One of San Francisco’s most active developers pitches 2 more condo projects near Mid-­Market

By Roland Li: Reporter for San Francisco Business Times

Trumark Urban, one of the most active residential developers in San Francisco, is moving forward with two more condo projects near the rapidly changing Mid-Market corridor.

The developer plans to break ground later this year on 109 condo units at 1554 Market St. after getting approvals from the Planning Commission in June. It is also seeking entitlements by the end of the year for a 220-unit project at 1601 Mission St., a few blocks to the south.

The projects would bring hundreds of new units to the western edge of the Mid-Market area, a historically gritty neighborhood that has attracted new investment as tech companies open new offices. “The transition largely catalyzed by the mayor’s efforts is just phenomenal,” said Arden Hearing, managing director of Trumark Urban. “Twitter’s a big part of that. Dolby’s a part of that.”

The two projects are part of an ambitious 700-unit pipeline that Trumark Urban, a division of Irvine-based Trumark Cos., is planning in San Francisco. Unlike most local developers who are predominantly building rentals, Trumark focuses on condos in part because of the lack of new supply. Texas-based Hillwood Investments is the developer’s equity partner.

The 12-story 1554 Market St. building will be one of the only large condo projects around Hayes Valley and Mid-Market. It will replace small retailers including a liquor store that shuttered in June, which Hearing described as a “beacon of blight.” Construction is slated to begin by December and finish in around 18 months. Pricing hasn’t been determined.

“It’s the center of San Francisco. It’s got one foot in Hayes Valley. It’s got one foot in Mid-Market,” said Hearing.

The 1601 Mission St. project will also be 12 stories and roughly twice as large. It is located at a “hub” between Mid-Market, South of Market and the Mission, and will replace a car wash, Hearing said. “(The car wash) is just not the highest and best use in such an urban environment.”

Polaris Pacific is marketing both projects, and Handel Architects is responsible for both designs.

Trumark Urban is also building two condo buildings of 91 units at 645 Texas St. in Dogpatch and 70 units at 346 Potrero Ave. in the Inner Mission. The developer is also redeveloping the former Dugani School of Dentistry property at 2121 Webster St. in Pacific Heights into 72 condos, which could have some of highest prices per square foot in the city.

Rincon Hill Sale Confirmed at $410MM

Posted on August 12, 2015 by publisher in Commercial, Finance, INDUSTRY news,Residential

Last month, the San Francisco Business Times reported that a partnership between the Rockpoint Group and Maximus Real Estate Partners was in the process of purchasing the 298-unit luxury residential tower at 401 Harrison Street. The public documents today confirm the sale closed on July 2nd, and the purchase price of $410 million. At that amount, the two firms paid roughly $1.375 million per unit.

As we reported earlier, after reviewing the offering document, which The Registry was able to procure, it was evident that in this case timing was one of the main factors that played the role in this transaction. The rental building has already applied to convert the rental units into condos. If the new owners are successful in the conversion, they will have the only offering of scale to close condo sales for the remainder of 2015. Most new condo development projects are still in planning phases expecting delivery in 2017 and beyond. Tishman Speyer’s Lumina project is perhaps the only competitive offering in the very active Transbay neighborhood, however, those units are still under construction, whereas Rincon Hill’s are ready for move in.

According to a recent, San Francisco Condominium Market Report for July 2015 from Polaris Pacific, the average price per square foot for condos in buildings over 13 floors is $1,282, which represents a 14.6 percent change year over year across the entire city. In district 9, where this building is located, that annual change climbed 22.2 percent over the same time period. For the fourth month in a row, the median price has surpassed the $1,000,000 mark, according to the same report.

Over the last several decades, San Francisco has struggled to fulfill its housing needs, which is not news to anyone tracking the housing market in the Bay Area. The offering document gave an insight into that, as well stating that since 1990, San Francisco’s occupancy has never dipped below 95 percent, with an average occupancy of 96.7 percent from 1990 through 2014.

The months of remaining inventory figure, or MRI, indicates how many months it would take to absorb current supply. Six months is considered a balanced market, while nine months or more is considered an oversupplied market. The MRI figure has remained below the six-month benchmark since 2012. The most recent figure was 2 months, a 13 percent decrease from the prior year, according to Pacific Polaris.

