its own private residential boom, and investors are looking to cash in on the demand for mid-Market residences. The San Francisco Business Times reports that apartment developer Archstone is currently looking to offload one of its larger Bay Area properties in the hopes of getting a hefty payday. The company has designated Colliers International to handle the sale of its 443-unit Archstone Fox Plaza Apartments, located on the top levels of a Market Street high-rise.

The Fox Plaza listing that Archstone has made available for sale also includes a neighboring development site with approvals in place for a 250-unit residential development and an underground parking facility with 399 spaces. Attached to the mixed-use tower is a two-story retail building currently housing a Starbucks, as well as other shops. That building would be leveled should plans for the additional building go ahead.

According to industry professionals, the listing should fetch the seller around $150 million.

1390 Market Street is a 1960-built concrete construction developed by the Cahill family. The first 13 floors of the building feature office space that Archstone sold out to Broadreach Capital in 2007. The 232,000 square feet of office space then got the company $42.7 million. Archstone initially bought the entire building in 2005 for a total of $147.5 miilion.

In other news, the city of San Jose is set to record a $148 million transaction after Essex Property Trust announced the acquisition of Willow Lake Apartments. The local apartment complex offers up 508 residential units featuring one-, two- and three-bedroom floor plans. The complex is set for a $4.5 million exterior renovation process that will be handled by the new owner, the San Jose Business Journal reports.

According to data supplied by Marcus & Millichap Real Estate Investment Services, the overall sales trend for the city of San Francisco is not as high as it should be, with 2012 set to trail 2011′s figures slightly. However, the nearing sale of Archstone’s 443-unit multifamily property would almost double the average per-unit sales values that the city has seen this year.

Image courtesy of Archstoneapartments.com

Chart courtesy of Marcus & Millichap Real Estate Investment Services at marcusmillichap.com

Warriors Arena Gets Development Team as Architect Unveils New Design

By Alex Girda, Associate Editor

A new hurdle was recently cleared in the process of delivering a new sports arena to the city of San Francisco, as the project finally has a construction deal. The San Francisco Business Times reports that companies Hunt Construction Group and Webcor have been awarded the coveted contract.

The developing team won the construction deal to the detriment of three other competing bids, one of which was submitted by Turner Construction. Set to be developed on a site at Pier 30-32 just next to the Bay Bridge, the arena’s design was only recently unveiled by project architect Snohetta, according to which the oval-shaped arena will stand 135 feet tall.

The Golden State Warriors confirmed they are crossing the Bay back to San Francisco after four decades of residency in neighboring Oakland. The currently struggling franchise is set to move out of the Oracle Arena, with the new project reportedly offering around 2,000 seats less than the 19,500-seat Oakland facility.

The $500 million development should be completed by the beginning of the 2017-2018 season in order to match the expiration date on the lease the Warriors have in place with the Oracle Arena.

Additionally, Webcor has partnered up with Hunt Construction Group—a company known across the country as one of the prominent stadium and arena developers—to develop the project. The Scottsdale-based contractor has wide experience in sports-centric projects, and its current completion record boasts dozens of such constructions. Brooklyn’s $485 million Barclays Center, the New York Mets’ $600 million Citi Field, San Francisco’s very own AT&T Park, Nationals Park in Washington and the brand new home of the St. Louis Cardinals—Busch Stadium—are all part of Hunt’s impressive portfolio.

Rendering courtesy of snoarc.no