A years-long effort to build a performing arts and education center at the intersection of Market, Turk and Mason streets could collapse now that an out-of-town property owner has ended talks with the project’s backers and put the lots up for bid.

“I’m hoping that whoever ends up with the property is willing to do an arts component and not just make everything market rate,” said Will Thacher, whose family has owned the rest of the proposed project, the adjoining property at 950-964 Market St., since 1937. “But San Francisco is one of the hottest real estate markets in the nation and Mid-Market now is one of the hottest areas in the city.”

It wasn’t always that way. Just a few years ago, Mid-Market was a seedy urban desert plunked in the middle of the city’s signature boulevard. Then-Mayor Gavin Newsom and current Mayor Ed Lee worked to create tax breaks and incentives to bring in businesses to replace the empty buildings, boarded-up storefronts and cheesy retail shops that contributed to the area’s dangerous, down-at-the-heels vibe.

Against that background, the plan for a mixed-use arts center that would transform three-quarters of one of the sketchiest blocks on Market Street was a gift from above. City officials, the arts community and neighborhood groups from the adjoining Tenderloin quickly embraced the plan.

“Theater groups are getting priced out of the city, even as people are coming to the city for the arts,” said Carmela Gold, president of the Tenderloin Economic Development Project, which has put together the proposed arts project. “If you talk to anyone in the arts, even an organization as big as (the American Conservatory Theater), they’ll say they’re going to be priced out of the city in five years.”

The plan for the 950 Center for Art and Education calls for four small theaters, rehearsal space, meeting rooms and public areas that could be shared by several performing arts groups, along with office space. ACT, which is converting the nearby Strand Theater into another performing space, would also use the new center for administrative and education efforts, according to a January 2013 report on the project.

“We want to provide affordable space for arts groups that are being squeezed out of the city because of what’s happening in the real estate market,” said John Clawson, founder of Equity Community Builders, the development consultant on the project.

With the arts activity on the second and third floors of the proposed development, there would be room in the sprawling building for street-level restaurant and retail space, as well residential or office uses on higher floors, making the project more attractive to a developer.

Ideal for small groups

The shared space idea is perfect for small local theater groups, which wouldn’t be burdened with the day-in, day-out costs of running their own performance spaces, said Steven Anthony Jones, artistic director of the Lorraine Hansberry Theatre.

“We can share office and rehearsal space and put the money we save into the artistic side,” he said.

But, except for Thacher, property owners’ early interest in the arts plan waned as the price tag rose on Mid-Market property. The Lone Star Fund of Dallas, which now owns the other three Market Street parcels earmarked for the arts center, turned down an offer by the project’s backers and opted to put the properties up for bid late last month.

City officials, however, continue to see the arts as a major part of Mid-Market’s revival. On Jan. 30, the mayor and Supervisor Jane Kim sat down with the arts center’s sponsors and potential bidders for the Lone Star property and made it clear the city would work with developers to get the deal done.

“We’re excited about the economic growth we’re seeing,” Kim said. “But the concept also was to recognize the existing community that had always been there … and continue to protect services and the arts who were the area’s original tenants.”

Trying to stay in S.F.

If the arts plan dies, it will be a loss to the city and the artists who make it home.

The Lorraine Hansberry Theatre has been the Bay Area’s signature professional black theater company for 32 years, all of it spent in San Francisco. But after losing their theater a few years back, “we’ve been barnstorming, making plans and then looking for a venue,” said Jones. “This would mean we’d have a permanent home.”

Without the new arts center, “I’m not sure we can stay in San Francisco,” he said.

For now, there’s not much Gold and other supporters of the arts hub can do.

“We’re just waiting for Lone Star to pick a winner and then talk with whoever gets the bid,” she said.

But Gold remains confident. The arts center has both political and financial backing and is the type of project that could transform the adjoining Tenderloin neighborhood.

“We want the Tenderloin to benefit from the extraordinary growth of business along Mid-Market,” she said. “We want development to increase to where people are happy to walk down Turk Street.”

John Wildermuth is a San Francisco Chronicle staff writer. E-mail: jwildermuth@sfchronicle.com

Article source: http://www.sfgate.com/bayarea/article/Mid-Market-arts-center-at-risk-amid-boom-4342332.php

While the changes over the last five years have inevitably created volatile market conditions for owners and developers of life science real estate, the best assets in the prime biotech clusters of the U.S., including Boston/Cambridge, New York, the San Francisco Bay Area, San Diego and the Research Triangle of North Carolina, appear to have withstood the recession and unsteady recovery fairly well, especially as compared with the larger office and flex space property markets.

According to CoStar data, the number of office/flex sales transactions involving biotech, lab and RD space actually saw five quarters of growth between mid-2010 and mid-2011, when the downturn was falling hard on most office landlords. Like other property types, the number of deals has fallen slightly over the last two or three quarters, reflecting the uncertainty of the broader U.S. and global economy, the slowed pace of capital markets and uncertainty of future government financing for biotech research and development.

J.P. Morgan bought the buildings from Canyon Capital Realty Advisors LLC, which manages a portfolio for the California Public Employees Retirement Systems (CalPERS), at a quite compressed actual capitalization rate of about 4.7%. About 30% of the 502,000-square-foot Wharfside and 400,000 Berry St buildings are leased to various life sciences tenants.

