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March 17, 2014

Week in Review: 3/1 - 3/5, 3/10 - 3/14

• A homebuilders trade group has dropped a lawsuit seeking to stop a controversial, long-range plan promoting high-density housing near public transit in the Bay Area. The Building Industry Association Bay Area had sued the Metropolitan Transportation Commission and Association of Bay Area Governments last year after they approved Plan Bay Area. Plan Bay Area calls for adding almost 188,000 housing units by 2022. Local planning officials are required to use Plan Bay Area as a template when planning growth in their city or making zoning considerations. ABAG and MTC finalized Plan Bay Area in July 2013 in response to a state law that requires every region in California to devise building and transportation plans to cut the emission of greenhouse gases. The Building Industry Association’s lawsuit alleged that Plan Bay Area violated state law by failing to provide for enough housing to accommodate the Bay Area’s projected population and by failing to provide a realistic development pattern to accommodate residential growth. The Building Industry Association agreed to settle in exchange for MTC and ABAG agreeing to adopt a new methodology for regional population, housing and development forecasts that will be used for the next update of the plan in 2017. The Building Industry Association lawsuit was one of four filed since Plan Bay Area was approved. Three other lawsuits — filed by Post-Sustainability Institute, Bay Area Citizens and Communities for a Better Environment and the Sierra Club — allege violations of the California Environmental Quality Act. CEQA mandates that local agencies follow a certain protocol of analysis of environmental impacts and mitigation of impacts when projects are being planned. The settlement of the Building Industry Association lawsuit does not affect the remaining legal challenges. The remaining legal challenges do not automatically stop Plan Bay Area from being implemented. (SF Biz Times)
• Google Inc.'s mysterious barge was moved Thursday to the Port of Stockton, where it was greeted by port and city officials. Stockton officials hung a welcome banner at a nearby building and took pictures with the barge, despite not knowing exactly what was inside, the Sacramento Bee reports. Google needed to find a new home for the vessel after it was told to move it from Treasure Island in San Francisco Bay. Google will pay $12,000 per month to lease a pier in Stockton. Google has avoided providing details of its plans for the barge. (Sac Bee)
• A Maryland-based developer has filed a proposal to build 186 housing units on the 1000 block of Market Street, a $52.8 million development that would be one of two large housing developments on the block. LCL Global — 1028 Market LLC, a company set up by former Under Armour clothing company executive Scott Plank — is proposing to build a 13-story condo building at 1028 Market St. with 9,600 square feet of ground floor retail. The building would replace a vacant two-story structure that was previously home to Hollywood Billiards. Plank bought the property in June of 2013 for $9.5 million. The 192,000 square foot building would include 42 parking spaces. The units would be small — an average of 625 square feet. The architect is Solomon Cordwell Buenz.Craig Young of Tidewater Capital is leading the effort for the developer. The project proposal comes a few weeks after Shorenstein Residential filed an application to build a 301-unit midrise apartment tower at 1066 Market St. Originally Shorenstein had worked with David Addington, the former owner of the 1028 Market St. site, to combine forces and build one project. When that deal stalled, Addington sold his property and now the two parcels will be developed separately. The Shorenstein project is being designed by Bernardo Fort-Brescia of Arquitectonica. It would feature a slender 12-story tower fronting Market Street, a 5,000 square foot site last occupied by the defunct Pipers Jewelers. But most of the 300,000-square-foot complex would spread out on a 23,400-square-foot surface parking lot on the Tenderloin side of Market Street, according to an application filed with the city. The project would include 162 feet of frontage on Golden Gate Avenue and 141 feet along Jones Street. Shorenstein has owned its property for years, primarily using the lot to accommodate theatergoers attending shows at the nearby Golden Gate Theater, which the family also owns. Tenderloin activists have long complained that the parking lot’s relatively inactive use contributes to one of the neighborhood’s most blighted blocks, with drug-dealers and their patrons regularly camping out along the property’s chain-link fence. (SF Biz Times)
• Speculation is picking up that Salesforce is in deep negotiations to take about 300,000 square feet in the Transbay Tower at 415 Mission St. A source familiar with the talks said that the cloud computing giant is looking at the space and that the two parties are working on a “letter of intent” document, although it is not yet complete. The source cautioned that the talks are in early stages and that many details need to be ironed out for the lease to be completed. Salesforce is currently consolidating its downtown San Francisco offices into three buildings: 50 Fremont, Rincon Center, and 350 Mission St., which is currently under construction. By the end of 2015 Salesforce will occupy about 500,000 square feet at 50 Fremont, 400,000 square feet at 350 Mission St., and 236,000 square feet at Rincon Center. The company is currently looking to sublease its space in three other buildings: One Market St., 123 Mission St., and One California St. The space Salesforce is giving up in those three buildings totals about 275,000 square feet. The 1.4 million square foot Transbay Tower will rise 1070 feet on the skyline, making it the tallest tower in San Francisco. The building is being constructed by Hathaway Dinwiddie/Clark Construction and leased by Cushman & Wakefield and CBRE. The developers are Hines and Boston Properties. In a recent earnings call Boston Properties Chairman Mort Zuckerman said that the “subgrade work at Transbay is progressing and our marketing program is in full swing.” (SF Biz Times)
