Swinerton Builders has gotten the green light to start work on a long-stalled 749-unit apartment complex at 10th and Market Streets.

The $200 million apartment project, being developed by Crescent Heights, is a central piece of the city’s plan to bring new activity and investment into the city’s Mid-Market neighborhood. The development, originally for-sale condos, was shelved before the recession started in 2008; it was redesigned as apartments last year.

“We got the notice to proceed today,” said Jeffrey Hoopes, president of Swinerton. “Tomorrow we will be moving trailers in and putting up fencing.”

The project will bring significant relief to the ranks of the city’s construction trades, which have struggled with double-digit unemployment for three years. The 10th and Market project will be built all at once, rather than phased, and will be the largest new housing development in San Francisco since the recession started in 2008.

“It’s pretty exciting. We’ve been waiting for some of the larger projects to start,” said Hoopes. “At the peak there will be 800 workers on that site.”

Swinerton is also the general contractor on phase two of Angelo Sangiacomo’s Trinity Place, a 417-unit rental project at Eighth and Mission. The two developments represent 1167 new Mid-Market housing units. Earlier this year the San Francisco Board of Supervisors passed a Mid-Market payroll tax break in an effort to lure tech firms to the area. The geographically target tax break resulted in Twitter’s announcement that it was moving to 1355 Market St., the former San Francisco Furniture Mart building.

Glenn Rescalvo of Handel Architects, who also worked on the Millennium project at First and Mission streets, designed the revised project.

Development of the Mid-Market shopping center project came to a screeching halt earlier this year due to the financier’s (Connecticut based Commonfund Realty Inc.) default on close to $40MM in debt covering several parcels on the 935-965 Market Street stretch, between 5th and 6th Street.  The planned-for and approved of 250,000 sq foot retail center was to be developed by SF based Urban Realty prior to the loan defaults.  

The development has been coined as a keystone project to the city’s efforts in revitalizing the Mid-Market / Tenderloin areas.  The suspension of the project was further complicated as the debt was cross collateralized and had been appended to what was a $10B loan portfolio held by recently nationalized Anglo Irish Bank Corp.  Reports had reflected the initial round of private equity partnerships (including Paulson Co.,  BlackRock divisions) hawking for the distressed assets, but it was just announced earlier this month that the eventual victors of the substantial CRE portfolio were PE shop Lone Star Fund, Wells Fargo and JP Morgan Chase.  Lone Star reportedly will take on all the non-performing assets which actually includes all the parcels encompassing the original City Place Center, this in turn should resurrect interest in the development site all together.  But whether or not the actual development will mirror the original planned renderings remain to be seen. The loans may end up being shopped to local SF opportunity funds or proceed with foreclosure cycle, and then the eventual sale of underlying assets.

This pricing reflects about a 40% discount to what the building originally sold for by the prior ownership Broadreach Cap. Partners, but roughly 10% higher then what some of the whispers exchanged with us during that time (cursory underwriting placed the opportunity at about $165/sf  to substantiate a mid to high IRR (levered) with a mid-range commitment schedule, 2 year stabilization, 5 to 6 years reversion) all in all still at 50% replacement cost which was stellar in anyone’s eyes.  But the counterbalance was its long history of 40%+ vacancy, liquidity  and truly understanding the complexity in a JV structure which included multiple LP sponsors, operators and debt source.

It was a highly intriguing play for our end of the spectrum as the asset would have spearheaded our client portfolio into direct exposure to the prime CBD market of the SF Bay Area.  We’ve spent a majority of 2010 bidding for smaller office buildings on behalf of several different clients (debt plays direct from regional bank SAG depts. and trading desks).   In retrospect we would not have been able to justify pricing the asset over $180/sf  mainly due to the lack of pre liminary due diligence, window of time to conduct said DD, liquidation   Also due to the lack of oversight on the project and theoretical practice within the industry ( respecting the source of information, NDA restrictions, political protocol > practicality )  we had to take a step back before encouraging our capital sources to commit to what was an estimated 10% participation on the equity side.  But in all honesty, if it were my own money,  I may have pulled the trigger without any hesitation.  Thumbs up to the winning bid,  We hope to share the same success story later this year.

As part of the city’s effort to reconcile existing land uses on the ground with various records and plans, the planning department assembled a detailed andconfusing series of maps, explaining the zoning and building heights for every parcel in Oakland.

More than two dozen Oakland residents packed the tiny hearing room to voice their opinions on the proposed zoning changes. Most of the residents were from North Oakland, there to discuss changing the maximum allowable building heights from the current 35 feet to 60 feet.

