The Syrah Versailles is one of four home prototypes available in Toll Brothers’ The Reserve development in Pleasanton. 

Blanca Torres
Reporter- San Francisco Business Times

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In another sign that the single-family home market is rebounding in the Bay Area, Toll Brothers, one of the country’s largest homebuilders, is now selling homes in the Reserve, a 19-unit luxury home development in Pleasanton.

The development, at the corner of Manoir Lane and Vineyard Avenue, is surrounded by vineyards. The homes start at $1.3 million and range in size from 3,800 to 4,160 square feet with 4 or 5 bedrooms.

Toll Brothers (NYSE: TOL) designed four different prototypes for the development, all named after wine varietals including Cabernet, Merlot, Syrah and Riesling.

The company joins other homebuilders including KB Home (NYSE: KBH), Shea Homes and Summerhill Homes, who have been debuting new home developments in the Bay Area.

Demand for single family homes is on the rise and homebuilders say there aren’t enough development sites available to keep up.

Toll Brothers, based in Pennsylvania, reported revenue of $1.68 billion for the most recent fiscal year ending July 31, 2012.

Blanca Torres covers East Bay real estate for the San Francisco Business Times.

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Article source: http://www.bizjournals.com/sanfrancisco/blog/real-estate/2012/10/toll-brothers-opens-pleasanton.html

The Board of Directors declared a dividend of $0.3875 per preferred
share on Terreno Realty Corporation’s 7.75% Series A Cumulative
Redeemable preferred stock. The preferred dividend will be payable
October 1, 2012 to preferred stockholders of record at the close of
business on September 10, 2012.

Terreno Realty Corporation is an acquirer, owner and operator of
industrial real estate in six major coastal U.S. markets: Los Angeles;
Northern New Jersey/New York City; San Francisco Bay Area; Seattle;
Miami; and Washington, D.C./Baltimore.

Additional information about Terreno Realty Corporation is available on
the company’s web site at www.terreno.com.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of the federal securities laws. We caution investors that
forward-looking statements are based on management’s beliefs and on
assumptions made by, and information currently available to, management.
When used, the words “anticipate”, “believe”, “estimate”, “expect”,
“intend”, “may”, “might”, “plan”, “project”, “result”, “should”, “will”,
and similar expressions which do not relate solely to historical matters
are intended to identify forward-looking statements. These statements
are subject to risks, uncertainties, and assumptions and are not
guarantees of future performance, which may be affected by known and
unknown risks, trends, uncertainties, and factors that are beyond our
control, including risks related to our ability to meet our estimated
forecasts related to stabilized cap rates and those risk factors
contained in our Annual Report on Form 10-K for the year ended December
31, 2011 and our other public filings. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated,
estimated, or projected. We expressly disclaim any responsibility to
update our forward-looking statements, whether as a result of new
information, future events, or otherwise.

Article source: http://www.businesswire.com/news/home/20120803005645/en/Terreno-Realty-Corporation-Declares-Quarterly-Dividends

This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are based on KRC’s current expectations,
beliefs and assumptions, and are not guarantees of future performance.
Forward-looking statements are inherently subject to uncertainties,
risks, changes in circumstances, trends and factors that are difficult
to predict, many of which are outside of KRC’s control. Accordingly,
actual performance, results and events may vary materially from those
indicated in the forward-looking statements, and you should not rely on
the forward-looking statements as predictions of future performance,
results or outcomes. Numerous factors could cause actual future events
to differ materially from those indicated in the forward-looking
statements, including, among others: risks associated with KRC’s
investment in real estate assets, which are illiquid, and with trends in
the real estate industry; the availability of cash for distribution and
debt service and exposure of risk of default under KRC’s debt
obligations; significant competition, which may decrease the occupancy
and rental rates of properties; the ability to successfully complete
acquisitions and dispositions on announced terms; the ability to
successfully operate acquired properties; and the ability to
successfully complete development and redevelopment properties on
schedule and within budgeted amounts. The factors included in this press
release are not exhaustive and additional factors could adversely affect
KRC’s business and financial performance. For a discussion of additional
risk factors, see the factors included under the caption “Risk Factors”
in KRC’s Annual Report on Form 10-K for the year ended December 31,
2011, and KRC’s other filings with the Securities and Exchange
Commission. All forward-looking statements are based on currently
available information and speak only as of the date on which they are
made. KRC assumes no obligation to update any forward-looking statement
made in this press release that becomes untrue because of subsequent
events, new information or otherwise, except to the extent it is
required to do so in connection with its ongoing requirements under
Federal securities laws.

