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April 16, 2012

Week in Review: 4/9 - 4/13

Redwood City wants to know where voters stand on the Saltworks project.  At its April 9 meeting, Redwood City Mayor Alicia Aguirre and the City Council directed City Manager Bob Bell to schedule a discussion about placing a non-binding “advisory” question on the November ballot. The date for the discussion has not yet been set.  The future of the 1,400-acre former salt production site, west of Highway 101 along Seaport Boulevard, has been the focus of a five-year contentious battle between environmentalists and developer DMB Pacific Ventures Associates. The current plan calls for 12,000 units of housing, which groups like Save the Bay oppose because they would like to see the site restored to wetlands. Last November, the applicant informed the city that it intends to conduct internal review and evaluation of its submitted proposal. A revised proposal is expected to be submitted to the city and it will require further analysis and environmental review.  (SF Business Times)

A combination of a frothy investment market and unbridled technology growth could lead to more new office construction than San Francisco has seen since 1999 and 2000.  Tishman Speyer announced last week that it would start construction on a 286,000-square-foot building in Foundry Square, an effort to lure one or more of the fast-growing social media companies exploding in San Francisco. Not far behind is 222 Second St. — a surface parking lot approved for a 27-story, 450,000-square-foot tower — which Tishman Speyer may start work on early next year.  Tishman’s joint-venture partner for both projects is J.P. Morgan Asset Management’s Global Real Assets unit, on behalf of institutional investors.  But while speculative development is always risky, Tishman Speyer’s total costs may be significantly less than the sale price of two other similar Foundry Square buildings which are on the market. Tishman Speyer’s total, all-in cost for the development will come in between $180 million and $185 million — $37 million for the land, $4 million for architectural drawings, and about $140 million for construction. That comes out to about $630 per square foot, less than the $715 a square foot, or $240 million, the State Teachers Retirement System of Ohio is in contract to pay for Foundry Square I.  Foundry Square III is the final phase of a four-building SoMa campus that Studios Architecture designed more than a decade ago. Three of the buildings are complete and are anchored by Orrick, Herrington & Sutcliffe, BlackRock Inc. and Gymboree.  Other approved office sites that could go vertical this year include 350 Mission St., 350 Bush St. and 535 Mission St., which is currently for sale.  (SF Business Times)

Developer Brian Spiers is teaming up with basketball legend Magic Johnson’s Canyon Johnson Urban Funds on a 115-unit housing project on Upper Market Street that will likely be under construction this spring.  The San Francisco project at 1998 Market St., the site of a defunct gas station, is being designed by Arquitectonica and is one of the few Bay Area developments being built as condominiums, rather than rental units. The hard construction costs will be $35.5 million. Spiers bought the site in 2006 for about $10 million. Canyon Johnson and Spiers are finalizing a construction loan with Wells Fargo.  The project is the first large housing development that was entitled as part of the city’s Market Octavia plan, a rezoning that allowed for higher housing density along Upper Market Street and along the Octavia Boulevard parcels that were freed up when the Central Freeway was torn down nearly a decade ago.  In addition to 1998 Market St., Spiers and Canyon Johnson are going forward with 1600 Market St., a 24-unit project, which will satisfy the affordable housing requirement for the 1998 Market project. Under the city’s affordable housing ordinance, 15 percent of a project’s units must be affordable to low- to moderate-income households, a requirement that rises to 20 percent if a developer chooses to build the affordable portion off-site. Both parcels of land were transferred into a joint venture with Spiers and Canyon Johnson. (SF Business Times)

Facebook Inc. has agreed to pay millions of dollars as part of a proposed development agreement in Menlo Park as the company seeks to expand there.  Facebook will also join in community ventures including sponsoring internship and job training programs, backing affordable housing, and improving bike and pedestrian pathways.  The agreement has been negotiated by Facebook and the city over the past 10 weeks and is now set to go before the City Council for a vote on Tuesday.  Facebook last year moved 2,000 employees from Palo Alto to the former Sun Microsystems campus in Menlo Park and is looking to expand that number to 6,600 in coming years -- nearly double the 3,600 allowed by the city.  (Palo Alto Daily News)

