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THE

Registry

BAY AREA real estate JOURNAL

MAY 2010

Good Roads, Good Value

pg. 12

Rapid Transit Gets Personal Who Has the Money?

pg. 14

pg. 16

Airports: Cloudy with a Chance of…Debt? pg. 18 Train Not in Vain

pg. 20

Central Subway: San Francisco’s Big Dig?

pg. 22

Google in Mountain View Writing a Land-Planning Algorithm pg. 8

Hot Lot: Please Shop Burlingame Avenue Recession Rocks the Rich, Too pg. 10

Design Works for ClimateWorks San Francisco Nonprofit Creates Offices in Its Image pg. 26

By The Numbers: Banks Boost Commercial Lending Tiny Bit pg. 34 Final Offer with Silicon Valley’s Carl Berg In the Beginning… pg. 36

®


Contents May 2010

6 News Desk  A summary of recent planning decisions from select cities, news about the industry and people on the move

8 Commercial Market Report Googleplexed

10 Hot Lot | Burlingame Sunny Side of the Street

12 Feature Package Infrastructure:

Infrastructure

Block by Block pg. 12

• • • • • •

Building Better Bones Personal Space The Private Trough No Port in the Storm Connecting the Dots Down Under

24 Rob’s REality

Quaking in His Boots

25 Employment The Heard Mentality

26 Design W  orking Design

28 Legal | Residential

Home Grown

30 REal People Events Around Town 32 Commercial Lease Report 33 Commercial Sales Report 34 By the Numbers Split Personality 35 Calendar of Events 36 Final Offer | Carl Berg

F r o nt c o v e r and this page b y C had Z i emendorf

A Man And His Mission


THE

Registry

TM

P.O. Box 1184 San Mateo, CA 94403 415.738.6434

Editorial Boards Board members of The Registry serve without expectation of recompense or reward. They advise the magazine’s executive team on matters of relevance to the region’s commercial and residential real estate community. The board’s make up reflects the wide readership of the magazine including attorneys, architects, interior designers, residential and commercial real estate brokers, investors, lenders, general contractors and subcontractors, engineers and other professionals.

Mission Statement The Registry is a real estate journal that aspires to fulfill the need of Bay Area professionals for accurate, unbiased and timely news, analysis and information.

NORTH

Publisher Vladimir Bosanac vb@theregistrysf.com President Heather Bosanac 415.738.6434 heather@theregistrysf.com

Stephen Austin, RPA

Marc Cunningham

Bruce Dorfman

President All West

Principal Thompson | Dorfman Partners, LLC

Daniel Myers

Jeanne Myerson

Anton Qiu

Partner, Real Estate Practice Group Leader Wendel, Rosen, Black & Dean LLP

President & Chief Executive Officer The Swig Company

Principal TRI Commercial

Jennifer Dizon, CPA Audit & Advisory Partner Hood & Strong, LLP

Regional Property Manager Boston Properties

Editor-in-Chief Sharon Simonson 408.334.2512 ssimonson@theregistrysf.com

Daniel Huntsman, LEED AP President & Founding Principal Huntsman Architectural Group

Jesshill E. Love III Partner Ropers, Majeski, Kohn & Bentley

Creative Director Karyn Charm Photographer Chad Ziemendorf Writers Robert Celaschi, Michael Fitzhugh, Eugene Gilligan, Brian Miller, Jessica Saunders, Sharon Simonson, Sasha Vasilyuk Contributors Rob La Eace, Dan Sapp, Todd Williams

Phil Williams, P.E., LEED AP

Paul Zeger

Vice President Webcor Builders

Principal, President & CEO Pacific Marketing Associates

Erik W. Doyle

Geoffrey C. Etnire

Michael W. Field

President Cornish & Carey Commercial

Co-Chair, Real Estate Group Hoge, Fenton, Jones & Appel, Inc.

Director, Commercial Real Estate The Sobrato Organization

SOUTH

Advertising 415.738.6434 Printer Bay Area Graphics www.bayareagraphics.com News news@theregistrysf.com

Terry de la Cuesta, IIDA, LEED AP Associate RMW Architecture & Interiors

Feedback letters@theregistrysf.com Subscriptions subscriptions@theregistrysf.com Ethics Policy The Registry embraces a strict ethics policy for its staff and contributing writers, including columnists and freelance reporters. No person employed by or affiliated with The Registry has accepted or will accept any compensation, monetary or otherwise, in exchange for editorial content. All information that appears in the magazine is selected solely for its informational value to readers.

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Norman C. Hulberg, MAI President Hulberg & Associates, Inc.

Robert Kraiss, CFM

Jody Quinton

Patricia Sausedo

Jeffrey A. Weidell

Director of Corporate Facilities & Real Estate Adaptec, Inc.

Regional Manager DPR Construction, Inc.

Vice President of Public Policy & Communications San Jose Silicon Valley Chamber of Commerce

Executive Vice President NorthMarq Capital


Contributors Rob La Eace

Dan Sapp

Todd Williams

The Three Dwarfs, pg. 24

The Heard Mentality, pg. 25

Home Grown, pg. 28

Responding to emergencies as a firefighter in a variety of uncertain situations and diverse neighborhoods taught Rob La Eace a lot about how people should be treated, not only during a crisis, but also in everyday problems. Today, these same skills are an asset to those who work with this San Francisco native in his career as a broker associate with McGuire Real Estate. The tools he puts to work as a firefighter are what makes the difference to the clients La Eace works with as an agent. While it may help that La Eace is the type of guy with a warm smile and a friendly attitude, his professionalism, organization and drive to succeed are what make him stand out in his career. Working in his sixth year in the industry, La Eace is in touch with his clients’ needs and with the city—putting a local’s perspective to work.

Dan Sapp has been a thought leader in business communications for more than 20 years. He holds a master’s degree in clinical and sport psychology and combines deep experience with a unique perspective on how leaders must communicate to move people to action and drive business results. Sapp has earned a reputation for changing the way architectural, engineering and contracting firms approach the interview process. Clients include San Francisco-based Anshen & Allen, Gensler, Sundt Construction and Cannon Design as well as senior executives at Nokia Corp., Cisco Inc., UC-Berkeley Haas School of Business, Stanford Graduate School of Business, Silicon Valley Bank, Mellon Capital Management Corp., Hellman & Friedman LLC and Ernst & Young.