Kilroy Realty Corporation, a member of the SP Small Cap 600 Index, is a
real estate investment trust active in the office and industrial
submarkets along the West Coast. For over 60 years, KRC has owned,
developed, acquired and managed real estate assets, consisting primarily
of Class A real estate properties in the coastal regions of Los Angeles,
Orange County, San Diego County, the San Francisco Bay Area and greater
Seattle. At December 31, 2011, KRC owned approximately 11.4 million
rentable square feet of commercial office space and 3.4 million rentable
square feet of industrial space.

Article source: http://eon.businesswire.com/news/eon/20120214006284/en

“Our ongoing focus on leasing, portfolio enhancement and financial
strength really paid off in 2011”

For its fiscal year ended December 31, 2011, KRC reported net income
available to common stockholders of $50.8 million, or $0.87 per share,
compared to $4.5 million, or $0.07 per share, in fiscal year 2010.
Revenues from continuing operations in 2011 totaled $367.1 million, up
from $287.4 million in 2010. FFO for the year totaled $136.2 million, or
$2.29 per share, compared to $106.6 million, or $2.05 per share, in 2010.

Results for the fourth quarter and fiscal year ended December 31, 2011
include the receipt of a $3.7 million, or $0.06 per share, cash payment
under a bankruptcy claim related to a 2009 tenant default. Net income
for the fourth quarter and fiscal year ended December 31, 2011 includes
approximately $39.0 million and $51.6 million, respectively, of net
gains from property dispositions. In addition, results for the fiscal
year ended December 31, 2010 include a $4.6 million, or $0.09 per share,
charge for the early extinguishment of debt. All per share amounts in
this report are presented on a diluted basis.

During the fourth quarter of 2011, the company sold a 192,000
square-foot industrial building located in the El Segundo submarket of
Los Angeles for a sales price of approximately $42.2 million bringing
total 2011 disposition proceeds to $66.1 million. In addition, on
January 30, 2012, the company closed on the disposition of two office
properties in San Diego at a sales price of approximately $146.1 million
or $576 per square foot.

Also during the fourth quarter, the company completed the acquisition of
two office properties totaling just over 484,000 square feet, for an
aggregate purchase price of approximately $121.5 million. Both
properties are located in the South of Market (SOMA) district of San
Francisco, one of the top performing real estate markets in the country.
301 Brannan Street is 66.1% occupied and 100% leased. 370 Third Street
is 8.9% occupied and 36.8% leased, and is currently undergoing
redevelopment.

For 2011, KRC completed the acquisition of eight office projects
encompassing 11 buildings and approximately two million square feet for
an aggregate investment of $637.8 million. These properties are located
in the high-growth, gateway markets of San Francisco, San Diego, and
greater Seattle.

KRC reported its strongest annual leasing performance in the company’s
history as a publicly traded company during 2011. For the year, KRC
signed new and renewing leases on 2.6 million square feet of office and
industrial space. At December 31, 2011, the company’s stabilized
portfolio totaled approximately 14.8 million square feet and was 92.4%
occupied.

“Our ongoing focus on leasing, portfolio enhancement and financial
strength really paid off in 2011,” said John Kilroy, Jr., KRC’s
president and chief executive officer. “We successfully extended the KRC
franchise into the high potential, high value West Coast markets of San
Francisco and Seattle. We implemented an effective capital recycling
program to finance a portion of our acquisitions. We achieved the
strongest annual leasing performance in our history as a public company.
And the impact is apparent in our 2011 financial results, with
year-over-year increases in both FFO and same-store net operating
income, and a strong total return to shareholders.”

KRC management will discuss updated earnings guidance for fiscal 2012
during the company’s January 31, 2012 earnings conference call. The call
will begin at 10:00 a.m. Pacific time and last approximately one hour.
Those interested in listening via the Internet can access the conference
call at http://www.kilroyrealty.com.
Please go to the website 15 minutes before the call and register. It may
be necessary to download audio software to hear the conference call.
Those interested in listening via telephone can access the conference
call at 888-679-8034, reservation #51740166. A replay of the conference
call will be available via phone through February 7, 2012 at
888-286-8010, reservation #17959731, or via the Internet at the
company’s website.