• Swedish telecom company Ericsson is zeroing in on a big lease in Santa Clara, potentially the largest new office deal here that doesn't involve Google in well over a year. Ericsson is considering leasing in the ballpark of 440,000 square feet at Irvine Company’s under-construction Santa Clara Square, according to multiple sources not connected to the potential transaction. The blockbuster deal would be a coup for Irvine, coming on the heels of news last month that it was close to signing Whole Foods to a retail component of the same project. As a caveat, there are several speculative projects in the area all looking for tenants right now, and a big lease deal is never a sure bet until the ink is dry. If completed, a deal this size would dwarf any office lease done this year or last that does not involve Google. The search and advertising company's 500,000-square-foot lease of Mountain View’s San Antonio Station last year topped our chart of biggest transactions. Softbank also leased 240,000 square feet in San Mateo, Nvidia leased 200,000 square feet in Santa Clara, and Netflix signed for a 242,000-square-foot build-to-suit in Los Gatos (though the latter was a re-do of a previous deal). But overall, the Valley has not seen the flurry of huge, monster leases and build-to-suits that typified 2011 and 2012. Newport Beach-based Irvine Co.'s Santa Clara Square is located at Bowers Avenue and Highway 101, along some of the highest-profile freeway frontage in all of Silicon Valley. Irvine Co. bought the already entitled development site in August 2012 from Equity Office Properties, and has steadily been adding parcels in the neighborhood since. Both Santa Clara Square and its other spec project in the city, Santa Clara Gateway, are designed by New York-based Pei Cobb Freed & Partners. (SF Biz Times)
• Acclaim Cos. is hoping to build a five-story apartment building in downtown Redwood City, one that would join four others between six and nine stories that have been approved since 2011. The 133-unit Fuller Street complex, along with the other projects, would provide a total 1,239 rental units for the city. The Fuller Street project would include a two-story underground parking garage, as well as a clubhouse and fitness center. Two additional apartment complexes are being built just outside the city center. (Palo Alto Daily News)
• The legal challenges continue for California’s planned high-speed railroad. A Sacramento judge has ordered a trial stemming from a lawsuit alleging that the state’s bullet train does not adhere to promises in a 2008 initiative that approved bonds for the project. The lawsuit was filed by Central Valley residents. The ruling appears to set the stage for a trial in which the plaintiffs and the California High-Speed Rail Authority argue over the design of the 520-mile line that would run between San Francisco and Los Angeles through the San Joaquin Valley and whether it conforms to requirements of Proposition 1A, the $9.9 billion high-speed rail bond measure approved by California voters in 2008, the Fresno Bee reports. Sacramento County Superior Court judge Michael Kenny ruled last year in the first phase of the lawsuit, rejecting a request from the High-Speed Rail Authority to sell $8 billion in bullet train bonds. Kenny said state bullet train planners were wrong to determine it was “necessary and desirable” to start selling the bonds because they failed to adequately describe future funding sources for the $68 billion project. Key issues for the upcoming trial are likely to be the rail agency’s proposal for a “blended” train system to share improved, electrified tracks along the Bay Area peninsula — something that some bullet train advocates say is different than what voters were promised in Prop. 1A, the Bee reports. Rail opponents add that the blended system will preclude high-speed trains from achieving Prop. 1A’s mandate for a 2-hour 40-minute nonstop ride from downtown San Francisco to Los Angeles’ Union Station, the newspaper reported. The lawsuit also alleges that the bullet train system will not be able to operate without a public subsidy, as the ballot proposition required. Representatives for the rail authority said they believe the proposed system does comply with Prop. 1A and characterized the Kings County lawsuit as a stall tactic, the newspaper said. The ruling does not immediately put the brakes on plans for bullet train construction. The California High-Speed Rail Authority wants to start construction on the train with a 29-mile stretch of track between Madera and Fresno. (SF Biz Times)
• The sudden and somewhat unexpected buyout of San Francisco’s Club One by Active Sports Clubs has left the company’s nearly 2,500 employees in health care limbo and raised questions over why the fitness chain — one of the largest in the Bay Area — changed hands so quickly. As it turns out, there was a compelling reason: Club One was struggling financially and contemplating closing its doors, a former company spokesperson said. While Active Sports Clubs owner Jill Kinney would not confirm the financial health of Club One prior to the takeover, she said her company had to “move very quickly” to acquire the brand. Club One CEO Robin Klaus claimed that the company was never at the point of closure and said only that a "tough rental market" created challenges for the company. "There were portions of our business that were very healthy and portions that were struggling," he said. "The club market is very difficult here and a rapidly changing rental market made some leases difficult." But now all that,"is irrelevant," he added. "We got a deal done." Meanwhile, Kinney said that her company did what it could to assemble a “strong, well-capitalized company and acquire the assets to protect the employees, members and business that was there.” Unfortunately, that didn’t turn out to be the case with employee’s healthcare benefits. While the details are still unclear, the rapid turnover had the unintended consequence of leaving all of Club One’s former employees — most of whom have been hired by Active Sports Clubs — without health insurance. (SF Biz Times)