Media Partners The Registry would like to acknowledge its partnership with the following organizations:

Todd Williams is a partner at law firm Morgan Miller Blair in Walnut Creek. He serves as vice chair of the firm’s Land Use Group. His practice focuses on land-use and development litigation and land-use entitlement processing. Williams has represented developers and local agencies in matters relating to property entitlement processing; California Environmental Quality Act litigation and compliance; planning and zoning law; redevelopment and affordable housing; historic preservation; and real-property litigation. He has also represented clients in matters concerning use permits, the Subdivision Map Act and the Williamson Act. He is a frequent speaker and author on land use topics. n


Letter from the Publisher Dear Reader, When we decided to cover Bay Area infrastructure, I was reminded of something that I noticed about the United States years ago—the constant, and to some annoying, presence of construction on roads and highways. To me, it was a sign of progress. I was raised in the former Yugoslavia where infrastructure was often neglected. The big machinery, cranes and their operators wearing hard hats to me was a pleasant sight. And when I found it a bother, I reminded myself that these projects are all very good signs of progress. Today, however, I am noticing a little more of what I left behind years ago. The current hardship, to no one’s surprise, has cut deep and wide. As I write this letter, I am reminded of the realities of our economy as I listen to the Los Angeles mayor outline the hard and deep cuts across all departments in his city. The press conference could have been from any city in California these days. So, what does this all mean for my road-work nostalgia? Well, I think we’re going to have to be creative if we hope to pursue any such progress in the future. There is every indication that keeping our roads fit for travel is only a percentage of our needs; there is no denying that our generally worn infrastructure stems from years, and even decades, of neglect. Our public transit, airports, seaports and other public-sector investments that connect us to goods and services across America and around the world will have to be upgraded if we hope to remain competitive globally. The private sector has taken this opportunity to position itself inside what used to be the exclusive realm of government. But this uneasy marriage will have its challenges as we consider balancing the interests of the people with those of the shareholders. As you’ll see on page 16 in the article titled “The Private Trough” by Jessica Saunders, we examine how these public-private partnerships have come to be and how they will change the landscape of the public domain. Another very important aspect of the infrastructure network is our airports. With the volcanic eruption in Iceland, we have all been reminded of the increasingly vital role they play in our justin-time, everyone-connected global economy. Bay Area airports have been unable to avoid the realities of today’s economic times. Traffic is down at all three over the last decade, precipitously in

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San Jose and Oakland. One could argue our airports, like their private-sector brethren, have taken on too much debt and now find themselves in a pickle. Further, San Jose is already concerned about how the new high-speed rail will impact its traffic in the long term. Current projections are that the California High Speed Rail system will have lower ticket prices than the airlines and that San Jose’s Diridon Station, one of the high-speed rail’s proposed stops, will eventually handle more passenger traffic than the nearby airport—not a comforting thought for an airport drowning in debt. Only San Francisco International has remained busy, although it is clearly at the expense of its two neighbors to the east and south. Still, without question San Francisco’s success is directly related to the infrastructure investments (new terminals and BART lines) made in the past 15 years. International travel has helped it prosper in today’s tough economy, and the marketshare wars among low-cost carriers jetBlue, Southwest and Virgin America have only benefited it—whatever brings and moves the passengers works for SFO. To be sure, private enterprise meddling in the public realm needs scrutiny. On page 8, Sasha Vasilyuk writes how some at the City of Mountain View are resisting Google Inc.’s overtures to have the city re-zone an important section of the city’s shoreline to allow mixed-use development including housing in this traditionally industrial enclave. Google is not the only party endorsing this vision. The company has had a tremendous impact on Mountain View’s economy, almost single-handedly supporting job growth and home values. But city officials and others worry about giving one company undue influence on planning decisions intended to set the community’s physical structure for the next two decades. In some ways, the issue is no different from Fireman’s Fund wanting a station built next to its headquarters in Novato, (Connecting the Dots, page 20), although in Fireman’s Fund case, the company has been around since the Civil War. Thank you again for your support. As always, we welcome your feedback and thoughts. Regards, Vladimir Bosanac


An exemplary approach to preconstruction. Unrivaled team building. Total project ownership and attention to detail.

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These are the qualities that have quickly established BCCI as one of the Bay Area’s most skillful

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JOB NO. IDEA-631 PUBLICATION The Registry INSERT DATE February 2010

DESCRIPTION BCCI Quarter Page Ad

TITLE Strructural Builders

LIVE 4.375” x 5.875”

TRIM 4.375” x 5.875”

FILE NAME BCCI-stb_Regi10_Feb_QtrP.indd

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CONTACT INFO Wendy Bryant-Beswick INSERT ADDITIONAL IN 2010 wbryant@bcciconst.com Tel 415-817-5211 n/a

CLOSE DATE January 4, 2010

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* According to the San Jose Business Journal and San Francisco Business Times’ rankings based on total agent count.

4 COLOR PROCESS


News

Desk

Planning News from around the Bay San Francisco 555 Washington St. The San Francisco Board of Supervisors reversed the planning commission’s approval of the Environmental Impact Report for 555 Washington St., a proposed 430-foot, 38-story condominium tower near the Transamerica Pyramid. The April 20 decision came after a nearly five-hour public hearing on an appeal by residents of the surrounding neighborhood, who contended the EIR was flawed. The developer did not immediately respond to an email seeking comment.

issued the mitigated negative declaration under the California Environmental Quality Act. The proposed development requires a General Plan amendment to change the land-use designation from medium-density residential to high-density residential, as well as Precise Plan amendments and associated permits.

Oakland 1100 Broadway SKS Broadway LLC sought a three-year extension for the construction start of a 20-story office tower and rehabilitation of the historic Key System Building. The proposal would push the deadline to June 25, 2013. Work was originally scheduled to start by April 30, 2009, with an earlier extension to October 2009.