Zoosk is joining Zendesk, Twitter, and One King’s Lane in San Francisco's Mid-Market.  The social network company has leased 52,000 square feet at 989 Market St., the same building at Sixth and Market streets that Zendesk moved into last year.  The new office space will accommodate Zoosk’s growth as it expands from 102 employees in San Francisco to a planned 160 employees by the end of 2012, according to Mayor Edwin Lee, who announced the lease.  (SF Business Times)

An anonymous local private investor bought a fully-leased Cupertino office complex for $20.4 million, or $389 per square foot.  Metzler Real Estate sold the 52,438-square-foot property at 10381-10443 Bandley Drive last week, according to Don Wise, president and CEO of the Seattle-based investment firm.  Apple occupies 75 percent of the two single-story office buildings, which are adjacent to its global headquarters campus. The company had been a tenant — occupying 60 percent of the buildings — when Metzler first purchased the property in 2007. Metzler renewed Apple’s lease for another 10 years in late 2011.  Ducati North America, an Italian motorcycle maker, occupies the remainder of the property.  Metzler had acquired the buildings on behalf of its sponsored fund, Metzler North America Partners, which represents German and U.S. high net-worth investors.  (SJ Business Journal)

San Francisco's port is resurrecting plans to begin water taxi service along the city's waterfront, perhaps starting in time for the America's Cup in 2013.  The port will issue a request for qualifications in May.  In 2010, the port approved a proposal to begin water taxi service on the bay. Under the deal, a company called San Francisco Water Taxi LLC agreed to pay 7 percent of gross revenue to the port as part of a five-year deal.  But that accord quickly ran into trouble. The water taxi company couldn't find the money to build its boats, blaming the downturn in the economy.  But port staff think the time is right to lure another water taxi operator.  The port said it wants an operator to run boats that are less than 60 feet long and which can accommodate a maximum of 49 people.  (SF Business Times)

The long-awaited redevelopment of the old Bay Meadows racetrack in San Mateo will get started this summer with the 63-unit complex to be built by TRI Pointe Homes.  Bay Meadows master developers Stockbridge and Wilson Meany Sullivan have sold the parcel to TRI Pointe Homes for an undisclosed price. Stockbridge and WMS are reportedly close to selling at least one other parcel.  TRI Pointe homes plans to begin construction as early as summer 2012 with model home openings and sales launching in early 2013.  TPH will build Amelia, a 63-home neighborhood of two- and three-bedroom townhomes featuring porches and balconies in an updated expression of traditional Bay Area architecture, designed by KTGY Architecture + Planning.  In total Bay Meadows, which sits at a Caltrain stop, will consist of 14 neighborhoods with 1,171 residential units, up to 1.5 million rentable square feet of office space and approximately 90,000 square feet of retail space. The Bay Meadows redevelopment will also include a 12-acre park, a community garden, traditional town square, main street retail.  (SF Business Times)

Longtime Mid-Market booster David Addington has sold the Warfield office building at 982-998 Market St. to Group I, a Taiwanese investment company with a long San Francisco track record.  The price was not disclosed. Group I has owned boutique San Francisco buildings like 254 Pine St., 140 Second St., and 410-440 Pacific Avenue.  Addington confirmed the sale and said that the new ownership, led by Joy Ou, would be “great owners and great for the neighborhood.” Ou did not return a call seeking comment. The building includes about 6,000 square feet of retail and about 36,000 square feet of office space, including a tricked-out penthouse (once the regional offices of gangster Al Capone) that Addington built out as his office.  (SF Business Times)

San Francisco passed legislation Tuesday designed to simplify the city’s permitting process for restaurants and bars.  The Board of Supervisors approved the changes 11-0, according to Supervisor Scott Wiener, who authored the rules.  Under the new rules, the city will narrow its definitions of restaurants to three from 13. The new rules also eliminate “micro-managing” distinctions such as the number of chairs needed at an establishment or whether a toaster oven is used on the premises.  The law will go into effect by late May.  (SF Business Times)