• Jack London Square Ventures is building a 49,000-square-foot entertainment and food destination in Oakland's Jack London Square, satisfying a hunger for more retail in the neighborhood. Trifecta Management Group has signed on to become the single vendor taking over a 34,000-square-foot building and a 15,000-square-foot outdoor plaza at 98 Broadway, which lies at the center of the 9 block project where Broadway dead-ends into the waterfront. Trifecta plans to turn the large space into a casual dining area featuring a gastro-pub with “coastal California cuisine,” bowling lanes, new and vintage interactive games, as well a large outdoor beer garden with a long bar and bocce courts. “This is a one-of-a-kind waterfront venue. We are looking forward to finalizing and debuting our unique food and entertainment concept,” said Mike Auger, Trifecta Management Group’s managing partner, in a statement. “One that incorporates everything we’ve learned from projects around the country, but something that uniquely reflects what this market wants.” Jack London Square Ventures — the developer behind the Square — is a joint venture between Ellis Partners LLC and DivcoWest. Ellis Partners completed the first phase of its projected, $350 million redevelopment of Jack London Square in 2008. The first phase’s office space was leased relatively quickly to tenants, however, the retail part of the building, about 70,000 square feet that was to be a kind of food market similar to the Ferry Building, has sat vacant other than Daniel Paterson’s Haven Restaurant. In November, the team announced plans to build two residential towers with 665 units of housing in the area and the developers continue to look for more retail tenants. Dean Rubinson, senior vice president of development for Ellis Partners, said the developers are still pursuing the food market concept, and that the Trifecta space is about two blocks from market building and filling up the Trifecta space is a key element in executing the overall concept of the market and a key catalyst in getting the market leased. The Trifecta Management Group has developed 30 independent concepts throughout the country, focusing primarily on operating entertainment and restaurant spaces. The identity of this custom tailored waterfront food and entertainment concept will be introduced later this summer and the site will open to the public this fall. Construction has already started. (SF Biz Times)
• San Francisco Mayor Ed Lee wants city departments to draw up lists of landholdings that could be converted to new housing. Whether that effort takes off or gets bogged down in bureaucratic inertia remains to be seen. San Francisco developer Michael Yarne hopes it succeeds, saying it can help the city increase its supply of badly needed new housing. But as a veteran of the real estate industry, Yarne has seen previous calls to use public land for housing go nowhere. “It’s my feeling that the city has tremendous real estate assets that are dramatically under utilized,” said Yarne, a principal at Build Inc., an urban developer. A real estate and land use attorney, Yarne has previously negotiated real estate deals on behalf of the San Francisco mayor’s office. In the past, mayoral administrations that suggested the use of public land for housing did not treat it as a priority, Yarne said. It was “the flavor of the month... In general, I don’t think any mayor has owned this and said, ‘This is a Number One priority.’ Maybe this time,” Yarne said, “there is enough of a sense of urgency to make it happen.” There can be resistance from city departments to turning over city-owned land. Each agency has its own goals and motivations. Turning over part of their landholdings can be seen as limiting the department’s future options and reducing its influence. But if Lee can motivate his departments, the payoff in more housing stock could be tremendous, Yarne said. “The question is ‘Can the mayor really motivate these large institutions to think differently, to be entrepreneurial, to see real estate as an asset?’” (SF Biz Times)
• Palo Alto's Epiphany Hotel opened its doors this week, seeking to bring tech entrepreneurs and those who court them to the 86-room boutique property from Joie de Vivre Hotel group. The hotel is a rebirth of the former Casa Olga hotel and is just the second hotel to debut in downtown Palo Alto in nearly a decade. The hotel includes several work lounges and co-working spaces, as well as an 80-seat restaurant and bar with outdoor spaces. The Epiphany Hotel’s new exterior – paneled with perforated metal – retains the original façade’s six-story-tall mosaic portrait of El Palo Alto, the thousand-year-old coastal redwood that gave the city its name. Niki Leondakis, CEO of Commune Hotels & Resorts, Joie de Vivre’s parent company, said that this hotel fits seamlessly into the Silicon Valley needs and spirit. On the ground floor of the Epiphany Hotel is Lure + Till, a welcoming, all-occasion indoor-outdoor restaurant led by Executive Chef Patrick Kelly. The restaurant serves simple, honest food and craft cocktails. Lure + Till is currently serving breakfast and lunch through in-room dining. The restaurant will open for full breakfast, lunch and dinner service on March 17. JDV pumped several million into the renovation of the property and tapped Palo Alto-based Steinberg Architects, McCartan Interior Design and IDEO to carry out the vision. Earlier this year, JDV estimated that the hotel will bring the city $800,000 in annual tax revenue — the most of any property, since the only other nearby high-end hotels, the Four Seasons and the Rosewood, are located outside of city limits. (SF Biz Times)
• A new 20,000-square-foot Chinese food emporium is coming to San Francisco’s Chinatown — a combination marketplace and high-end restaurant by restaurateur George Chen. Real estate investment firm Cypress Properties Group has signed a 20,000-square-foot lease at 644 Broadway with China Live. While Cypress already owned the 45,000-square-foot Broadway building, the group went out and acquired 660 Broadway to be able to offer more ground floor space to Chen’s groups. China Live will be a culinary destination occupying the ground floors of 644 and 660 Broadway. Founded by restaurateurs George Chen and his wife Cindy Wong-Chen — the couple is behind Shanghai 1930 and Betelnut — the China Live group includes managing partner Richard Miyashiro, who has been involved in Boulevard and Hakkasan. The plan is to create an unprecedented Chinese food and beverage marketplace on the ground floors, presenting curated interactive retail and a variety of casual dining options prepared at exhibition kitchens. The second floor at 644 will include Eight Tables, an intimate upscale restaurant, in addition to a bar, lounge and banquet space. Both venues are scheduled