The neighborhood, the amenities that include a sky lounge and clear, unobstructed views of the bay and surrounding neighborhoods and the timing of this sale could make the Rincon Hill purchase pay out nicely for the buyers.

Jeff Weber, senior managing director, Steven Van Dusen, managing director, Jason Flynn, managing director, along with Kara Wiard, Joseph Angiuli and Eve Myers from Eastdil Secured represented the seller, Principal Real Estate Investors.

Pinterest grabs fourth SoMa office with 150,000­ square-­foot lease

By Roland Li: Reporter for San Francisco Business Times

Pinterest, the growing image­-sharing tech company, has signed a lease for the entire 150,000­ square-­foot office development at 505 Brannan St. in what will be its fourth office in a half-­mile stretch in South of Market.

A joint venture of Alexandria Real Estate Equities (NYSE: ARE) and TMG Partners is developing the project, which has been approved and is scheduled to begin construction in early 2016. The building will open in 2017 and will be next to a new Muni stop on the Central Subway that will eventually connect to Chinatown.

Alexandria and TMG have also filed preliminary plans to expand the building by another 180,000 square feet after it’s built. Officials at Alexandra and TMG didn’t immediately have comment.

Pinterest currently occupies 60,000 square feet at its headquarters at 808 Brannan St., where it moved in 2012 from Palo Alto. Last October, Pinterest leased 100,000 square feet at 651 Brannan St. after previously considering a larger lease at 2 Henry Adams St., which would have displaced smaller tenants. It also has space at 888 Brannan St. Pinterest’s total footprint in San Francisco is now approximately 335,000 square feet.

Pinterest now has over 500 employees, up from 200 in 2014, according to Business Times research.

Pinterest declined to share the asking rent for the space, but the average Class A rent is $67 a square foot for San Francisco, according to CBRE.

“We’re proud to have been a part of the SoMa and Brannan Street community for the past three years, and we’re thankful for the opportunity to remain in the neighborhood as we create a service that helps people all over the world unlock creativity,” said Natalie Fair, head of finance at Pinterest, in a statement.

Pinterest has raised over $1 billion in venture capital with a current valuation of $11 billion, the company said in March.

Alexandria also lured another growing tech company, Stripe, to a 300,000 ­square-­foot lease at nearby 510 Townsend St. earlier this year.

Developer adds 120 apartments to wave of housing hitting S.F.’s Van Ness corridor

By Cory Weinberg: Reporter – San Francisco Business Times

San Francisco-based developer Build Inc. wants to keep pumping the waves of housing hitting the Van Ness corridor in anticipation of new public transit upgrades and the construction of a major hospital.

Build Inc. just filed a proposal to construct a new 14-story, 120-unit apartment building at 830 Eddy St., the latest of several projects with at least 100 units proposed or just built in the area around Van Ness Avenue between Civic Center and Washington Street.

Lou Vasquez, managing director at Build Inc., said the Cathedral Hill project would likely break ground by 2017 if all goes according to plan.
That means it should open its doors just before the start of a new bus rapid transit system along Van Ness and the opening of the California Pacific Medical Center’s new 700,000-square-foot hospital.
“That’s going to create not only a huge amount of jobs in the neighborhood and all sorts of housing demand near it, it’s going to create commercial demand for it as well,” Vasquez said “That whole Van Ness corridor is changing drastically.”
That area was zoned for housing and some height increases two decades ago, but only recently has the corridor started to squeeze in more housing to replace or complement the range of auto shops on Van Ness.

Build Inc. is familiar with the change popping up farther south on Van Ness, around Market Street. The developer is planning to build the One Oak tower, one of several residential high-rises planned for that area.
Build Inc. has been one of the city’s most active developers during this phase of the boom, planning major projects in Dogpatch, Mid-Market, Bayview and India Basin. The developer wrapped up this Cathedral Hill site last month.
The residential building will sit next to an existing commercial building at 825 Van Ness, which houses a Burger King on the bottom floor and will share parking with the proposed residential building. The 830 Eddy property now consists of a two-floor parking structure.

Vasquez said the builder is planning apartments instead of condos, and rent at about $5.80 a square foot. Although Build Inc. has been piling on major projects, the developer has bulked up hiring to keep pace, he added.

“It takes so long (to build) in San Francisco. There’s moments of panic interspersed with long periods of boredom,” Vasquez said.

BAR Architects was tapped to design the project. It is expected to cost Build Inc. $40.8 million to develop, according to the preliminary proposal filed with the city.