Kilroy Realty Corporation, a member of the SP Small Cap 600 Index, is a
Southern California-based real estate investment trust active in the
office and industrial property sectors. For over 60 years, the company
has owned, developed, acquired and managed real estate assets primarily
in the coastal regions of Los Angeles, Orange County, San Diego, greater
Seattle and the San Francisco Bay Area. At December 31, 2011, the
company owned 11.4 million rentable square feet of commercial office
space and 3.4 million rentable square feet of industrial space. More
information is available at http://www.kilroyrealty.com.

KILROY REALTY CORPORATION

SUMMARY QUARTERLY RESULTS

(unaudited, in thousands, except per share data)

Three Months

Three Months

Ended

Ended

Year Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

2011

2010

2011

2010

Revenues from continuing operations ⁽¹⁾

$

101,458

$

79,309

$

367,131

$

287,396

Revenues including discontinued operations⁽¹⁾

$

105,138

$

82,941

$

383,131

$

301,980

Net income available to common stockholders⁽¹⁾

$

39,910

$

1,535

$

50,819

$

4,512

Weighted average common shares outstanding – basic

58,440

52,274

56,717

49,497

Weighted average common shares outstanding – diluted

58,440

52,274

56,717

49,497

Net income available to common stockholders per share – basic⁽¹⁾

$

0.68

$

0.02

$

0.87

$

0.07

Net income available to common stockholders per share – diluted ⁽¹⁾

$

0.68

$

0.02

$

0.87

$

0.07

Funds From Operations ^{(1), (2), (3)}

$

40,528

$

29,485

$

136,173

$

106,639

Weighted average common shares/units outstanding – basic ⁽⁴⁾

61,108

54,786

59,362

52,033

Weighted average common shares/units outstanding – diluted ⁽⁴⁾

61,110

54,802

59,549

52,049

Funds From Operations per common share/unit – basic ^{(1), (4)}

$

0.66

$

0.54

$

2.29

$

2.05

Funds From Operations per common share/unit – diluted ^{(1), (4)}

$

0.66

$

0.54

$

2.29

$

2.05

Common shares outstanding at end of period

58,820

52,350

Common partnership units outstanding at end of period

1,718

1,723

Total common shares and units outstanding at end of period

60,538

54,073

December 31,

December 31,

2011

2010

Stabilized portfolio occupancy rates: ⁽⁵⁾

Office

90.1

%

87.5

%

Industrial

100.0

%

93.9

%

Weighted average total

92.4

%

89.1

%

Los Angeles and Ventura Counties

83.5

%

89.9

%

San Diego County

92.5

%

86.4

%

Orange County

99.1

%

93.5

%

San Francisco Bay Area

93.3

%

84.3

%

Greater Seattle

89.9

%

100.0

%

Weighted average total

92.4

%

89.1

%

Total square feet of stabilized properties owned at end of period: ⁽⁵⁾

Office

11,421

10,395

Industrial

3,413

3,603

Total

14,834

13,998

(1) Results for the three months and year ended December 31, 2011
include the receipt of a $3.7 million cash payment under a bankruptcy
claim related to a 2009 tenant default.

(2) Reconciliation of Net Income Available to Common Stockholders to
Funds From Operations and management statement on Funds From Operations
are included after the Consolidated Statements of Operations.

(3) Reported amounts are attributable to common stockholders and common
unitholders.

(4) Calculated based on weighted average shares outstanding including
participating share-based awards and assuming the exchange of all common
limited partnership units outstanding.

(5) The Company’s stabilized portfolio excludes two office buildings
classified as held for sale as of December 31, 2011.