to open by Chinese New Year, February 19, 2015. In addition, San Francisco Film Society leased approximately 4,000 square feet in the 644 Broadway building. The San Francisco Film Society will house its FilmHouse residency program, which provides free office space to up to 25 filmmakers to work on narrative feature projects in any stage of production, from development to post. SFFS FilmHouse is funded by the Kenneth Rainin Foundation and the Broadway space is scheduled for occupancy by August this year. “When we looked at this building we just saw this huge opportunity to do something creative with the space and re-energize the neighborhood. We could not be more pleased to have China Live and the San Francisco Film Society as occupiers and partners in fulfilling our vision for the property,” said Chris Wight. The third floor of 644 Broadway is available to lease and the property includes a subterranean, 437-seat theater with direct access to Broadway. (SF Biz Times)
• Starting construction on a 64-acre site that could eventually house thousands of people and jobs may sound daunting, but the build-out might be the easy part of Brooklyn Basin. Developers marked the ground breaking of the huge, waterfront development in Oakland on Thursday morning a good 13 years after it was conceived. Investors, city officials, labor groups, community leaders and residents gathered for the event that, as Oakland Mayor Jean Quan put it, was not just a milestone for the developers but all of Oakland. “Our history and future is on the waterfront,” Quan said before a crowd of about 200 people who showed up for the ground breaking. The developers behind Brooklyn Basin include Signature Development Group and Zarsion Holdings Group Ltd., a Chinese investor that committed $1.5 billion to build out the project over the next 15 years. Signature Development came on to the project after being selected by the Port of Oakland as the master developer in 2001. The project went through years of securing approvals from various entities, lawsuits and the Great Recession before reaching the point of getting started. Brooklyn Basin is slated to include 3,100 units of housing, 200,000 square feet of commercial space and more than 30 acres of parks and open space on former industrial land along the Oakland Estuary. It is the one of the biggest residential projects ever in Oakland’s history and is currently one of the largest Chinese investments in a U.S. project. “Oakland has a lot of potential. Some people were a little bit worried about the city, but that’s why we are here,” said Arthur Wang, president of Zarsion America Inc., the division of Zarsion managing the Brooklyn Basin investment. “We want to contribute to this community.” (SF Biz Times)
• UCSF’s pending deal to buy 3.5 acres in Mission Bay from Salesforce would pump $32 million into affordable housing and infrastructure improvements. UCSF is in talks to purchase lots 33 and 34, the rectangular-shaped property across Third Street from UCSF’s under-construction women’s, children’s and cancer hospitals. The acquisition would allow UCSF to build 300,000 square feet of office space needed to support its new hospital and research campus.
• While the price that UCSF would pay for the land has not been disclosed, San Francisco Office of Community Investment and Infrastructure Executive Director Tiffany Bohee said the transaction would accelerate investment in housing as well as the parks, streets, and other infrastructure that master developer FOCIL-MB LLC is responsible for. Under the master development agreement, FOCIL is responsible for $300 million in infrastructure improvements, which includes everything from the Fourth Street extension to waterfront parks to the new fire and public safety building being built. About half of the improvements have been completed. The deal with UCSF calls for $10.2 million for affordable housing, money that will go into the development for about 100 units on blocks six and three. Bohee’s office will issue two requests for proposals that would have a mix of affordable family housing as well as supportive housing for formerly homeless. The deal would leave Salesforce with 10.5 acres of Mission Bay land. The company has been interviewing brokerages to market the property off and on for several years, but has never formerly brought it to market. Salesforce had planned to build a 2 million-square-foot campus in the neighborhood, but instead decided to grow in the south financial district, where it has taken space in 50 Fremont, 350 Mission St. and Rincon Center. (SF Biz Times)
• The day after a huge fire destroyed an apartment building nearing completion Tuesday evening, it is unclear whether developer BRE Properties will restart the 172-unit portion of the project. Meanwhile, surrounding developments face at least short-term delays. The site that caught fire at 4th and China Basin streets was part of a $227 million, two-building, 360-unit project known as MB360. The contractor on the project was Suffolk Construction. Construction on both M360 buildings started a year ago and were about 75 to 80 percent complete looking toward finishing by June. Other projects near the BRE site were ordered by safety officials to stop construction along 4th Street until further notice, including Equity Residential’s Sol at Mission Bay, a 273-unit project that Nibbi Brothers is building across the street, and 180 4th St., 150 affordable units from developer Mercy Housing and contractor Roberts-Obayashi Corp. San Francisco-based BRE released a statement stating, “We carry comprehensive insurance coverage for events such as this including hard cost replacement, soft costs and loss of revenue. We believe any losses to the company caused by the fire should be covered by insurance and will not have a material effect on our financial condition, operating results, or pending merger transaction.” The statement did not address the prospect of rebuilding. BRE is in the process of merging with Palo Alto-based Essex Property Trust, so it is likely that Essex will decide whether or not to rebuild the apartments, a source familiar with the project said. BRE’s shareholders are scheduled to vote on approving the merger March 28. (SF Biz Times)
• In yet another sign of strong hospitality development winds here, a group of hotel-industry veterans has purchased a 1.56-acre Sunnyvale site where they are looking to build a new hotel.