Telegraph Hill dwellers contend the project EIR is “fundamentally flawed” and the public precluded from “meaningful” review and comment. The community interest group’s letter to the board cited 14 EIR findings, including an inadequate project description and project objective and failure to address the building’s impact on urban sprawl, land use, parking, transportation and shadows. In an April 6 letter to board President David Chiu, developer Liberty Hill Development LLC President Andrew Segal urged the board to reject the appeal, saying it has spent five years in predevelopment including an “exhaustive” environmental study. The Planning Commission voted 4-3 on March 18 to certify the project’s EIR.

The agreement would also push back to the same date a requirement for SKS to buy 145 city-owned parking spaces in at 1111 Franklin St.

Liberty Hill and Lowe Enterprises Real Estate Group, another developer, plan to demolish two buildings at 501-505 Washington St. and 545 Sansome St. to build a 332,000-square-foot residential building with 4,650 square feet of ground-floor retail, a mechanical penthouse and four levels of subsurface parking and 215 spaces and two car-share spaces. As part of the project, the sponsor would give nearby Redwood Park to the city and maintain it in perpetuity.

Plans call for construction of 310,000 square feet of offices and 9,810 square feet of ground-floor retail on a vacant lot at 1100 Broadway and the rehabilitation of the eight-story Key System Building at 11th and Broadway including connection with the new office tower’s lower floors. Entitlement and design work on the project are complete, but SKS has been unable to sign lease commitments sufficient to secure financing, according to a city report.

Treasure Island/ Yerba Buena Island The San Francisco Planning Commission approved a measure deleting about 175 acres of U.S. Coast Guard property from the redevelopment area map for Treasure Island and Yerba Buena Island. The city is preparing to redevelop the former Naval Station Treasure Island with 6,000 new residential units, three hotels, a marina, restaurants, retail, entertainment venues and 300 acres of parks and open space. The redevelopment area includes all of 400-acre Treasure Island, about 150 acres of Yerba Buena Island and about 550 acres of tidal and submerged land adjacent to the islands, according to planning documents. The Coast Guard installation on the southern side of Yerba Buena was never part of the Naval Station and will remain in operation, leading to the change in the redevelopment map.

Mountain View 421-455 W. Evelyn Ave. The city found no significant environmental impact from Prometheus Real Estate Group Inc.’s proposed 213-unit apartment complex along West Evelyn Avenue. The project would redevelop the 3.5-acre Minton’s Lumber and Supply site with two building complexes ranging from two to four stories arranged around interior courtyards, along with a subsurface parking garage, recreational facilities, open space, landscaping and a public roadway. City staff did an initial review of the project and

Sent to us Marin County Seeks Emergency-Facility Design Jones Lang LaSalle has issued a request for qualifications seeking design and development teams for a proposed emergency-operations building in Marin County. The proposed $83 million Emergency Operations facility was approved by county supervisors in July. Building is expected in two phases, with a first phase budget of $58 million, consisting of approximately 54,600 square feet of essential service space plus up to 6,500 square feet of ancillary space. Roughly 27,700 square feet of essential service space would be built in the second phase. The RFQ is the first in a three-step process to select a developer. The goal is to house all county emergency operations services and a portion of the sheriff’s office. The new facility is expected to be open by 2014.

Health Care Company Opens Corporate Office at Santana Row Silicon Valley-based Satellite Healthcare will relocate its corporate offices to 300 Santana Row in San Jose, becoming the first office tenant to move into the newly completed building. The not-for-profit provider of dialysis and kidney-disease therapy will occupy 16,000 square feet. Currently based in Mountain View, the company is expected to move this summer, consolidating its Satellite Healthcare, Satellite WellBound, Satellite Dialysis & Satellite Research corporate offices into a single floor. The five-story office building is located at Santana Row, the wildly popular shopping, eating and be-seen spot at Stevens Creek Boulevard, across from Westfield’s Valley

Pleasanton 4800 Bernal Ave. The City Council approved Braddock & Logan Services Inc.’s proposal to expand its Civic Square downtown apartment complex at Bernal Avenue and Sunol Boulevard by 36 units. The project was enlarged from an original 12-unit expansion, submitted in 2009, to allow more low-income units and more access for residents with disabilities. Four ground-floor units will be designed and constructed to be accessible to persons with disabilities under the Americans with Disabilities Act, and 10 other ground-floor units will be designed and constructed to be ADA-adaptable. All 36 new units will be covered by an affordable housing agreement designating five units for low-income households in perpetuity and 31 units for moderate-income households in perpetuity.

Emeryville Bay Street City planners expect applications within the next few months for development of Bay Street’s next phase. Bay Street, a mixed-use development built on a 26-acre former brown-field site at the eastern foot of the Bay Bridge, includes 400,000 square feet of retail including shops, restaurants and a movie theater. Developeroperator Madison Marquette has already entitled the un-built portion of Bay Street’s Site A, located north of Christie Avenue, for a hotel and retail uses. In addition, Bay Street’s Site B is to be developed with a department store and public parking. Site B is owned by the city redevelopment agency and is located between the un-built portion of Site A and Powell Street. Required environmental approvals are in place, according to a city progress report. continued on page 29

Fair shopping center. It has 65,000 square feet of offices and 15,000 square feet of street-level retail.

City: San Francisco Property-Class Futures Are Mixed Hotel tax receipts are projected to rise later this year and next considerably faster than other local tax revenues based on changes in international business activity and tourism, according to a three-year budget forecast for the city and county of San Francisco general government operating fund. Meanwhile, real-property transaction levels and transfer taxes have rebounded this year and are expected to return to historic averages, excluding the boom in commercial sales from 2005 to 2007 and up from almost no commercial transactions in early 2009. The report projects a nearly 5 percent decrease in property tax revenues in the city’s next fiscal year, followed by a flat year, then a 2 percent rise in fiscal 2012-13. “This is substantially slower than the 11 percent annual growth rates in property tax collections experienced during the decade from [FY] 1998-99 to FY 2007-08,” the report says. The projections were prepared by the city controller’s office, the mayor’s office and the board of supervisors budget analyst. Commercial real-estate values drive San Francisco’s property-tax revenues, which are roughly $1 billion a year. Hotel-room taxes, in comparison, account for less than $200 million annually in local tax collections. continued on page 29

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PEOPLE on the move Marcus & Millichap President Retires Harvey E. Green, president and chief executive officer of Marcus & Millichap Real Estate Investment Services since 2000, has retired and a formal search has begun to replace him. Green joined Marcus in 1981 and rose through its ranks, opening an Encino office that became its flagship operation. He led the company’s growth from 22 offices and 424 agents in 1996 handling just over 1,000 transactions to 76 offices and more than 1,200 agents handling 3,400 transactions in 2009, the highest of any real estate brokerage company. “The firm would not be where it is today without his leadership,” said George M. Marcus, company founder and chairman. Marcus & Millichap was founded in 1971 and is the nation’s largest real estate investment-services firm.