Some residents claimed that the relatively suburban and currently residential Broadway, Telegraph and Shattuck needed to remain lightly developed for fear of a “canyon” effect on the major streets. One speaker warned of the possibility of height bonuses allowing eight-story buildings, even though no developments have used this bonus to date.

Other neighbors supported the change to 60 feet, citing the city’s own greenhouse gas emission targets and the need for density and transit-oriented development to reduce the need for driving. One of these speakers cited “scary prairies,” referring to the underbuilt spaces on Telegraph. In the quote of the meeting, one resident assured the committee that 60-foot buildings would not lead to the Manhattanization of Telegraph: “Maybe the Brooklynization, but not Manhattanization.”

In the end, the committee moved the zoning update along to next week’s City Council meeting with few changes. Councilwoman Nancy Nadel asked for new automobile sales and rental places to be allowed only by permits on Telegraph and Broadway. Councilwoman Jane Brunner agreed to lower maximum building heights on most of the major corridors between Highway 24 and Berkeley, but pointed out that the whole zoning discussion will come up again in 10 years.

After zoning, with the meeting already over time, half of the original audience left. The next major item up for discussion was the International Boulevard Transit-Oriented Development Plan. Because the state requires every adopted plan to undergo environmental impact analysis (called CEQA – the California Environmental Quality Act of 1970), and the TOD plan was funded without any money allocated for environmental impact analysis, the city cannot officially adopt the plan.

The city staff person that managed the plan’s creation urged the committee to read the plan, make suggestions and improvements, but ultimately allow the city’s planning department to pursue funding. Once the environmental impacts are studied and documented, the city can move forward with the plan.

The city unanimously moved the plan on to the City Council. The plan will not be discussed at the next meeting, but instead approved as a consent item. It also won’t be adopted because of the environmental analysis requirement. Hopefully consent will allow the city’s staff to keep moving forward to do the required documentation and start implementing the International Boulevard community’s vision.

Lastly, the committee heard an item to accept a grant from the National Endowment for the Arts to convert the lot at Telegraph and 19th into an arts park. The conversion is officially temporary, in case the city decides to construct a parking lot of other structure in the future, but this is considered a huge win for many uptown residents. The current space is surrounded by chain link fence and tarp. The NEA grant requires the city to split the cost of the project, and to finish by the end of 2011.

Here’s hoping it gets done, is an improvement, and is done with lots of community input.

According to a Bloomberg report, U.S office rents will see modest growth in 2011,  potentially the first increase in three years.   Our company (357) was able to take advantage of the decline in class A office space when we decided to open our office at 580 California street originally.  At the time we received elevated sky line views in a class A for a premium which was heavily discounted as compared to prior years (no longer the case).

According to CBRE, San Francisco will most likely see the largest gains, an expected range of up to 9 percent over the next two years.  We

Phoenix and Orange County should share the next biggest increases of a projected  4 percent+.

The main CBD area averaged about $25.6 per square foot, down from $26.84 in 2009.  Experts are expecting a range of recovery between $26 to $26.10 this year.

Argonaut Private Equity Group is placing 250 Montgomery st. up for grabs at $300 a foot (est. $35MM), that’s close to a whopping 75% increase from what they originally acquired the building for in just over a year’s time.  If the deal trades for what the principal is expecting, then by all means ladies and gentleman, the market is back with a f-cking vengeance (at least in affirmation of trophy assets in SF).

The interesting part is Argonaut P.E.G was not known for any commercial real estate exposure prior to this deal.  Lead by billionaire George Kaiser who had then recently purchased $412 million in natural gas assets from Chesapeake Energy, the price he captured Montgomery at was just under 25% of replacement cost, it was a no brainer and he definitely had the cash.

The past 10 months have been modern day warfare in the commercial real estate and (hard) asset management realm for me.  Although I was capable of procuring solidarity amongst a handful of high net worth investors sniffing for top tier assets via my personal nasal cavity,  it has proven to be one of the most difficult assignments of  capital I have ever experienced.  Back to Georgy and a little history on the transaction…

The 116,000 sf building, located on San Francisco’s “Wall Street of the West” FiDi, was purchased by Lincoln Properties for $400 a square foot back in ’06, but in tandem with the debt crisis was forced to be sold in deed-in-lieu (short saled) at $172 bucks a foot in 2009.  The senior lender at the time, Realty Finance Corp, took a $22 million hit. It was also the first San Francisco office building to trade in that year, and the first “round trip” sale, where a property goes from a one new owner directly to another new owner via a deed in lieu of foreclosure. The total sale price of $19.9 million represented, as aforementioned, a mere 25% replacement cost! G-d damn that was one hell of a deal.