KILROY REALTY CORPORATION CONSOLIDATED
BALANCE SHEETS

(unaudited, in thousands)

December 31,

December 31,

2011

2010

ASSETS

REAL ESTATE ASSETS:

Land and improvements

$

537,574

$

491,333

Buildings and improvements

2,830,310

2,435,173

Undeveloped land and construction in progress

430,806

290,365

Total real estate held for investment

3,798,690

3,216,871

Accumulated depreciation and amortization

(742,503

)

(672,429

)

Total real estate held for investment, net

3,056,187

2,544,442

Real estate assets and other assets held for sale, net

84,156

—

Cash and cash equivalents

4,777

14,840

Restricted cash

358

1,461

Marketable securities

5,691

4,902

Current receivables, net

8,395

6,258

Deferred rent receivables, net

101,142

89,052

Deferred leasing costs and acquisition-related intangible assets, net

155,522

131,066

Deferred financing costs, net

18,368

16,447

Prepaid expenses and other assets, net

12,199

8,097

TOTAL ASSETS

$

3,446,795

$

2,816,565

LIABILITIES, NONCONTROLLING INTEREST AND
EQUITY

LIABILITIES:

Secured debt, net

$

351,825

$

313,009

Exchangeable senior notes, net

306,892

299,964

Unsecured senior notes, net

980,569

655,803

Unsecured line of credit

182,000

159,000

Accounts payable, accrued expenses and other liabilities

81,713

68,525

Accrued distributions

22,692

20,385

Deferred revenue and acquisition-related intangible liabilities, net

79,781

79,322

Rents received in advance and tenant security deposits

26,917

29,189

Liabilities and deferred revenue of real estate assets held for sale

13,286

—

Total liabilities

2,045,675

1,625,197

NONCONTROLLING INTEREST:

7.45% Series A cumulative redeemable preferred units of the
Operating Partnership

73,638

73,638

EQUITY:

Stockholders’ Equity

7.80% Series E Cumulative Redeemable Preferred stock

38,425

38,425

7.50% Series F Cumulative Redeemable Preferred stock

83,157

83,157

Common stock

588

523

Additional paid-in capital

1,448,997

1,211,498

Distributions in excess of earnings

(277,450

)

(247,252

)

Total stockholders’ equity

1,293,717

1,086,351

Noncontrolling Interest

Common units of the Operating Partnership

33,765

31,379

Total equity

1,327,482

1,117,730

TOTAL LIABILITIES, NONCONTROLLING INTEREST AND EQUITY

$

3,446,795

$

2,816,565

KILROY REALTY CORPORATION CONSOLIDATED
STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share data)

Three Months

Three Months

Ended

Ended

Year Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

2011

2010

2011

2010

REVENUES:

Rental income

$

89,504

$

73,112

$

332,489

$

261,534

Tenant reimbursements

7,492

5,576

27,976

22,918

Other property income

4,462

621

6,666

2,944

Total revenues

101,458

79,309

367,131

287,396

EXPENSES:

Property expenses

18,761

15,358

72,869

56,389

Real estate taxes

8,422

7,102

32,521

26,342

Provision for bad debts

503

129

644

16

Ground leases

513

336

1,779

984

General and administrative expenses

7,793

6,867

28,148

27,963

Acquisition-related expenses

1,224

624

4,053

2,248

Depreciation and amortization

38,022

28,225

133,220

99,611

Total expenses

75,238

58,641

273,234

213,553

OTHER (EXPENSES) INCOME:

Interest income and other net investment gains

299

261

571

964

Interest expense

(23,254

)

(19,044

)

(89,409

)

(59,941

)

Loss on early extinguishment of debt

—

—

—

(4,564

)

Total other (expenses) income

(22,955

)

(18,783

)

(88,838

)

(63,541

)

INCOME FROM CONTINUING OPERATIONS

3,265

1,885

5,059

10,302

DISCONTINUED OPERATIONS:

Income from discontinued operations

2,566

2,550

10,843

8,635

Net gain on dispositions of discontinued operations

39,032

949

51,587

949

Total income from discontinued operations

41,598

3,499

62,430

9,584

NET INCOME

44,863

5,384

67,489

19,886

Net income attributable to noncontrolling common units of the
Operating Partnership

(1,154

)

(50

)

(1,474

)

(178

)

NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION

43,709

5,334

66,015

19,708

PREFERRED DISTRIBUTIONS AND DIVIDENDS:

Distributions on noncontrolling cumulative redeemable preferred
units of the Operating Partnership

(1,397

)

(1,397

)

(5,588

)

(5,588

)

Preferred dividends

(2,402

)

(2,402

)

(9,608

)

(9,608

)

Total preferred distributions and dividends

(3,799

)

(3,799

)

(15,196

)

(15,196

)