Seasoned East Bay Broker Jumps Edward Del Beccaro has rejoined brokerage Grubb & Ellis as executive vice president, managing director, leading Grubb’s Walnut Creek office. Del Beccaro has spent his 33-year career in the East Bay. He returns to Grubb after nearly 11 years with Colliers International at its Walnut Creek office, where he most recently served as managing partner.

Pacific Union Names San Francisco Leader Patrick Barber is the new president of Pacific Union International Inc. in San Francisco County. Barber is responsible for executing the company’s San Francisco growth strategies including office expansion, recruiting, marketing and client services. He will lead the existing management team responsible for the firm’s two San Francisco offices comprised of nearly 100 professionals. Before joining Pacific Union, Barber was a senior vice president and managing broker for the San Francisco and Wine Country offices of Sotheby’s International Realty, leading 130 agents.

Fitzgerald Abbott Adds Again Steven J. Cramer (top) and Matthew F. Graham (bottom) have joined law firm Fitzgerald Abbott & Beardsley LLP as partners focusing on litigation and business matters respectively. Their additions support the firm’s goal of measured growth in these practice areas.

We’ll take care of it.

Cramer has represented a diverse client base ranging from large international corporations to family-owned companies in matters including mergers and acquisitions and real-estate transactional matters. A veteran litigator, Graham represents plaintiffs and defendants in construction-industry disputes. He also represents numerous public agencies, large general contractors and mechanical contractors. Fitzgerald Abbott is a multi-practice law firm founded in 1883.

Five Move Up at Structural Engineering Firm San Francisco’s Forell/Elsesser Engineers Inc., has named David Englund (2nd from left) a principal and announced four other key employee promotions. Russell Berkowitz (right) and Steve Marusich (left) are new senior associates; Christopher Petteys (2nd from right) and Carolynn Smith have been elevated to associates.

Zack

WASSERMAN

Englund, the company’s chief financial officer, brings 29 years of financial expertise to the firm. He joined the company in August 2009. Berkowitz is a licensed civil and structural engineer who began his career with Forell/Elsesser in 1999. His project management experience includes the new Disney Pixar Film Production facility in Emeryville.

A leader. A counselor. A catalyst.

Marusich is a licensed civil and structural engineer who joined the firm in 2002. He is currently project manager for the $119 million UCSF Institute for Regeneration Medicine design and build project on the Parnassus campus.

Zack’s legal practice emphasizes navigating complex real estate and financial

Petteys is a licensed civil and structural engineer who joined Forell/Elsesser in February 2009. Since joining, he has provided structural engineering services for such projects as the U.C. Berkeley Memorial Stadium Retrofit project and the San Francisco U.S. Mint Seismic Evaluation and Seismic Upgrade project.

expertise in public-private partnerships and regional development projects

Carolynn Smith, office manager, has been promoted to associate. She joined Forell/ Elsesser in 2007 bringing nine years of experience to the firm, where she has assisted in the recruiting efforts and helping it grown from 34 employees to 45.

demand across many practice areas. He serves as general counsel for several

Copriviza as Director of Operations at Skyline Peter Copriviza has joined Skyline Construction, the San Francisco based general contractor. As director of operations, Copriviza will assume responsibility for project planning and logistics, as well as the firm’s overall construction process— ranging from estimating to document control to personnel training. He will also assist the business development and marketing department with job selection, client presentations and client satisfaction. Prior to joining Skyline Construction, Copriviza was an account representative and project executive with Devcon Construction where he managed key projects in retail, housing, hospitality, manufacturing, office and sports facilities amongst others. He is a twenty year industry veteran with a Bachelor of Science in Mechanical Engineering along with a Master in Business Administration from Santa Clara University. continued on page 34

dealings. He knows how to cut through red tape and keep things moving. His keeps him ahead of the curve on trends in infrastructure, financing and land use issues. Zack's years of experience and clear communication skills put him in public agencies in transportation, including the Alameda County Congestion Management Agency and the Alameda County Transportation Improvement Authority. He’s the recipient of the inaugural "East Bay Vision Award" from the East Bay Economic Development Alliance and general counsel of the Oakland Metropolitan Chamber of Commerce. When your project needs to get going, Zack is the catalyst that can move you toward your goal.

the leader ...in the

wendel.com

EAST BAY


commercial market report

Googleplexed Mountain View maps its future as Google continues to add heft. By Sasha Vasilyuk

L

ike many South Bay cities in transition from suburban past into more urban future, the city of Mountain View is a-changin’. As local tech giants continue to grow and attitudes toward long commutes and their environmental impact continue to change, South Bay cities are being forced to adapt by altering allowable land-use patterns and adding new transportation links. It has been 18 years since Mountain View, home to such companies as Google Inc. and LinkedIn, last updated its master landuse plan. The last time the community completed the exercise, the world’s largest search-engine company had not yet been founded and the region’s agricultural past was still fading in the rear-view mirror. Now, as Mountain View looks forward to planning its growth over its next 20 years, it is grappling with many of the same issues as its South Bay peers: the need to balance municipal fiscal health and quality of life against the persistent demands to accommodate more people, more jobs and more homes. But the forces at work in Mountain View are also its own. Long a respectable step-sister to its prestigious neighbor Palo Alto, Mountain View’s stature has improved in recent years. Sixty percent of its residents have a college or advanced degree, compared to 46 percent countywide. At $46,644, its median per capita income beats the county’s by nearly $10,000. Home values, apartment rents and commercial property lease rates have held up well in the recession, and the city continues to experience fairly substantial development pressures, despite the larger economy’s anemic health. Among other projects, Prometheus Real Estate Group Inc. is seeking to build a 213-unit, high-density four-story apartment complex near the CalTrain station downtown. Another developer is seeking to remake the city’s sprawling and inefficient San Antonio Shopping Center at San Antonio Road and El Camino Real. Job growth has been nothing short of spectacular. The number of jobs in Mountain View grew by 19 percent, or 9,000, between 2003