Exclusive: Developers plot rooftop restaurant in revamp of Union Square building

By Annie Sciacca: Reporter for San Francisco Business Times

A new rooftop restaurant could be headed to Union Square.

San Francisco-based Axis Development Group has purchased the building at 340 Mason St. and has big plans for its redevelopment, including an exterior renovation and the addition of a 5,000-square-foot rooftop restaurant.

Axis Development’s managing partners, Theo Oliphant and Muhammad Nadhiri, have teamed up with real estate veteran Julie Taylor, executive vice president at Colliers International, to help plan the space. WZ Architects has sketched up the preliminary designs.

No restaurant operator has been chosen yet, but Oliphant said that the partners are envisioning a high-end restaurant with indoor and outdoor space. It would likely be open for breakfast, lunch, dinner and late at night.

The team said it will soon file applications for restaurant permits to the city. In the meantime, the group is embarking on renovating the building in stages.

The site, which is on the corner of Geary and Mason streets, is currently home to Lori’s Diner, Sushi Boat and International House of Wine & Spirits. It has a lower level, a ground floor and a second floor, each about 7,000 square-feet, but the second floor has long been vacant, according to Oliphant and Nadhiri.

They want to fix the exterior, including making improvements to windows and signage on the building, as part of the first phase of renovation. Eventually, Oliphant said, they will either find tenants for the second floor or renovate the building to be configured differently.

The building improvements will help market the building as more of a destination, he said, while the rooftop restaurant will provide an upscale destination for people at all hours. “

“The rooftop restaurant is especially compelling because there are very few venues like this in the city, but they are really popular in other markets like downtown Los Angeles or New York,” Taylor said, adding that Union Square has become very “mature.”

“The streetscape has evolved to pinnacle heights in the east and south and north, so (the area) west of Union Square is very logically the next to spring forth,” Taylor said. “A number of buildings have traded hands west of Powell Street in the last 18 months on Geary and Post and Sutter — this whole area is really ripe (for development).”

The restaurant could be a couple years out, depending on the permit process within the city and the construction timeline. It would join several recently opened Union Square restaurants, including three from chefs Sylvain Royer and Sam Fechheimer.

Apple dives into SoMa for first big S.F. real estate grab

By Cory Weinberg: Reporter for San Francisco Business Times

The San Francisco office market may get its first big bite of Apple.

Apple Inc. (NASDAQ: AAPL) reached an agreement to rent about 76,000 square feet of office space in the South of Market neighborhood’s 235 Second St., several real estate sources in San Francisco and Silicon Valley said.

The potential sublease is a modest amount of space for a company with the world’s largest market capitalization ($705 billion) that is constructing a 2.8 million-­square-­foot “Spaceship” campus in Cupertino.

But this would signify Apple’s first push into San Francisco – piling onto the herd of Silicon Valley companies that have wanted a taste of the city.

Apple declined to comment, so it’s tough to tell what this kind of deal may represent. One big question mark: Which division of Apple employees could call the SoMa space home?

Beats Music, which Apple acquired last year, started leasing a few years ago about 26,000 square feet in San Francisco’s Dogpatch neighborhood through 2017. Beats also leases about 10,000 square feet in Palo Alto, according to real estate sources.

The SoMa building – on Second Street between Howard and Folsom Streets – has been marketing a two­-floor sublease through 2022 from tenant CBS Interactive. The space, which has been marketed for seven months, could hold between 400 and 500 employees, based on industry standards for employee­-per­-square­-foot.

CBS Interactive, which declined to comment, still leases the vast majority of the 280,000­ square­-foot, six­-story building, which was built by Birmingham Development with a hand-­laid brick facade during the dot-­com boom.

The vacant second and third floors have “exposed ceilings,” a mix of offices and an open area on floor plates that span about 38,000 square feet, according to the building’s marketing material. The brochure didn’t list what a potential tenant would pay, but the area has some of the highest monthly asking rents in the city at about $66 a square foot.

Patty Henderson, real estate manager for the landlord, declined to comment. John Lewerenz, a broker for the real estate firm Cushman & Wakefield who has been marketing the space, wouldn’t confirm or deny the deal with Apple.

“It’s a little too fresh,” he said.

