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?Sellers may move money across
the bay in search of higher
yields or park capital in
less management-intensive
single-tenant retail assets,? says
Mishkin.

SAN FRANCISCO-A research report that GlobeSt.com exclusively obtained from Marcus Millichap Real Estate Investment Services shows that for the San Francisco apartment market, renovating existing properties is key to outsized returns. According to the report, the apartment market here is arguably the strongest in the nation, and the impending construction boom will only have a minor impact on operations.

Job growth in the tech industry remains the key driver for occupancy and rent gains, and owners will likely have a strong negotiating position into next year, says the report. However, some early indications are emerging that rent growth will slow to a sustainable pace during the next several quarters, the report says.

Jeffrey Mishkin, first vice president and regional manager of the San Francisco office, notes that “class A vacancy is leveling off, while lower-tier vacancy tightens. As rents in the top-tier have climbed, many tenants are choosing to move down the quality scale rather than spending more of their income on housing,” he says. “Although new demand has been sufficient to offset these losses, new supply could tip the supply-demand bal­ance. Several thousand units will come online during the next two years, creating competition for class A properties. As a result, operators are expected to slow rent gains to maintain occupancy rates until the development cycle wraps up in 2015.”

Investors will remain active in the San Francisco market, though deal flow could be impeded by the number of available listings, he adds. “Sellers may move money across the bay in search of higher yields or park capital in less management-intensive single-tenant retail assets,” he says. “Some owners see the low cap rates and low interest rates as a favorable time to divest. Buyers, meanwhile, remain focused on the spread, which points toward a strong buy stance.”

Many of these investors are seeking older, larger units that can be upgraded, he says. “Changing a large studio to a one bedroom or a large one bedroom into a two bedroom can have a significant impact on asking rents.”

The new owner may have to wait for rent-controlled units to be vacated to execute this strategy, which could tie up capital for an extended period, adds Mishkin. Nonetheless, he explains, “the return could be much more lucrative than the average 5% yield for a class B asset in today’s market.”

Categories:

West,
Multifamily,
Acquisitions/Dispositions,
Development,
San Francisco

Natalie Dolce Natalie Dolce, editor of the West Coast region for GlobeSt.com and Real Estate Forum, is responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, Natalie was Northeast bureau chief, covering New York City for GlobeSt.com. Dolce?s background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats Arthur Frommer?s Budget Travel magazine, FashionLedge.com, Co-Ed magazine, and has also freelanced for a number of publications including MSNBC.com and Museums New York magazine. Contact Natalie Dolce.

Article source: http://www.globest.com/news/12_484/sanfrancisco/multifamily/Renovating-Existing-Property-Key-to-Outsized-Returns-327035.html

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Riverbed Technology will relocate
to floors two through six
at 680 Folsom St. with
a 10-year lease term.

(Mark Your Calendars: RealShare REAL ESTATE 2012, March 22^nd in Los Angeles).

SAN FRANCISCO-TMG Partners and financial partner Rockwood Capital LLC have signed a 167,788-square-foot lease to relocate Riverbed Technology to 680 Folsom St., a class A office building in San Francisco’s South of Market District near the Moscone Convention Center. Riverbed, currently at 199 Fremont St., will move into floors two through six at 680 Folsom St. with a 10-year lease term.

David Churton, headquarter practice leader and international director at Jones Lang LaSalle, represented the tenant. He points out that the Riverbed real estate team “took a very strategic approach to their future real estate requirements.” He explains that by being proactive, “they executed a headquarters strategy ahead of today’s constricted market and netted a superb block of quality space offering the flexibility to accommodate growth as well as excellent terms and prominent signage in what will be the finest redevelopment in San Francisco in the last decade.”

According to Mayor Ed Lee of San Francisco, “Riverbed’s long term commitment to keep their worldwide headquarters in San Francisco through 2024 demonstrates once again that we are the location of choice for high tech companies. With dynamic leaders like Riverbed’s Jerry Kennelly, we are making San Francisco the ‘Innovation Capitol of the World.’”

According to a recently tech report from JLL, San Francisco is the top high-tech industry growth market with the most impacted office market. Booming high-tech industry employment growth of more than 15 percent is creating strong demand for office space and has boosted rents 18.5 percent over the past 12 months. Stiff competition between tenants for the best quality space is moving market rents toward pre-recession highs in some buildings and causing high-tech firms that prefer South of Market Street to head north into the CBD. The excitement has drifted into the capital markets space and investors are snapping up properties at rates last seen in 2007. The resurgence in high-tech is electrifying not only San Francisco, but the entire Bay Area.

According to Michael Covarrubias, chairman and CEO of TMG Partners, “Riverbed is the ideal tenant not only for this space, but to complement the increasing tech growth in San Francisco’s SoMa area.” GlobeSt.com could not get further lease terms, like aggregate lease value, asking rent or taking rent by deadline. An unidentified source not involved in the deal says base rent is approximately $50 to $54 per square foot per annum.

According to Riverbed co-founder and CEO Kennelly, “we think the City is the right location to attract the best talent and provide a thriving environment for our current employees. Moving to a state of the art building in the heart of the City will be a great move for our company.”

With construction now underway, the 12-story mid-rise tower at 680 Folsom St. and adjacent three -story building at 50 Hawthorne St. will be fully renovated to Class A standards. The $87-million renovation, supported by TMG and set for completion in late 2013, calls for 680 Folsom St.’s existing 1960′s concrete exterior to be replaced with a clear glass curtain wall skin.

In addition, a two-story vertical addition and several small horizontal additions will also be added to the building, “increasing the gross building area by more than 100,000 square feet for a total of approximately 522,000 square feet,” according to a prepared statement.