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and 2008, more than three times the rate for Santa Clara County as a whole, according to public records. In 2003, the city had 1.2 jobs for every employed resident. By 2008, it had 1.4, and the ratio of jobs to residents is only expected to rise. The primary cause of these metrics is no secret: Google Inc. Employment in the information sector, which includes services such as Internet publishing and Web-search portals, grew nearly 300 percent from 2003 to 2008 in Mountain View, far and away the fastest growth rate, public records show. But now the question becomes: What does Google’s continued success mean for the community and its general plan? Google’s role has already become a point of debate. Martin Alkire, the city’s principal planner, rightly cautions against viewing the community-planning exercise solely through the Google prism. But the incredibly prosperous and fast-growing company also cannot be ignored. Already, Google has asked city officials to allow mixed-use developments in its North Bayshore neighborhood to allow for more local services and housing for company employees. Were the city to agree to Google’s request, up to 2,100 homes and apartments could be built where none have traditionally been before. “As we continue to hire and make our home in Mountain View, we think that mixed-use development will be the best way to meet the needs of both residents and businesses in the coming years,” Dan Hoffman, Google’s real estate director, told City Manager Kevin Duggan in a February letter. While some have interpreted Google’s request as corporate bullying, in fact, ample evidence suggests that its behavior coincides with that of many other high-tech and other corporate Silicon Valley residents. An August 2009 report prepared by city consultants in the general-plan process suggests a similar re-development profile for the North Bayshore area as that described by Google. The Current Conditions Report, prepared well before Google’s letter, was intended as a baseline snapshot of the city and the point from which decision makers should launch their thinking. “What [Google is] suggesting is consistent with the much larger trend toward more integrated mixed-use development that has more transportation options including walking, bicycling and transit,” said Jim Musbach, principal of Economic & Planning Systems, one of the report’s contributors. “You need housing to support the tremendous job engine of the Bay Area. The whole issue of housing and employment has been at the top of the list in public policy debates.” The stakes are high. The North Bayshore area is a critical jobs support for the Mountain View economy. Besides Google, the Bayside enclave has about 90 biotech and life-science businesses, according to the Current Conditions Report. Most of the city’s office and research and development space is in the North Bayshore Area and one other. Start-ups migrate elsewhere, but “… as the firms expand, they often relocate to larger spaces in the North Bayshore Area,” the report concludes. Not upsetting this delicate economic dance is clearly of concern. Some city leaders say building housing in North Bayshore intensifies potential issues including possible sea-level rise, soil toxins from former site uses, increased traffic to and from the isolated area, lack of strong transportation and conflicts of interest between residents and industrial or manufacturing-type firms.


“It’s never been a great place for housing,” said Councilmember Jac Siegel. “And we don’t want to rely on any one company [for that] because companies may come and go.” Councilmember Tom Means agreed, “To me, it’s a commercialindustrial area. I don’t want to restrict commercial people just because we put residents there.” But others argued any growth in a commercial area—and Google is definitely not showing any signs of slowing down—should be accompanied by residential growth. “I believe we should look really seriously at housing there,” said Councilmember Mike Kasperzak. “We need to do a better job at balancing job-creation growth with housingcreation growth. I think that’s smart growth and is the way to go.” Although North Bayshore is the most contentious area of the general plan update, city leaders are also considering increasing allowable development density by as much as 50 percent in areas such as El Camino Real and the San Antonio Road area. “We’ve had very little new development on the El Camino corridor in the last 20 years,” said Randal Tsuda, the city’s community development director. “We have vacant lots and older buildings, so we’re looking to provide some flexibility in allowing different types of uses that will hopefully give people economic incentive to rebuild.” The plan calls for increasing mixed-use development and building heights from two and three stories to four stories along the twomile El Camino in Mountain View stretch, with five-story buildings at key street nodes.

San Antonio is also planned to see four-story mixed-use developments in the San Antonio Shopping Center area surrounded by three to four-story mixed-use developments that would include some residential units. “The council has a Santana Row-type vision for San Antonio,” said Kasperzak. “There’s agreement that it is an area ripe for redevelopment.” While in the last 20 years the population of Mountain View has grown by only 5,000, the new plan would increase the city’s population by a third from 72,000 to 98,900 and jobs by roughly 20 percent from 56,500 to 67,700 over the next 20 years. While most city leaders subscribe to this vision, not everyone agrees. “It would start the conversion of our city to a different kind of city—it would be much more urbanized,” said Siegel, who favors a different plan with less density increases. “We need some growth, but if you really want to live a more urban environment, why don’t you move there?” A special study session on North Bayshore set for April 20 with the full council and the full planning commission was to give the community more time to discuss the area’s future. In addition, Alkire says city staff intends to meet with additional community groups in the months to come to present staff general plan proposals. No matter what, one thing is certain, said Councilmember Laura Macias: “We’re only 12 square miles, so whatever we do, we got to do it pretty smartly.” n


hot lot | burlingame

Sunny Side of the Street After a rise in store vacancy, Burlingame Avenue is poised for a rebound.