But the astonishing part in retrospect is that the building actually traded for about 40% ABOVE the initial BOV (brokers opinion of value).

Moral of the story is, opportunities come and go, be prepared…be very, very prepared or you shall be left twiddling your thumbs and end up expressing your awe for someone else’s glory via an internet blog … smh.

San Jose, CA-based Rosendin Electric has started construction on the new University of California San Francisco Medical Center at Mission Bay. The $80 million contract to wire the new 878,000-square-foot hospital complex includes an energy center, helipad, and support services. Scheduled for completion in 2014, the first phase of this $1.6 billion project is construction of a 289-bed hospital, specializing in care for women, children and cancer patients. The new UCSF Medical Center has been designed to meet LEED Gold certification standards through the use of recycled materials, low-voltage lighting controls, and the widespread use of energy-efficient electrical and HVAC equipment. Rosendin Electric was one of the initial developers to work on preconstruction of this project as a member of the Integrated Center for Design & Construction. ICDC included more than 100 architects, engineers, construction managers, and subcontractors who created a Building Information Model of the entire Medical Center. As a result, the team was able to reduce the cost of the overall project by $100 million prior to the start of construction, according to a prepared statement.

Steve Golubchik and Nicholas Bicardo, both vice presidents of Grubb & Ellis Co.’s investment services group, represented Strada Investment Group in its acquisition of Berkeley Crossing, a class A office building in Berkeley. Strada Investment purchased the note, originally valued at $28 million, and worked with both the lender, New York Life Investment Management LLC, and the previous owner to take ownership of the property in a deed-in-lieu-of-foreclosure transaction. Located at 1608 4th St., Berkeley Crossing offers 131,694 square feet of space and was approximately 30% leased at the time of the acquisition. Renovated in 2000, the property is designed for technology use with open floor plans for flexible layouts. Additionally, Berkeley Crossing is equipped with a roof deck that provides views of the surrounding Bay Area and East Bay Hills. The property is located within close proximity to Interstates 80 and 580 as well as State Route 123. “This is a high quality property in a strong location that offers a tech type feel for tenants in the region looking for larger contiguous blocks of space that are rarely available in Berkeley,” says Golubchik.

WASHINGTON, DC-The US commercial real estate industry started off 2010 with eyes firmly fixed on one of the few bright spots: foreign investors said they were chomping at the bit to invest in the country, particularly in such gateway cities as New York City, Washington, DC and Chicago.

While some of this investment did materialize – in some cases from unlikely sources such as China–Brookfield, for instance, secured a $800 million refinance package on  245 Park Ave. in Manhattan from Bank of China–the levels were way off from expectations.

That may be different this year, according to the latest survey by the Association of Foreign Investors in Real Estate. Foreign investors were fired up to invest in the US last year, AFIRE CEO James A. Fetgatter acknowledges. “There was some skepticism on my part as to whether that attitude would translate into action,” he tells GlobeSt.com.

His fears – namely that investors would ultimately shy away due to global economic concerns – were correct, especially as fears mounted that there would be a double dip recession. For 2011 “I think that fear is over and we will see more action.” However investors are still cautious and are likely to stay in solid markets such as Washington, DC and New York City, as the new survey indicates.

The survey, which was conducted in the fourth quarter of 2010 by James A. Graaskamp Center for Real Estate, Wisconsin School of Business, found that more than 60% of respondents indicated that the US offers the best potential for capital appreciation, a margin of 54 percentage points over second-ranked China. This is the highest positive response to this question since it was first asked in 2000, AFIRE says, and is a dramatic reversal from 2006 when it reached a lowest level of 23%.

Other findings:

-  Investors overwhelmingly chose New York City and Washington, DC as the two top global cities for their real estate investment dollars;

-  72% of respondents say they plan to invest more capital in the US in 2011 than they did in 2010;

- When ranked among countries targeted for real estate investment in 2011, the US score was quadruple that of the UK;

- The top five destination cities in this year’s survey were  1) New York City (#2 in 2010); 2)  Washington, DC (#1 in 2010); 3) Boston (#4 in 2010); 4) San Francisco (#3 in 2010); and 5) Los Angeles (#5 in 2010).

Jack London Square, Oakland’s $350 million centerpiece waterfront development, would get a new majority owner — and much-needed capital — in a potential deal revealed this week.

An entity controlled by San Francisco-based real estate investor Divco West would assume 98.5 percent ownership of the recession-slowed project, according to Port of Oakland documents. Ellis would retain the remainding 1.5 percent and continue as master developer overseeing the project. Terms have not been disclosed.