Japanese retail giant Uniqlo has closed a much-anticipated deal to open a flagship store in San Francisco.  Snatching up one of the few top-shelf spaces available in Union Square, the popular fast-casual retailer will take over a 29,000-square-foot lease on 111 Powell Street sometime this fall. Uniqlo will replace DSW Shoe Warehouse, which has relocated to the former Borders location on Post and Powell streets. Terms were not disclosed.  Taylor, who has been working with the new tenant since 2010, said Uniqlo had its sights set on the location for quite some time. The popular Japanese retailer has only three other U.S. stores, all of which are in New York City. The move marks the beginning of Uniqlo parent company Fast Retailing Co.’s plan to roll out to hundreds of cities and shopping malls across the country over the next several years. Run by Japanese billionaire Tadashi Yanai, the company hopes to reach $10 billion in U.S. sales by 2020, according to several media reports.  What this means for other top Union Square retailers remains to be seen. The globally recognized brand is considered a direct competitor to similar companies such as Gap and H&M, both of which have huge stores near Powell Street.  (SF Business Times)

Filmmaker George Lucas dropped plans to build a film studio on rural land he owns in Marin County.  Lucas planned a 270,000-square-foot digital movie studio and associated facilities at the Grady Ranch site, but even though the project had been approved by local regulators, groups of neighbors still fought against it, claiming it would bring traffic to a still pristine area with just a two lane road for access.  Lucas plans to build the project elsewhere. His Lucasfilm Ltd. headquarters is now in San Francisco at the Presidio.  In a jab at his obstructionist Marin neighbors, Lucas said he plans to sell Grady Ranch to someone who will build housing there, preferably homes for poor people. “If everyone feels that housing is less impactful on the land, then we are hoping that people who need it the most will benefit,” the letter said.  (SF Business Times)

The Warriors have been tight-lipped about whether the club plans to abandon Oakland’s Oracle Arena once its lease expires in 2017.  But today comes news that the club is considering how it might build an arena on Piers 30-32 in San Francisco.  While today’s report might well be the club’s only plan, don’t consider this the last you’ll hear about the Warriors’ new home. Like any professional franchise, the Warriors surely will listen to many pitches before making a final decision.  The crumbling 13 acre piers have been used for parking in recent years. They were closed for big events such as X Games and KFOG fireworks shows that had taken place there after the wheel of a semi truck punched a hole through the surface of the 100-year-old structure in 2009.  The city pledged to spend $8 million to reinforce them enough for America's Cup team bases next year after a previous deal that included the America's Cup Event Authority spending $60 million on the structure fell through.  (SF Business Times)

Pebblebrook Hotel Trust has bought the Hotel Milano in San Francisco's South of Market district for $30 million.  Pebblebrook said it plans to spend between $8 million and $10 million over the next year to renovate the 108-room hotel, including its rooms, public areas and restaurant.  Pebblebrook has chosen Viceroy Hotel Group to manage the property. Viceroy is the manager of other Pebblebrook hotels.  The purchase of the Milano brings the number of hotels owned by Pebblebrook, a publicly traded real estate investment trust, to 21.  (SF Business Times)

A key loan financing the multi-million dollar renovation of the Tahoe Biltmore property showed up on regional real estate listings last week, spurring questions about the Boulder Bay project.  How did the $33.75 million land acquisition note for the redevelopment end up for sale? In this case, it was the lender, not the borrower, who failed, said Boulder Bay Project Manager Brian Helm.  After the 2008 economic meltdown, the bank that issued the original loan was overtaken by the FDIC, Helm said, and the loan for the project was transferred to another bank, which was not interested in doing business with Boulder Bay.  In response, Boulder Bay started looking for an exit strategy, and in 2010 its executives found an investor interested in taking over the note.  Helm would not say which bank now holds the note, who the interested investor is or what he or she offered to pay, but he did say the bank wants to guarantee it is getting a fair market price for the asset.  To do so, the bank listed the note on the market without an asking price. The commercial real estate brokerage firm Cushman & Wakefield will call for bids, Helm said, after the item has been listed for three to four weeks.  He said the buyer will probably take a look at the highest and best use of the property. And he points out, the Tahoe Regional Planning Agency permits issued for the remodel of the property are good until 2014. (Sierra Sun)