“There will be well-capitalized retailers, not in need of debt, who are going to take the opportunity to enter this market at a reasonable rental rate.” Michael Seigel, senior retail specialist, Terranomics

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ith a mix of household-name and highend retailers such as Sephora and Apple, as well as independent boutiques and restaurants, Burlingame Avenue is a magnet for the affluent. Shoppers can select from the latest in French and European high-fashion at Les Deux Copines, buy a gift for the four-legged member of the family at Plaza de Paws (including dog bakery and spa) or pick a flower bouquet at Fiori. Yet even with Burlingame median family incomes approaching $100,000 a year and $200,000 in neighboring Hillsborough (San Francisco is $88,000), when the Great Recession hit, the surrounding affluence proved only a partial shield from an increase in forrent signs in Burlingame Avenue storefronts. “It was a big shock to see that,” says one Burlingame Avenue retailer. “The affluent shop here.” Shop they did, but as the recession tightened its grip, not so much, and with retailers paying rents that in some cases had reached $80 a square foot a year during the boom, the trouble began. “Downtown Burlingame is not downtown San Francisco, where you have a huge amount of shopper traffic,” said Steve Cutter, president and principal of

Lockehouse Retail Group. Rents at or near those levels for Burlingame Avenue space are unrealistic, he said. Indeed, retail rents on the street are the highest in the Bay Area excluding San Francisco’s Union Square, said Michael Seigel, senior retail specialist at Terranomics brokerage. “Business was good, and rents escalated.” But, rents started to fall and vacancy started to increase beginning some 18 months ago. There are now a dozen empty stores on Burlingame Avenue, ranging from 1,000 square feet to 6,000 square feet, he said. Vacancy is 8 percent to 10 percent, a five-fold increase from the 2 percent rate in mid-2007, he estimates. Many landlords on the avenue have owned their property for a long time, so they are not overleveraged and can weather a rise in vacancy in their buildings, Seigel said. But, on the minus side, many of these same landlords have been slow to re-negotiate lease rates with tenants who sought relief. Now, many landlords are showing a greater willingness to compromise, Seigel said, and asking rents on Burlingame Avenue now typically range from $48 a square foot to $54 a square foot. For the right retailers, Burlingame Avenue now represents a source of rising interest.

ph o t o s b y C had Z i emendorf

By Eugene Gilligan


“There will be well-capitalized retailers, not in need of debt, who are going to take the opportunity to enter this market at a reasonable rental rate,” Seigel said, adding that the lack of nearby developable land should also act as a “stabilizing factor.” There have been casualties. Men’s and women’s upscale boutique clothier Malouf ’s, which had a long-time presence selling classic style on Burlingame Avenue, has closed, and the building is for sale. An Ann Taylor store closed last year, though Ann Taylor Loft remains. Burlingame Stationers, a large office-supply store on Burlingame Avenue for nearly 40 years, closed in 2008. Janeville, a division of Gymboree, shut in 2007. Homegoods retailer Bombay Company, woman’s clothier Chico’s and White House/Black Market all left in 2008. Many think better days for the high-end shopping haven are just around the corner. “I think we’re over the worst of it,” said Norman Goldau, a commercial and residential broker at Switzer, Goldau and Associates. He cites recent leasing activity, such as a new Teacake Factory, a chain that sells gourmet baked goods. It has opened in a space formerly occupied by Peet’s Coffee and Tea, which moved to another location on the street. Some new retailers that perhaps wouldn’t be expected to call Burlingame Avenue home, are also establishing a presence. BevMo, a wine and spirits retailer, recently opened, and a new Walgreens is set to open. Cutter also expresses optimism about a new Safeway on Howard Avenue, one block over from Burlingame Avenue, which will also have 11,000 square feet of new retail space adjacent to it. That space is renting for approximately $55 a square foot, he said. This new development will be a “big plus” for Burlingame Avenue, Cutter said.

After some quiet months, Patricia Love, economic development specialist for the City of Burlingame, said she has been getting more calls from retailers inquiring about opening in Burlingame. “We’ll work on hooking them up with property owners,” Love said. The city does not offer incentives to entice retailers to move to Burlingame, but it will arrange meetings between retailers and city’s building officials, she said. The building official and fire marshal also visit locations with prospective tenants to see if there are obvious fire, life-safety or other issues that might make tenant improvements costly or delay an opening. Often property owners attend too, so they understand the costs a tenant faces to prepare a space for business. Burlingame Avenue’s retail makeup is comparable to downtown Walnut Creek and Palo Alto’s University Avenue, and all three shopping destinations can best be described as stabilized, Seigel says. “The bleeding has stopped,” but, he cautions against a premature declaration of victory. “There are vacancies in all of these areas, and some of it is lingering, and there is minimal leasing activity.” Andrew Reeder, a principal at retail brokerage Trade Commercial Group, said there is always a segment of the retail universe that wants to have a presence in shopping areas such as Burlingame Avenue. “There may be a small jewelry store that isn’t making it anymore, so that means that Tiffany will come in and take that space,” Reeder said. “The line to rent space may be shorter than it was a few years ago, but these types of shopping areas are always the first to turn around.” “There is only one Burlingame Avenue,” said Ron Karp, a broker who also owns property on the street. “People who live here have a lot of disposable income, and they are going to spend it.” “This is Grade A space; it’s not going to stay vacant for long,” he said. n

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Infrastructure

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Building Better Bones

The health of America’s public systems will help drive property values and global competitiveness.

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By S h a r o n Sim o n s o n and J e s s i c a S a u n d e r s

ention the word ‘infrastructure’ to the average person and you’re likely to elicit a polite but bored response. For those in the real estate business, initial reaction might be much the same, though it should not be. The value of all real estate is fundamentally a function of the infrastructure around it. On a perfect planet, we could quantify easily how much each new road, transit station and air connection upped the worth of nearby plots of land. In the real world, common sense is enough to explain the correlation between property value and strong physical ties. “Would you pay the same for a piece of property near the Los Angeles airport as one out in the suburbs?” says Michael Lucki, global leader of infrastructure and construction for Ernst & Young. The difference between the two sites, of course, is connectivity and what that linkage allows you to do: Get peaches to market before they rot; get steel to manufacturers in time for the next shift; get workers to plants and home again. “Infrastructure is the lifeblood of the economy,” Lucki says. Broadly, infrastructure consists of the various transportation and utility systems that underlie our economy and way of life. It includes airports, seaports, rail, roads, water, sewer. Historically, using tax dollars, U.S. cities and states, with lots of federal help, have built, managed and maintained the bulk of the nation’s infrastructure. Given the economic trials of the last two years—and arguably chronic overspending for years before—government at all levels is tapped out. But the need remains. According to a new E&Y and Urban Land Institute report on infrastructure, the fourth in an annual series, the United States would have to spend $2.2 trillion over the next five years to bring the national infrastructure up to an “adequate” level. That is roughly the equivalent of 15 percent of the value of all U.S. economic output last year. Major metropolitan regions, including the San Francisco Bay Area, are especially fragile. As the nation accommodates an estimated 120 million more people by the year 2050, these metropolises, which produce 90 percent of our gross domestic product, will almost certainly absorb the greatest share of the influx, based on historic trends and the natural proclivity for humans to migrate towards employ. “We are really on a collision course between population growth in the United States and our infrastructure,” says Maureen McAvey, a ULI