• A partnership that includes local hotel developers Kelly Heil and Bob Longinetti, as well as Dewey Weaver of the hospitality firm InterMountain, paid about $5 million for the site at 861 East El Camino Real. The seller of the property, currently leased to Summewinds Nursery, was a family trust. The hospitality group has already turned in a preliminary application to the city to develop the site into a 163-room hotel. Heil told me that no brand has been secured for the property just yet. But given recent development trends, it is likely to be a "select service" type of brand catering to business travelers. "We're just very excited about this trade area. Cupertino and Sunnyvale are thriving," Heil said. "This is like a dream deal." Heil and Longinetti are also the developers behind the Hilton Garden Inn at 10741 North Wolfe Road in Cupertino. InterMountain is a developer, owner and operator that has more than 75 properties across its national portfolio, including flags of Hilton Hotels Corp., Marriott International, Hyatt Hotels Corp., Startwood Hotels, InterContinental Hotels Group and others. This is hardly the only hotel project under development in Sunnyvale. Two miles down the road, T2 Development is developing a 145-room Courtyard by Marriott at a former car dealership at 660 W. El Camino. Shashi Group is undertaking a conversion to the Aloft brand of the old Pacific Inn at 170 S. Sunnyvale Ave. And the Sheraton Hotel Sunnyvale has turned in plans to add a nine-story, 169-room tower to its existing property at 1100 North Mathilda Ave. (SF Biz Times)
• HOK Architects has joined developers Landbank, Cassidy Turley and CB Richard Ellis in a plan to build a futuristic campus for startups in Sunnyvale. The Mercury News reports the firms have filed an application to redevelop 18 acres of land on the north side of the city. The plans call for a 777,000-square-foot campus with an outline that resembles the Starship Enterprise, the report notes. The firms are aiming for LEED-platinum certification for the project, which would include three four-story buildings with 90,000 square feet of rooftop gardens. A draft environmental impact report for the proposal is expected in several months. (SJ Mercury News)
• KTR Capital Partners recently picked up a 30-acre development site in the Pinole Point Business Park in Richmond with plans to start construction this summer on 515,000 square feet of industrial space. The investor and partner Sponsor Properties bought the site from Sares RegisGroup of Northern California for an undisclosed amount. “This is an attractive opportunity to acquire a sizeable land position in the high barrier to entry Bay Area market,” said Brian Gagne, senior vice president of investments for KTR Capital Partners. “With the scarcity of Class A industrial product in this corridor, we plan to begin construction on a speculative basis.” Sares Regis owned the property since 2008, when it bought all of Pinole Point Business Park including more than 700,000 square feet of buildings and 43 acres of land for development. Sares Regis sold the buildings to Industrial Income Trust in 2010 and held on to the development sites. Last year, Sares Regis completed a 117,200-square-foot, build-to-suit warehouse and distribution center for Whole Foods. Other tenants in Pinole Point include Restoration Hardware, Serena & Lily, Broadline Medical, International Delicacies and Bio-Rad Laboratories. KTR plans to build out the remaining entitled space in the business park comprising three buildings ranging from 40,000 square feet to 250,000 square feet. With the Richmond deal, the New York-based firm’s East Bay portfolio will grow to 1.5 million square feet. The company recently bought 528,000 square feet at 1700-1788 Fairway Dr. in San Leandro from Orton Development. KTR, founded in 2004, owns close to 53 million square feet of industrial real estate across North America with about $7 billion of investment capacity. It owns 10.5 million square feet in California. (SF Biz Times)
• San Francisco should establish a process to legalize thousands of illegally-constructed housing units and bring them under rent control laws, according to a staff recommendation ahead of a Planning Commission review this week. The Commission is set to hear on Thursday the legislation sponsored by Supervisor David Chiu that would apply to the approximately 50,000 illegal units built in garages, attics and attached to the rear of homes all across the city. Many of those units, often called granny flats or in-law units, are occupied by renters. San Francisco has had illegal units for decades. If city inspectors find illegal units, property owners are required to either bring them up to code or ordered to tear them down. Destruction of illegal units does not happen often. Between 2000 and 2011, about 250 illegal units were demolished. Finding a way to permit illegal units, and not punish property owners in the process, has come into vogue as a way to maintain a significant portion of the city’s rental stock amid surging demand for housing, supporters of the ordinance said. “Creating a path to legalize the unauthorized dwelling units would allow the city to maintain a large source of affordable rental housing, while ensuring such units are habitable and meet the minimum life and safety standards,” reads a portion of the proposed ordinance. Extending rent control to those illegal units, however, is a controversial element of the proposal because it could serve as a disincentive for property owners to seek legal status. Under Chiu’s plan, the city’s Department of Building Inspection would approve an illegal unit if it complies with city ordinances for health, fire and building codes. (SF Biz Times)