City living

Apple and Facebook have been notable holdouts as Silicon Valley giants like Google and Linkedin gradually expanded their footprints in San Francisco. Linkedin signed a 450,000­ square-­foot lease last year at 222 Second St

Since 2010, Silicon Valley companies have gobbled up about 2.5 million square feet in San Francisco, according to CBRE. Those companies typically add branches in the city instead of migrating entire campuses, due to urban space constraints.

“It’s where the talent lives and wants to be,” said Colin Yasukochi, director of research at the real estate firm CBRE.

Fourteen percent of Apple’s Bay Area employees live in San Francisco, topped only by the 25 percent who live in San Jose, according to a 2013 company report. The company just leased its first big chunk of space in San Jose – 300,000 square feet – the Silicon Valley Business Journal reported earlier this month.

Rob Enderle, principal analyst with the Enderle Group, said Apple has been fighting for talent with Tesla Motors as Apple reportedly readies to build electric cars.

A San Francisco outpost could be an ideal spot for groups working on side projects that don’t need to be in the company’s Cupertino headquarters, Enderle said. Or the company could just want a location for San Francisco­-based employees to work part time, he added.

Like many of the region’s big technology companies, Apple runs buses from the city to its Silicon Valley offices.

“We’ll see more of this. Traffic in the Valley is horrid. A lot of companies are going to fight traffic problems by placing satellite offices where people live so they are more productive and spend less time in traffic,” Enderle said.

Another boost for SoMa

It’s unclear whether this sublease could lead to Apple seeking more space in San Francisco. In addition to its Cupertino headquarters and recent San Jose lease, the company has been furiously leasing space in Santa Clara and Sunnyvale lately.

Subleasing has become increasingly popular as little new office space hits the market this year while traditional companies like law firms and media groups downsize or relocate out of the city. It’s also nearly the only way companies can break into any office buildings south of Market Street.

The South Financial District has about a 7 percent vacancy rate, while SoMa and Yerba Buena has essentially no direct vacancies now though a spate of new buildings with available space will come online over the next few years, according to the brokerage Savills Studley.

San Francisco has about 1.1 million square feet of sublease space available, the most since the dot­-com era, according to brokerage DTZ. That kind of space provides growing companies with quick expansion access.

One available floor at 235 Second St. is available immediately, while one isn’t available until the start of next year, according to Cushman & Wakefield.

San Francisco Mid-Market Office Portfolio Up for Sale

By Nancy Amdur

With San Francisco’s Mid-Market neighborhood seeing much new development, an office portfolio at 1340-1370 Mission St. was recently put on the market, touted as a redevelopment opportunity.

The Mid-Market district is “one of the most dynamic neighborhoods in San Francisco right now,” said Kyle Kovac, senior managing director at commercial real estate firm Newmark Cornish & Carey, who is helping to market the property. “There has been a lot of transaction activity in the submarket in the last couple years.”

Selling the properties will capitalize on current investor demand in the market, Kovac said, adding that there is potential to modernize the properties for creative office use. More density also could be added. The four-story 47,294- sqare-foot office building portfolio includes properties built in 1907 and 1930. Zoning allows for a building height of 150 feet, which could add another five or six stories. The buildings could be used as office, residential or hotel space, Kovac said, and it is easily accessible to Highway 101 and Interstate 80.

According to public records, the properties were sold earlier this year. MCC 1360 LLC purchased 1340, 1360 and 1366-1370 Mission St. on May 29 for a total of $22.75 million. MCC 1360 LLC is listed at 1360 Mission St., which is occupied by affordable housing organization Mercy Housing California, according to public records. The company did not return a call for comment about the transaction.

The formerly blighted Mid-Market neighborhood began transforming in 2012 when Twitter Inc. moved into the former furniture mart at Ninth and Market streets, which led to “a whole host of new [technology] companies moving in,” Kovac said. Tech companies such as social networking service Yammer; car-sharing company Uber; and audio specialist Dolby are all located near the Mission Street property. The neighborhood also has 7,000 residential units under way or in the pipeline, Kovac said.

Other properties for sale in the area include the city-owned 30 Van Ness office building, which could provide space for up to 600 housing units.

Office vacancy in the South of Market district, which includes Mid-Market, was 3.5 percent for the second quarter 2015, according to a report by commercial real estate brokerage Newmark Cornish & Carey. The district’s blocks include Market between Fifth and Ninth streets along with properties on Mission between Fifth and South Van Ness.