executive vice president. “We need to think through how our urban areas are growing. The United States is over 85 percent urbanized, and how we do our infrastructure will predict which metro areas will be competitive and have quality of life.” “Infrastructure is the backbone of how commerce really works,” she says. Going forward, there is every indication that traditional American funding formulas for public infrastructure will change, and they must. In California and 26 other American states, the legal framework now exists to allow private-sector investment with an eye toward returns. Public-private partnerships have become a key part of Gov. Arnold Schwarzenegger’s plan to improve and rebuild California’s aging infrastructure in the face of massive state deficits. In February 2009, the state legislature passed Senate Bill 4, Second Extraordinary Session, to allow regional transportation agencies and the California Department of Transportation, or Caltrans, to enter into an unlimited number of public-private partnerships through the end of 2016. In addition to expanding the limited authority contained in 2006 legislation, it also eliminated many restrictions on the type and number of projects that could be undertaken. It authorized a private concessionaire, or the company contracting to build and/or operate a public facility, to impose tolls or user fees for its use. The bill also provides for 15 design-build transportation demonstration projects: five for local agencies and 10 for Caltrans. Design-build contracting is also authorized for corrections facilities, courts and redevelopment agencies.

“Infrastructure is the backbone of how commerce really works.” Maureen McAvey executive vice president, Urban Land Institute

The effects of this legislation are felt close to home. The California Transportation Commission was expected to decide in May whether to use a public-private partnership for phase two of San Francisco’s Presidio Parkway project to replace Doyle Drive. The 1930s-era southern entrance to the Golden Gate Bridge is to become a six-lane road and southbound auxiliary lane from the Park Presidio Interchange to the Girard Road exit ramp, a $954 million project. Investment banks and others have raised billions of dollars for infrastructure funds aimed at investing in public-private ventures. There is as much as $170 billion in real-estate funds targeting solely infrastructure, E&Y’s Lucki estimates. With reasonable debt, that equity could be pushed to more than $500 billion in total investment, a good downpayment towards American needs. “What makes [public-private partnerships] unique is that you are buying a monopoly type of asset, so you have a pretty sure bet that you are going to have a consistent revenue stream,” he says. Given investor returns in commercial real estate in the last couple of years that promise may be especially alluring to pension funds and other investors seeking security first, though Lucki admits that it is far from certain whether investor enthusiasm will gain strength. Another obvious beneficiary from increased spending on infrastructure would be the construction industry, where job losses nationally and regionally have been severe. n

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Personal Space

Mass transit, one at a time. By B r i a n M i l l e r

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leek, fast, personal and solar-powered, SkyTran looks like the future of transportation. NASA Ames researchers, seeing its significant potential as a feeder system to other transit networks such as BART and high-speed rail are collaborating on its creation pro bono. Lots of other smart people back the personal rapid-transit concept as well. “The existing mass transit options are clunky, cumbersome and frankly not the answer for too many people,” says Russell Hancock, chief executive of Silicon Valley: Joint Venture, a San Jose nonprofit that corrals business, government and academia behind innovative ideas. “This might be the answer we’ve been waiting on for generations.” Or, it might be the answer that will never see the light of day, at least not in the United States. “SkyTran really resonates with people because it emulates the car—personal, non-stop, point-to-point travel; we get inquiries and enthusiastic comments constantly from all over the world,” says John Cole, the Irvine-based chief executive of Unimodal Systems, the Washington State company behind the SkyTran concept. “But the entire means of procuring transit in this country, while not deliberately, is designed to filter out anything that has the slightest bit of political and economic risk, which is why for well over half a century there has been no innovation.” That is also why, 20 years after its conception, there is still no SkyTran test track, let alone a SkyTran station integrated into the second story of your office building, Cole says. Aside from its Internet presence and the deep noodling now going on at NASA, SkyTran exists only as a life-sized pod car shut in a warehouse.

The SkyTran vehicle can carry up to two people weighing no more than 250 pounds each.

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Still, SkyTran and similar systems are hailed as the next-generation mass-transit alternative. Compared to conventional systems, they can be built faster and more cheaply, operate on demand, move people more quickly and emit no ambient pollutants. ULTra Personal Rapid Transit in England and VECTUS in Sweden have had test tracks in operation for many years; commercial systems are in the offing. ULTra launches commercial service at Heathrow Airport this spring. VECTUS last fall won a contract to build a personal rapid-transit system for the Suncheon Coastal Wetlands Park in South Korea. The Swedish government has committed to placing a system in one of its major cities. Local governments in the United States, after seeing what’s happening overseas, are now considering personal rapid-transit systems as a way to improve their overall transportation systems. In Northern California alone, local governments mulling the possibilities include San Jose, Mountain View, Oakland, Pleasanton, Fresno, Santa Cruz and Marin county. Laura Stuchinsky, sustainability officer for the City of San Jose Department of Transportation, says SkyTran’s concept is one of many the city plans to evaluate. “We’re looking to connect the airport to light rail on one side and CalTrain and BART on the other side, and this kind of technology, because of its lower cost, appears to work in lower-demand, lower-density urban environments like ours,” she says. The city is retaining global engineering and design consultant Arup to evaluate the options, Stuchinsky says. A contract for research work should be approved this month, with the results expected nine months later. Arup was involved with the ULTra system at Heathrow. “The study will tell us if the technology is available to do what we want to do, to see if we can justify spending additional time and money developing a plan for such a system,” Stuchinsky says. Arup’s charge in San Jose will be to determine what viable PRT technologies are available, she says, and if any, or a combination of them, could eventually run without a government subsidy. If so, the goal will be to develop a system that would eventually end subsidies currently being used to fund intra-airport bus lines as well as those running between the airport, CalTrain and VTA light rail. “We hope to be home to the fifth PRT system globally,” she says, explaining that the system at Heathrow will be the first, followed by systems in the United Arab Emirates, South Korea and Sweden. Beyond that, she would like to see the valley become a center for PRT technology. “Fifty percent of the cost of PRT is in software; it is very computer-intensive, so being able to improve and grow this industry here would be a natural,” she says. “Plus, we’ve got the kinds of drivers and residents who are open to new and innovative products.”