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS

$

39,910

$

1,535

$

50,819

$

4,512

Weighted average common shares outstanding – basic

58,440

52,274

56,717

49,497

Weighted average common shares outstanding – diluted

58,440

52,274

56,717

49,497

Net income available to common stockholders per share – basic

$

0.68

$

0.02

$

0.87

$

0.07

Net income available to common stockholders per share – diluted

$

0.68

$

0.02

$

0.87

$

0.07

KILROY REALTY CORPORATION FUNDS FROM
OPERATIONS

(unaudited, in thousands, except per share data)

Three Months

Three Months

Ended

Ended

Year Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

2011

2010

2011

2010

Net income available to common stockholders

$

39,910

$

1,535

$

50,819

$

4,512

Adjustments:

Net income attributable to noncontrolling common units of the
Operating Partnership

1,154

50

1,474

178

Depreciation and amortization of real estate assets

38,496

28,849

135,467

102,898

Net gain on dispositions of discontinued operations

(39,032

)

(949

)

(51,587

)

(949

)

Funds From Operations ⁽¹⁾

$

40,528

$

29,485

$

136,173

$

106,639

Weighted average common shares/units outstanding – basic

61,108

54,786

59,362

52,033

Weighted average common shares/units outstanding – diluted

61,110

54,802

59,549

52,049

Funds From Operations per common share/unit – basic ⁽²⁾

$

0.66

$

0.54

$

2.29

$

2.05

Funds From Operations per common share/unit – diluted ⁽²⁾

$

0.66

$

0.54

$

2.29

$

2.05

(1) The company calculates FFO in accordance with the White Paper on FFO
approved by the Board of Governors of NAREIT. The White Paper defines
FFO as net income or loss calculated in accordance with GAAP, excluding
extraordinary items, as defined by GAAP, gains and losses from sales of
depreciable real estate and impairment write-downs associated with
depreciable real estate, plus real estate-related depreciation and
amortization (excluding amortization of deferred financing costs and
depreciation of non-real estate assets), and after adjustment for
unconsolidated partnerships and joint ventures.

Management believes that FFO is a useful supplemental measure of the
company’s operating performance. The exclusion from FFO of gains and
losses from the sale of operating real estate assets allows investors
and analysts to readily identify the operating results of the assets
that form the core of the company’s activity and assists in comparing
those operating results between periods. Also, because FFO is generally
recognized as the industry standard for reporting the operations of
REITs, it facilitates comparisons of the company’s operating performance
to other REITs. However, other REITs may use different methodologies to
calculate FFO, and accordingly, the company’s FFO may not be comparable
to all other REITs.

Implicit in historical cost accounting for real estate assets in
accordance with GAAP is the assumption that the value of real estate
assets diminishes predictably over time. Since real estate values have
historically risen or fallen with market conditions, many industry
investors and analysts have considered presentations of operating
results for real estate companies using historical cost accounting alone
to be insufficient. Because FFO excludes depreciation and amortization
of real estate assets, management believes that FFO along with the
required GAAP presentations provides a more complete measurement of the
company’s performance relative to its competitors and a more appropriate
basis on which to make decisions involving operating, financing and
investing activities than the required GAAP presentations alone would
provide.

However, FFO should not be viewed as an alternative measure of the
company’s operating performance since it does not reflect either
depreciation and amortization costs or the level of capital expenditures
and leasing costs necessary to maintain the operating performance of the
company’s properties, which are significant economic costs and could
materially impact the company’s results from operations.

(2) Reported amounts are attributable to common stockholders and common
unitholders.

Article source: http://eon.businesswire.com/news/eon/20120130006587/en

Goldman, Sachs Co. and KeyBanc Capital Markets Inc. served as joint
book-running managers for the offering. Stifel, Nicolaus Company,
Incorporated served as lead manager and Mitsubishi UFJ Securities (USA),
Inc. and PNC Capital Markets LLC served as co-managers.

A copy of the prospectus supplement and prospectus relating to these
securities may be obtained, when available, by contacting Goldman, Sachs
Co., Attn: Prospectus Department, 200 West Street, New York, NY 10282,
telephone: 1.866.471.2526, facsimile: 1.212.902.9316, email prospectus-ny@ny.email.gs.com,
or KeyBanc Capital Markets Inc., Attention: Prospectus Delivery
Department, 127 Public Square, 6th Floor, Cleveland, OH 44114,
telephone: 1.800.859.1783.