• Three seasoned San Francisco residential builders are jockeying to develop Block 8, a Transbay District parcel that is approved for 740 housing units. The groups bidding on the property are: Millennium Partners, which developed the Four Seasons San Francisco on Market Street and the Millennium Tower on Mission Street; Related California, which built the Paramount at 680 Mission St.; and Golub, the Chicago-based developer that was selected to construct 299 Fremomt, a $200 million, 32-story residential tower. Like Block 8, the 299 Fremont St. parcel was previously city-owned and was sold off in order to raise money for the Transbay Terminal. In total, 10-acres of state-owned properties are being sold off to raise money for the terminal, a transportation hub that boosters call the Grand Central Station of the West. The teams feature two well-known local architects as well as one of the "starchitect" variety. Related California has picked Rem Koolhaas' Office For Metropolitan Architecture. Koolhas has never completed a San Francisco building, though he is familiar with the city because a controversial Prada store he designed near Union Square was rejected more than a decade ago Golub is working with Chris Pemberton of Soloman Cordwell Buenz, which also is designing 299 Fremont. Millennium has selected Glenn Rescalvo of Handel Architects, who also designed the Four Seasons and Millennium Tower. Block 8, a 42,000-square-foot property on Folsom Street between First and Fremont streets, could bring in more than $75 million, according to recent Transbay comps. Today the office of Community Investment and Infrastructure — the successor agency to defunct Redevelopment —issued a request for proposals for Block 8. The RFP requires that 27 percent of the project be affordable to qualifying households, and ground-floor retail be included in the in multiple building types, which will include a 550-foot tower, townhouses and two podium buildings. All three teams are working with a local affordable housing developer. Related is teamed with the Tenderloin Neighborhood Development Corp., while Millennium Partners is working with Chinatown CDC and Golub with Mercy Housing. The submissions come about 18 months after Avant Housing and equity partner Essex Property Trust were tapped to build a 400-foot tower on Block 9 in the Transbay District, a 563-unit project that could break ground this year. The Avant/Essex team agreed to pay $43.32 million for the site, which works out to about $100,000 per door for the project’s 420 market-rate rental units. The project also includes 143 units of below-market-rate family units, which are being developed by Bridge Housing. But Block 8 will likely fetch a significant amount more than Block 9. This is partly because the market has risen over the last year and partly because a significant percentage of the affordable units will be subsidized by the office of Community Investment and Infrastructure. (SF Biz Times)
• Five new things we learned about the pending downtown arena project at a panel presentation last night as part of the Construction Specifications Institute building industry forum:
1. Demolition of Downtown Plaza, where the forum was held, will begin in May.
2. To the chagrin of 12-year-olds everywhere, neither demolition of the plaza nor, in a few years, of Sleep Train Arena, is likely to involve explosives, according to Turner Construction.
3. The first stage of the demolition will likely be on the southeast corner of the arena site near 7th and L streets and then move north, and people who want to watch should be across L.
4. As part of the effort to make it the most energy-efficient arena building possible, designers oriented it on a northwest/southeast axis to catch more sunlight.
5. Contracting firms hoping to get a piece of the action won’t just be selected on bid price, but on their ability to use local labor as much as possible.
• The rehab project at a formerly rundown Rancho Cordova shopping center continues, with three new businesses poised to open by the end of summer. Ethan Conrad, who bought the Rivergate Center at Coloma Road and Sunrise Boulevard last year, said leasing is nearly complete for spaces created from what was an 83,000-square-foot Kmart store in the center that closed earlier this year. “We’re working to put a new façade on it and totally change the feel of the building,” said Conrad, whose company, Ethan Conrad Properties, specializes in buying properties with some issues and improving their status. Also at Rivergate, Sportman’s Warehouse is making tenant improvements for a 40,000-square-foot spot that was part of the Kmart location, and Conrad said he’s days away from finalizing a lease for a grocery store in the center. By month’s end, a pet products store is also expected to sign a lease, while Chick-fil-A is opening soon in the center as well. Conrad is also building a new, 5,400-square-foot standalone building in the center that’s already got two likely tenants: an up-and-coming national pizza chain and a popular Mexican fast casual restaurant. Combined, those new leases will give the center about 90 percent occupancy, up from about 70 percent when Conrad bought it, he said. And the overall quality of the businesses in the center has gone up, to an appreciative reception from shoppers and city officials, he added. “When those three tenants are up and running, you’re going to see quadruple the number of cars,” Conrad said. Holdover tenants like Jaspers Giant Hamburgers and newer ones like Dickey’s Barbecue Pit and Dollar Tree have boosted traffic at the other end of the center, he said. “It’s a basic principle, when you have a center that looks nice and has good tenants, you attract more good tenants and traffic, and you’ll do well,” he said. (Sac Biz Journal)
• A Sacramento Superior Court judge has tentatively denied a change of venue request for the eminent domain action by the city to acquire property for a downtown arena. In the tentative ruling released Monday morning, Judge Robert Hight said attorneys for the California Public Employees' Retirement System, which acquired the former Macy’s mens store property after it fell into foreclosure, hadn’t made a compelling case for the lender who foreclosed as being based elsewhere. “There is no dispute that U.S. Bank conducts retail and commercial banking in Sacramento County,” the ruling states. “The court finds that its activities in the county are substantial enough that the corporation can reasonably be viewed as being closely associated with the people of this community.” The tentative ruling also dismissed another reason cited for the request, of Sacramento as a prejudiced venue for the eminent domain trial. “Plaintiff asserts that no public funds will be used for the acquisition and thus there is no detriment to local taxpayers,” the ruling states. “Accordingly, the court will deny defendant’s motion for a discretionary transfer under that theory as well.” City of Sacramento officials have previously said a hearing in the case is set for Tuesday, and city officials are hoping for an expedited process to ensure arena construction happens on a timeline of opening the venue in fall 2016. Demolition work on the vacant Macy’s building is set to begin this summer. (Sac Biz Journal)