All building systems will be replaced and a new public plaza will be built on the corner of Folsom and Third streets, where there eventually will be a new 15,000-square-foot retail or cultural building constructed, says the release. A new glass, steel and granite lobby will have 30-foot ceilings with floor-to-ceiling glass and a floating staircase. The property is pursuing LEED Gold certification.

Pacific Bell owned and occupied the headquarters facility until 2007. In October 2010, TMG recapitalized the development with a new equity partner in Rockwood Capital.

Categories:

West,
Office,
Leasing,
San Francisco

Natalie Dolce Natalie Dolce, editor of the West Coast region for GlobeSt.com and Real Estate Forum, is responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, Natalie was Northeast bureau chief, covering New York City for GlobeSt.com. Dolce?s background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats Arthur Frommer?s Budget Travel magazine, FashionLedge.com, Co-Ed magazine, and has also freelanced for a number of publications including MSNBC.com and Museums New York magazine. Contact Natalie Dolce.

Article source: http://www.globest.com/news/12_280/sanfrancisco/office/87M-Renovated-Building-Gets-First-167788-SF-Tenant-318417.html

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New data center for Digital
Realty: 360 Spear, San Francisco

SAN FRANCISCO-Digital Realty Trust Inc. has paid $85 million for a 155,000-square-foot data center in downtown San Francisco. The announcement of the Bay Area deal coincides with the purchase of a similar building in Atlanta, near the Hartsfield-Jackson Atlanta International Airport, for $63 million.

Digital Realty’s new San Francisco building has at least one obvious appeal to the publicly-traded real estate company: The data center, which is a fully leased, multi-tenant building, sits back-to-backwith the company’s existing “server farm” at 365 Main St.

The purchase gives the company a greater “critical mass” in telecommunications and colocator space in San Francisco, according to Digital Realty vice president Pamela Garibaldi. With the purchase of 360 Spear, the company currently has three telecom properties in the city, including 200 Paul. “There’s very limited data center space in San Francico,” she adds.

Although the Spear Street facility is fully leased, “there is the potential for us to convert some of the space for our growing colocation business,” Garibaldi says.

Digital Realty invests primarily in data centers, which provide space for Internet and telecommunications equipment. Typical tenants include information technology companies, Internet-related businesses, manufacturing firms and financial service firms, according to the company.

With the exception of three properties owned in joint ventures, Digital Realty currently owns 100 properties comprised of 17.9 million square feet. This also includes 2.1 million square feet for redevelopment. The company’s property holdings are located in Australia, Europe, North America and Singapore.  

Categories:

West,
Industrial,
Acquisitions/Dispositions,
San Francisco

Article source: http://www.globest.com/news/12_257/sanfrancisco/industrial/Digital-Realty-Buys-Data-Center-for-85M-317085.html

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2080 Gough, one of the properties
in the 95% occupied portfolio.

(Mark Your Calendars: RealShare Apartments 2011, October 20 in Los Angeles).

SAN FRANCISCO-AREA Property Partners has acquired a 422-unit multifamily portfolio here for $59.6 million. “Plans for the properties include AREA’s proven strategy of revitalization, rehabilitation and repositioning of this formerly distressed portfolio,” says AREA partner James H. Simmons. 

Simmons points out that the strategy will be accomplished by “implementing building-wide improvement programs that involve working with the City of San Francisco to cure violations and improve the overall physical condition of the assets. It is our primary objective that the residents continue to receive the highest level of service throughout the process.”

The 20-building, 95% occupied portfolio is located predominantly in the Downtown and Tenderloin neighborhoods of San Francisco. A few properties are located in the neighborhoods of Pacific Heights, Russian Hill and Potrero Hill.

The rent-regulated buildings, totaling 278,395 square feet, were built between 1911 and 1965, with the majority constructed in the early 1900’s. The portfolio’s condition is commensurate with rent-regulated properties of similar vintage throughout the greater San Francisco Bay Area, according to a prepared release.

The acquisition presents a unique opportunity to capitalize on improving fundamentals, as San Francisco is one of the top performing multifamily markets in the US, according to the release. The acquisition follows AREA’s long term buy-and-hold strategy of creating high-quality affordable workforce housing alternatives for residents of highly supply constrained markets such as the greater Bay Area, Simmons says. 

“We are committed to providing safe and reasonably-priced work force housing for local families,” Simmons says.  “This acquisition fits squarely within our strategy of investing in and creating high-quality living alternatives in major metropolitan cities with significant demand for quality affordable housing.” 

AREA currently owns or controls over 18,000 units under its domestic emerging markets strategy in major metropolitan areas such as New York, Washington DC and Newark, New Jersey.  The brokers on the transaction were Eastdil Secured and Marcus Millichap.

Marcus Millichap did not respond to GlobeSt.com queries by deadline on the seller’s identity. AREA Property Partners tells GlobeSt.com that it cannot disclose the name of the seller due to a confidentially agreement. AREA could not confirm further GlobeSt.com regarding specifics about the properties by deadline.

Categories:

West,
Multifamily,
Acquisitions/Dispositions,
San Francisco

Natalie Dolce Natalie Dolce, editor of the West Coast region for GlobeSt.com and Real Estate Forum, is responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, Natalie was Northeast bureau chief, covering New York City for GlobeSt.com. Dolce?s background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats Arthur Frommer?s Budget Travel magazine, FashionLedge.com, Co-Ed magazine, and has also freelanced for a number of publications including MSNBC.com and Museums New York magazine. Contact Natalie Dolce.

Article source: http://www.globest.com/news/1997_1997/sanfrancisco/313855-1.html