This press release shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities
laws of any such state. Any offer or sale will be made only by means of
the written prospectus forming part of the effective registration
statement.

About the Company

Terreno Realty Corporation is an acquirer, owner and operator of
industrial real estate located in six major coastal U.S. markets: Los
Angeles; Northern New Jersey/New York City; San Francisco Bay Area;
Seattle; Miami; and Washington, D.C./Baltimore.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of the federal securities laws. We caution investors that
forward-looking statements are based on management’s beliefs and on
assumptions made by, and information currently available to, management.
When used, the words “anticipate”, “believe”, “estimate”, “expect”,
“intend”, “may”, “might”, “plan”, “project”, “result”, “should”, “will”,
and similar expressions which do not relate solely to historical matters
are intended to identify forward-looking statements. These statements
are subject to risks, uncertainties, and assumptions and are not
guarantees of future performance, which may be affected by known and
unknown risks, trends, uncertainties, and factors that are beyond our
control, including those risk factors contained in our Annual Report on
Form 10-K for the year ended December 31, 2010 and our other public
filings. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may
vary materially from those anticipated, estimated, or projected. We
expressly disclaim any responsibility to update our forward-looking
statements, whether as a result of new information, future events, or
otherwise.

Article source: http://www.businesswire.com/news/home/20120110006181/en/Terreno-Realty-Corporation-Announces-Pricing-Public-Follow-on

Terreno Realty Corporation is an acquirer, owner and operator of
industrial real estate located in six major coastal U.S. markets: Los
Angeles; Northern New Jersey/New York City; San Francisco Bay Area;
Seattle; Miami; and Washington, D.C./Baltimore.

Additional information about Terreno Realty Corporation is available on
the company’s web site at www.terreno.com.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of the federal securities laws. We caution investors that
forward-looking statements are based on management’s beliefs and on
assumptions made by, and information currently available to, management.
When used, the words “anticipate”, “believe”, “estimate”, “expect”,
“intend”, “may”, “might”, “plan”, “project”, “result”, “should”, “will”,
and similar expressions which do not relate solely to historical matters
are intended to identify forward-looking statements. These statements
are subject to risks, uncertainties, and assumptions and are not
guarantees of future performance, which may be affected by known and
unknown risks, trends, uncertainties, and factors that are beyond our
control, including risks related to our ability to meet our estimated
forecasts related to stabilized cap rates and those risk factors
contained in our Annual Report on Form 10-K for the year ended December
31, 2010 and our other public filings. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated,
estimated, or projected. We expressly disclaim any responsibility to
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Article source: http://www.businesswire.com/news/home/20120103005151/en/Terreno-Realty-Corporation-Announces-Lease-Miami

Nowhere in the country has the tightening of lab space supply been more evident than in the supply-constrained San Francisco Bay Area — especially in South San Francisco and the San Francisco CBD, where leading life science owners and developers such as Alexandria Real Estate Equities Inc. (NYSE: ARE) and HCP Inc. (NYSE: HCP) are competing with technology and Internet companies for some of the last available land parcels.

In recent months, tech companies have scooped up land in the Bay Area that effectively eliminates millions of square feet previously earmarked for lab and biotech buildings in one of the nation’s tightest land markets. In response, Alexandria and HCP have acted recently to lock up available properties and fill the demand at increasingly healthy return profiles on new development, including assets within the Mission Bay redevelopment in San Francisco’s CBD, one of the most desirable biotech addresses in the country.

However, observers say they don’t expect another speculative boom like the one during the mid-2000s upcycle that fueled construction of millions of square feet of life science space in clusters like the Bay Area, Boston/Cambridge, San Diego, Raleigh and Durham, NC; New York, Seattle and suburban Maryland. Even in the tightest markets like Boston and San Francisco, companies are still mainly interested in less risky build-to-suit or solid pre-leased projects.

“Building true, specialized life science space on spec is a challenge given both the above-average cost per square foot and the unique needs of each user,” noted Chris Macke, senior real estate strategist for CoStar.

Just seven months ago, ARE sold most of its undeveloped Mission Bay land to cloud computing company Salesforce.com for construction of a global headquarters — a loss of up to 2 million square feet of potential new lab space development. In April, ARE jumped back into the Mission Bay market, acquiring a newly developed two-building property at 409-499 Illinois St. developed by Shorenstein Properties and SKS Investments.