• The city of Sacramento is weighing the merits of two proposals for development at a highly visible but long-empty property on the southwest intersection of Howe Avenue and Fair Oaks Boulevard. Though the city’s missed a previous timetable to make a decision, city economic development manager Jim Rinehart said he’s reasonably confident the City Council by late spring will have a recommendation for which proposal to accept. After issuing a request for proposals for the 3.12-acre site last summer, the city received five viable entries, and narrowed the field to two, RInehart said. Though he wouldn’t identify them, one proposes offices for the site, the other retail, according to Rinehart. Zoning would allow either to be built. One of the considerations for which proposal is ultimately favored, Rinehart said, is how it would allow access on and off the two busy thoroughfares of Howe and Fair Oaks. City traffic engineers have been studying the proposals, including with a site visit to envision them, as part of that evaluation, he said. The developers of the two competing proposals have said, depending on weather and timing, they expect developing the site to be about an 18-month process once the city makes a decision on who to sell the property to, according to Rinehart. (Sac Biz Journal)
• Another infill/redevelopment project near the heart of Sacramento is making its way through city approvals, though with less rancor than some other recent proposals. Sutter Park, which would redevelop the existing Sutter Memorial Hospital property on F Street in east Sacramento into a community of about 125 homes, is in line for final approval by the City Council on April 8. Randy Sater, president of developer StoneBridge Properties, said unanimous approval earlier this month from the city of Sacramento's Planning Commission was bolstered by vocal support from three neighborhood groups for the project. One reason Sutter Park has drawn support is because it’s meant to reconnect the hospital property to the existing street grid surrounding the site. The project’s main feature is a central park with housing clustered around it. As well, neighbors have supported the project’s emphasis on housing styles that connect to the neighborhood’s eclectic feel, with a mixture of densities and architectural styles as well as a few mixed-use buildings and smaller residential cottages, Sater said. Actual construction of the project is now closer with not only the approvals nearly in hand, but work being completed on Sutter’s new hospital at the edge of midtown Sacramento. This winter, the hospital staff is scheduled to move over, with a four- to six-month demolition of existing buildings and site grading following during the 2015 construction season. By the end of that year, Sater said, Sutter Park should be ready to start coming out of the ground. (Sac Biz Journal)
• Mourier Land Investment Company has bought about 83,000 square feet of office buildings in Roseville, adding to a portfolio of other office properties in Roseville and Sacramento. The purchased properties, two buildings at 3200 and 2241 Douglas Blvd., were about 85 percent occupied at the time of sale, said Kevin Larscheid, an executive vice president at CBRE Sacramento who worked on the sale. MLIC, a commercial development branch of local homebuilding company JMC Homes, bought the buildings for about $11.4 million from an unidentified loan servicing company. Larscheid said he couldn’t discuss Mourier’s interest in the property, citing a confidentiality agreement about the sale, but said he was not aware of any changes planned for the buildings. Mourier has specialized in buying formerly distressed properties in recent years, buying both a 53,000-square-foot building on Sunrise Avenue in Roseville and a 69,000-square-foot building on Exposition Boulevard in Sacramento in 2012. (Sac Biz Journal)
• Several flood-control projects in the region will continue work this year after the U.S. Army Corps of Engineers announced appropriated funding for them totaling about $110 million. Among them is $1 million for levee improvement design for Natomas, though the project is separate from but related to necessary work for a building moratorium to be lifted for that area. Corps spokesman Chris Gray said the design work would be a precursor to actual levee improvements, but the commitment to do the improvements would come from another bill going through Congress. Passage of that bill would allow the city to petition for the moratorium to be lifted, and representatives of the office of U.S. Rep.Doris Matsui, D-Sacramento, have said they still expect that to happen in the first half of this year. “This does take care of some of the preliminary work that would have to be done,” Gray said of the $1 million for levee design. Other funding announced, such as $3 million for Sacramento River bank erosion repair and $10.8 million for flood wall construction on Florin Creek in south Sacramento, is for projects already underway. Gray said the $66.4 million appropriated for auxiliary spillway construction for Folsom Dam, another ongoing project, is notable because it’s a large-scale plan with potentially big impact. (Sac Biz Journal)
• The owner of Aioli Bodega Espanola at 18th and L streets in midtown Sacramento is going to take over the spaces vacated by the closing of The Broiler and Gallagher’s Irish Pub. Aziz Belarbi-Salah, who owns Aioli as well as The Grand wine bar at 16th and L streets, plans to open Brasserie Capitale in the large space on the bottom floor of 1201 K St. which had been the home of The Broiler. The Brasserie will serve a menu of French comfort food. It will also feature French wines and beers. In the space that had been Gallagher’s, Belarbi-Salah will open Café A Côté, which will sell pastries and coffee in the mornings, bistro-style lunches and wine in the evening. The Broiler and Gallagher’s closed suddenly over Labor Day Weekend. Belarbi-Salah plans a summer opening in the building, which is owned by the California Dental Association. (Sac Biz Journal)
• A struggling shopping center has been hit by another couple store closings. Country Club Plaza, after recently losing Hallmark and Claire’s, is almost entirely vacant, according to the Sacramento Bee. Last year, there was talk of attracting grocery store WinCo as an anchor to replace the long shuttered Gottschalks store at the mall near Watt Avenue and El Camino. But that deal didn’t happen. Country Club Plaza, owned by an affiliate of LaeRoc Partners Inc. of Hermosa Beach, also was put up for sale in May of 2013. It had just lost major stores Bed Bath & Beyond and Ross to Town & Country Village at Watt and Marconi. (Sac Bee)