On the leasing front, San Francisco-based BioMed Realty Trust Inc. is seeing healthy activity, signing a new long-term pact with a private biotech company which it declined to identify for 220,000 square feet at its Pacific Research Center campus in Newark, CA, in San Francisco’s East Bay.

BioMed Realty has emerged as a major player in recent years to compete with life science real estate industry leaders Alexandria Real Estate Equities Inc. (NYSE: ARE) and HCP Inc. (NYSE: HCP). BioMed Realty last month agreed to acquire the 287,000-square-foot Cambridge Place in Cambridge for $119 million, bringing the REIT’s holdings in the nation’s top bio-cluster to about 3 million square feet.

However, biotech and lab property owners are facing secular changes in their tenants’ industry since the Great Recession.

Cost reduction has been a major driver in location considerations over the last five years, while major biotech companies have been downsizing and returning space to the market for sublease. The big pharmaceutical companies have been consolidating, with more mergers expected, resulting in a downsizing of property requirements in many cases. Life science companies ranging from well-established industry leaders to startups have delayed leasing or expansion decisions in the face of the thus-far tepid recovery.

Another major factor affecting U.S. investment is global competition. Foreign direct investment in new pharmaceutical RD, life science office and manufacturing locations has shifted since the downturn, according to a recent study by Jones Lang LaSalle. The U.S. still led by far with $112 billion in investment between the study period of 2003-10, more than double that of Ireland, the nearest rival, according to JLL. China, India and Singapore have emerged as key markets since 2007 due to the quest for manufacturing cost reduction and Asia’s own growing domestic market for sales and RD, however, JLL reported. Brazil, Canada and Switzerland also made major gains in market share in the last half-decade.

That said, demand has been propped up by limited deliveries of new biotech space, which have been flat since late 2008. Existing properties have seen positive net absorption for five of the last six quarters, reaching a high of almost 657,300 square feet in fourth-quarter 2011, the highest level since second-quarter 2008, according to CoStar data.

Since reaching a five-year high of about 18% nationally in late 2009 following a flurry of new supply deliveries, the vacancy rate has slowly drifted down, reaching to 16.6% in the fourth quarter 2011 The availability rate, which reached a decade high of 23.6% in mid-2010 as landlords prepared for tenant departures, has fallen recently to below 21%.

The numbers are more volatile for quality assets in specific regions of the cluster-driven sector. For example, in the three submarkets that make up the Cambridge market in Boston, the vacancy rate fell to as low as 6.5% in early 2011 from a high of 21% four years ago and currently stands at 8.8%.

And now, there’s rising competition from developers in other parts of the country trying to get in on the action, including such previously overlooked markets as southern Florida and central New Jersey.

In Miami, Wexford Science Technology is developing the University of Miami Life Science Technology Park in the city’s fledgling Health District. The 252,000-square-foot first-phase building is currently 63% occupied about six months after opening, with tenants including Advanced Pharma CR, LLC, Community Blood Centers of Florida, the University of Miami Tissue Bank, Spain-based technology firm Ándago and medical device firm DayaMed taking up residence near the university. UMLSTP’s master plan includes five buildings comprising between 1.6 and 2 million square feet of space at build out.

In Port St. Lucie, FL, the Tradition Center for Innovation (TCI) recently opened a new 100,000-square-foot facility for Vaccine Gene Therapy Institute (VGTI) Florida in TCI’s 150-acre research complex. Martin Health System, are scheduled to begin work on its 82-bed acute care and clinical trials hospital at the complex this month, and Mann Research Center will begin work on an MOB in August.

But the economic slowdown and other factors have exacted a toll on the industry from Wall Street analysts. Moody’s Investors Service last November its outlook for the U.S. life science industry to stable from positive due to slower-than-expected growth and uncertainty over U.S. and European funding for academic research, which has caused researchers and manufacturers to reduce spending, combined with relatively flat demand from pharmaceutical customers, which represent 25% of industry revenue.

“Regardless of how the US government actually funds science research, academic customers will be cautious with their spending until there is clarity around 2012 and 2013 budgets,” said Moody’s Vice President and Senior Analyst Jessica Gladstone.

Article source: http://www.costar.com/News/Article/Biotech-Lab-Property-Owners-Holding-Their-Own-Despite-Shifting-Landscape-for-Tenants/136484

If you have no desire or need to sell your home, then falling home prices are just on paper and likely temporary, right? Depends on how you look at it.

Falling home prices put more borrowers in a negative equity position, that is owing more on their mortgage(s) than their homes are worth. We call that “underwater,” and for good reason, because for some borrowers that sense of drowning in debt has profound implications.

Today Zillow.com reported a new high in negative equity: 28.4 percent of single family homes with a mortgage (remember, 32 percent of all homeowners do not have a mortgage).

That’s a national average, but the numbers are far worse in some of the nation’s big metros. Atlanta, for example, has a 55.7 percent negative equity rate. Denver, 41 percent, Chicago nearly 46 percent. This is on top of all the foreclosure hot spots like Phoenix, where close to three quarters of all borrowers are underwater.

Why should we care if it’s all on paper?

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