Alexandria paid $293 million for the two towers totaling 453,000 square feet located across the street from the $1 billion University of California, San Francisco (UCSF) research and development campus and medical center.

The first 240,000-square-foot tower is 97% leased to a biotechnology company through November 2023, while the second tower has 212,000 square feet of rentable space in shell condition, which the company plans to build out. The acquisition gives ARE the capacity to develop nearly 300,000 square feet of additional new supply in Mission Bay, where it now has a footprint of more than 975,000 square feet of existing space at a vacancy rate that has dwindled to just 1%.

The peninsula has recently experienced a sharp increase in absorption, driving direct vacancy rates in South San Francisco to less than 5% and total vacancy to near-single digits when including subleased space, said Paul Gallagher, HCP chief investment officer, during the company’s first-quarter earnings call earlier this month. The ramp up of tenant demand from tech, life science and medical device companies has driven up rental rates by as much as 25% this year.

“This activity reiterates the importance of understanding which industries are driving the various markets and even submarkets across the country,” Macke said. “South San Francisco and the San Francisco CBD are benefitting from the confluence of tech companies and life science companies, as they have both chosen those submarkets as the place to be in the San Francisco MSA.”

ARE essentially traded development risk for leasing risk when it sold the Mission Bay land to Salesforce.com and acquired the new buildings from Shorenstein last month. But the decision whether to acquire or develop buildings is more than just a simple matter of comparing yields or initial rates of return, noted Joel Marcus, Alexandria chairman, president and CEO.

With a major presence in San Francisco, New York City and Boston/Cambridge, three of the nation’s strongest life science markets, the company is positioned to capitalize on pent-up demand as one of the few companies with the ability and resources to develop both build to suit and preleased projects.

In additional to the 300,000 square feet of remaining development capacity in Mission Bay, ARE has about 800,000 square feet left to build in New York at the Alexandria Center for Life Science, where it hopes to begin pre-marketing a 400,000-square-foot tower next month. The company also expects to announce the first build to suit at its Kendall Square project in Cambridge, where it has 1.7 million square feet in its development pipeline.

Leasing isn’t as brisk at its San Diego and North Carolina properties, but on May 18, Alexandria announced plans to build a 50,000-square-foot agricultural research center with 18,000 square feet of research greenhouse space near Research Triangle Park in North Carolina. The multi-tenant project will be called Alexandria Ag-Tech Center.

About 20% of HCP’s wholly owned properties are in the life science sector. Its portfolio also includes senior housing, medical office, post-acute/skilled nursing and hospitals assets.

In its life science portfolio, HCP has only about 750,000 square feet of vacancy across six buildings, with significant interest in about half of those buildings, HCP Chairman and CEO James Flaherty said.

Large tech companies such as HP, Motorola, Google and others have been expanding within Silicon Valley in recent quarters. Firms are now pushing from Mountain View and Sunnyvale northward into San Francisco, sometimes into land and space previously earmarked for life science development.

With lab vacancy now at about 5% in the San Francisco area, development may become an attractive option, with existing buildings for sale likely to be priced in the mid to high $600-per-square-foot range, HCP’s Flaherty said. And the company has jumped right in, announcing the purchase April 15 of the largest undeveloped site in the city, a 20-acre parcel called The Cove at the former U.S. Steel site in South San Francisco.

HCP acquired the land, next to the REIT’s 900,000-square-foot Oyster Point campus anchored by Amgen, from Genentech Inc. for $65 million and began development of The Cove at Oyster Point late last month. The project will deliver up to 800,000 square feet of new lab and office space at an estimated 8.5% return on cost, said Gallagher, the HCP CIO.

Flaherty emphasized that the bullish outlook on development is based on the heated South San Francisco area market, rather than a full-on development play across the company’s life science portfolio.

HCP, holding an already significant market share with its Amgen and Genentech campuses, will “move very quickly on [The Cove] to prepare for what we expect will be an attractive supply-demand dynamic in South San Francisco,” Flahery said.

Article source: http://www.costar.com/News/Article/LAND-GRAB-Developers-Ease-Back-Into-Life-Science-Market-As-Supply-Tightens/128906