• Fulcrum, the development company known for both infill and creative redevelopment projects, has bought land entitled for a condominium development in West Sacramento north of Raley Field. Already working on The Park Moderns, a single-family housing project south of the ballpark, Fulcrum closed escrow in recent weeks on two parcels across from each other, at 620 4th St. and 316-330 G St. Tony Wood of Tiner Commercial Real Estate Services, who brokered the deal, said Fulcrum bought the property for $960,000 in an all-cash deal from a lender who took the land back from the original developer. When the developer lost the property, Wood said, the parcels were in the middle of the entitlement process for 88 condominiums. The lender then had the dilemma of either stopping the process or lessening the value, or continuing investing some capital to get those entitlements, he said. “Between the lender and the developer, there’s a good $3 million to $4 million invested in the site,” Wood said. “But had he not done that, I don’t believe they would sell.” Even with the entitlements still in place, it’s possible Fulcrum will approach the city of West Sacramento about a new site plan, Wood said. He explained the condos, proposed during the housing boom of the last decade, were envisioned at selling for $400 to $500 a square foot, about twice what they’d likely sell for now. “It may be rentals, it may be for-sale property,” Wood said of the parcels, which total just less than two acres. According to the city, Fulcrum has not yet approached West Sacramento with a new plan for the property. But both Wood and a city planner said because the property is in an area of the city near the riverfront, city officials will be eager to see it developed. “I think the important thing is that it’s obvious West Sacramento is starting to see momentum,” Wood said. “With the enthusiasm about the arena across in downtown Sacramento, it’s reawakened awareness about just how close West Sacramento is.” (Sac Biz Journal)
• After 13 years serving the Truckee community its Cal-Asian cuisine, Dragonfly Restaurant and Sushi Bar is closing this month. Three weeks ago, owner and chef Billy McCullough received a unsolicited offer for Dragonfly’s downtown location that he couldn’t refuse. He declined to reveal the offer’s amount. “I just want to have lots of chapters, and the sale has presented an opportunity to have another chapter in life,” McCullough said during a busy late lunch Wednesday afternoon at the restaurant at 10118 Donner Pass Road. March 25 is the last day for lunch, and March 26 for dinner, he said. (Sierra Sun)
• A South Lake Tahoe development stopped by the economic downturn is now moving toward ownership by one interest, with Owens Financial Group entering an agreement to buy nine parcels of the Chateau project near the Nevada border. Approved in 2007, the original 29-parcel, 11.5-acre project would have included 477 housing units and more than 56,000 square feet of commercial space, and work had already begin on a parking garage and foundations for future buildings. But nine parcels, encumbered by loans predating the development, fell into foreclosure during the downturn and ultimately became owned by City National Bank. Owens Financial President William Owens said with work having resumed on the first phase of the development, his board thought it logical to acquire those outstanding parcels. “We felt it enhanced the value of the overall project,” he said. Chateau is be on the west side of Highway 50 between Stateline and Friday avenues, just before the highway crosses into Nevada. Owens said the nine parcels, which would be bought for $6 million, are likely to be developed after the parcels closer to the highway, where construction is currently happening. Those parcels in escrow also could potentially house 188 “tourist accommodation units,” meaning hotel rooms or condominiums, Owens said. In addition to the retail and residential components, Chateau is planned to have a 19,000-square-foot spa, more than 20,000 square feet of meeting space and designated open space, subject to approval by the city of South Lake Tahoe. (Sac Biz Journal)
• Former IVGID Trustee Chuck Weinberger had a message for board members this week regarding summer operations at Diamond Peak: Don’t lose sight of the locals. “The big ticket items are clearly not targeted at us. An alpine coaster and zip line cords are pretty much one-and-dones for the people who will be living here,” he said. “The big ticket items … the items that are supposed to drive revenue, I think we’re kidding ourselves if we think they are going to be profitable.” Weinberger and several residents gave input on the Diamond Peak Master Plan process during a special Incline Village General Improvement District board meeting Wednesday. The three-phase, multi-million-dollar plan would not raise recreation fees, according to resort planning firm SE Group, while bringing in revenue to a resort it says is underutilized for seven months of the year. The first phase would add several summer recreation options, including hiking and mountain biking trails, canopy tours, an Aerial Challenge Course, and an alpine coaster. Summer camps, on-mountain weddings, festivals and concerts also are being considered. Phase two includes a brand-new, 8,500-square-foot Snowflake Lodge, featuring 225 indoor seats and 225 outdoor seats, while the third phase focuses on winter upgrades, including a new detachable lift for Lakeview and more snowmaking. The master plan’s goal is to let revenue from phase one help fund phase two, and then for phase two revenue to fund phase three, SE Group Principal Kent Sharp told trustees, meaning it could be several years before the entire plan is finished. As part of its $100,000 contract with IVGID to create the plan, SE Group conducted an online survey last year of residents. Following is a breakdown of community desires, according to the firm:
• 67 percent in favor of mountain biking.
• 52 percent in favor of base area activities.
• 80 percent in favor of hiking.
• 56 percent in favor of canopy tours.
• 55 percent in favor of an Aerial Adventure Course.
• 83 percent in favor of on-mountain dining activities.
• 50 percent in favor of an alpine coaster.