“We’re in serious talks, but there’s still a lot of work to be done,” said Tim Gallen, spokesman for Divco West. He declined to give further details.

Most of Jack London Square is held on ground leases from the Port of Oakland. The port’s board of commissioners will review the proposed agreement on Nov. 30. If approved, it could close by the end of December.

Ellis Partners and partner Transbay Holdings have been working for the last decade to create a thriving retail and office district along the underutilized waterfront. So far, the developers completed about $130 million worth of projects including a renovation of a 91,900-square-foot office building at 66 Franklin St., a 143-room hotel and 130,000 square feet of retail space in three buildings. They have also constructed 100,000 square feet of Class A office space, a 72,000-square-foot market and restaurant space, a 32,000-square-foot retail and office building and a parking garage with 1,062 stalls and 31,000 square feet of retail.

Tenants such as solar firm Sungevity, bakery Miette Patisserie, restaurant Bocanova and hotel operator Joie de Vivre have moved into the renovated buildings, but most of the new office space is vacant and the opening of the market has been delayed, most recently to summer 2011.

The second phase will also include a 140,000-square-foot office building, 250-room hotel, an 8-story, 155,000-square-foot office building and 10,000 square feet of retail.

Under the development agreement between Ellis Partners and the port, construction on the 250-room hotel was supposed to have started by July 1, 2010.

According to a staff report for the commissioners: “The current lender (Bank of America) has requested that (Ellis Partners) attract new capital investment to the Jack London Project in order to reduce the amount of the mortgage debt on the property and to fund the future tenant improvement(s) and other capital and leasing costs for the Phase II assets.”

The port documents say Ellis Partners began searching for a capital partner last summer and brought in Divco West. Under the terms of the deal, Divco’s entity would assume 98.5 percent ownership of a new venture to hold the project. The new venture would take over eight ground leases that the port had conferred to Ellis Partners in 2005.

Ellis Partners had also bought two undeveloped parcels for $6.4 million from the port that are slated for the second phase of development. Those sites will also be sold to the new ownership entity.

Principals from Ellis declined comment on negotiations with Divco, but confirmed in communication with the port that ownership of the project would be changing.

“We look forward to working with the port to complete this important ownership transition in a timely manner,” wrote Melinda Ellis Evers, managing principal with Ellis Partners, in a letter to the port dated Nov. 12, 2010.

Divco West, founded by Stuart Shiff in 1993, invests in real estate with notable holdings in Silicon Valley, Boston and Austin. The firm has bought more than 22 million square feet of commercial space nationwide and manages more than $2 billion of equity.

The port’s commercial real estate staff recommends that the commission approve Ellis Partners’ deal with Divco as a way to jump-start the unbuilt parts of Jack London Square and ensure that the port’s rent stream continues.

“(Divco West) has significant real estate holdings and experience in the ownership, investment and management of commercial properties in the Bay Area and nationwide,” the staff report states. “The new capital investment in the project will reduce the debt burden which currently encumbers the property.”

The dealership will seek LEED certification. Green elements planned for the building include solar panels, energy-efficient lighting, and low water use. The location of the dealership allows it to serve several counties including Solano, Contra Costa, Napa, Sonoma, and Yolo.

Construction on the dealership is expected to be completed in August 2011. Local sources, including the city of Fairfield, tell GlobeSt.com that “the project cost is not a public number.” The general contractor is J.R. Roberts Deacon of Citrus Heights, CA, which has an extensive portfolio of auto dealership construction projects. The Ford dealership, which opened in October at the auto mall, is also owned by Price-Simms. The dealership includes a service center with repair and maintenance and adds 100 jobs.

Construction is expected to start on Lowe’s spring 2011. Escrow closed in October on the 11.04 acres at North Texas Street and Manuel Campos Parkway. In addition, a new 200,000-square foot Walmart Supercenter opened at the corner of North Texas Street and Atlantic Avenue. Walmart hosted its grand opening November 3, 2010.

“We continue to have strong economic development growth in our commercial and retail sectors,” says Fairfield City Manager Sean Quinn. “We are a business-friendly community with available land, approved business parks, and the infrastructure to help you house, build, and grow your company.”

In other business news Fairfield, CA news, Frank-Lin Distiller Products Ltd., has completed construction on a $34 million, 288,000-square foot building on 15 acres in the Tolenas Industrial Park. Financing for the project included $1.4 million in Recovery Zone Facility Bonds. The California Enterprise Development Authority applied on behalf of Frank-Lin for an additional $20 million, which was awarded to the business from the California Debt Limit Allocation Committee. The company moved to Fairfield from San Jose, California where it had been located since 1966. The facility will open for production in January 2011.