I mages C o u r tes y o f U n i modal S y stems / S k y T ran

Infrastructure


Hancock is of similar mind. “I hope SkyTran is embraced by Silicon Valley because we are the type of place than invests in the future,” he says. Invented by aerospace engineer Doug Malewicki, SkyTran uses small, lightweight pod cabs that hang from elevated, magnetically levitated guideways supported by standard utility poles. Travelers board waiting vehicles, type in a destination and relax in a climate-controlled, Internet-connected environment. A computer system routes them non-stop to within an eighth of a mile of their desired stop, traveling at highway speeds or faster. ULTra and VECTUS sit on a guideway rather than hang from it. If Unimodal attracts the $7 million it needs to build a test track, it would be built at the research park connected to NASA Ames Research Center. Cole says there are venture capitalists in the final stages of due diligence looking to invest the money needed. Unimodal added an office at the NASA Research Center last year and is now working with NASA researchers who are using NASAdeveloped control software and other techniques to evaluate acceleration, jerk and vibration related to SkyTran’s operation. NASA designed the software to control robots and for other applications. NASA’s researchers and technology are free to SkyTran because NASA believes it benefits from the endeavor. “There’s a lot in common with what they need to do and the kinds of things NASA has been involved with in terms of future air-transportation systems,” says Jeffrey Smith, chief of the Entrepreneurial Initiatives Division at NASA Ames Research Center. With lots of pods moving in lots of directions on lots of tracks, SkyTran’s operation is more akin to information processing than bus scheduling, Smith says. NASA has deep experience developing systems to optimize information routing through computer networks, including work on a next-generation air-traffic routing and control system. “So while we developed the software for the control of air and space operations, SkyTran presents a whole new arena that would help NASA prove out our technology and make it even more robust,” Smith says. “In trade, Unimodal might end up being able to adopt and use it as part of an intelligent control system and, therefore, not have to develop it themselves.” Despite such support as well as that of civic leaders such as Hancock and Judy Arnold of Marin County, Cole suspects that some type of campus environment is the likely first place people will see a commercial SkyTran system because its adoption would require a minimum number of stakeholders. NASA Ames Research Park would be great, Cole says, as would a theme park, which could supply enough ridership to prove profitability.

Acceleration lane switches you onto non-stop guideway

SkyTran High-speed, non-stop Maglev Guideway Solar Array (top of guideway) Deceleration lane

You board at the Departure Portal

Extra vehicles waiting on the Off Line Guideway

You exit at the Arrival Portal

Groups travel in a “train of vehicles” connected by full video and audio links

That said, Cole would love to be pleasantly surprised by a government or a private corporate campus that would be willing to transfer an existing people-mover subsidy to SkyTran. “We could absorb the subsidy and eventually ramp it down to nothing as the system became profitable,” he says. Scott Stewart, managing director for transportation systems at IBI Group, a global transportation consulting firm, expects the future of transportation to include PRT concepts like SkyTran for those willing to forsake their cars and, for those who cannot, automated, intelligent highways and arterials where vehicles physically connect to the road and wirelessly to other vehicles so they may safely and efficiently move at higher speeds until they unlatch near their destination. “No matter what we want to do, it will be hard to remove completely the notion of personal transportation, be it the horse and buggy, the Model T or, now, cars,” he says. “It’s still very much what people want.” n

“Fifty percent of the cost of (personal rapid transit) is in software; it is very computerintensive, so being able to improve and grow this industry here would be a natural.” Laura Stuchinsky sustainability officer for the City of San Jose Department of Transportation


Infrastructure

The Private Trough

Public-private partnerships rise as government struggles.

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global economic recession might seem the perfect time for a renaissance in public-private partnerships to rebuild the national infrastructure: Cash-strapped governments get capital and private investors get guaranteed returns. That’s the theory, at least. In practice, public-private partnerships, also known as PPPs or P3s, are complicated long-term deals and anything but sure bets. While the idea of using private investment to finance public infrastructure is centuries old, it has gotten more popular with elected officials as the recession emptied the public purse. In California, Gov. Arnold Schwarzenegger advocated public-private partnerships for infrastructure projects in his 2008 state-of-the-state address. Private investors are considered to provide up to 30 percent of the cost of high-speed rail from Los Angeles to San Francisco. Governments have used P3s for projects ranging from roads, bridges and buildings to airports and utility plants. Using private funding allows them to avoid debt and protect their credit ratings while leveraging private-sector expertise they may lack. Using private dollars also allows public entities to push off the risk of inflationary cost increases. “I think we are seeing the beginning of a longterm shift toward the use of public-private partnerships that will last for decades,” said Rick Norment, executive director of the National Council for Public-Private Partnerships, an advocacy organization in Arlington, Va. Private investors are attracted to funding public infrastructure because rates of return generally are guaranteed, with repayment tied to user fees such as road or bridge tolls or to direct government payouts

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such as lease or lease-back agreements. That makes investors, such as pension-fund managers, see infrastructure as relatively safe longterm, Norment said. There can also be a prestige factor associated with backing a highly visible and widely used public project. There are roadblocks to the smooth operation of a public-private partnership, most traceable to conflicts of interest between the entities. For example, a city or county may want congestion-free highways, but for a private-road operator, traffic equals toll revenue. The California High-Speed Rail Authority expects private investment to account anywhere from $10 billion to $12 billion of the total system cost, estimated at $35.7 billion in today’s dollars and $42.6 billion in year-of-expenditure dollars, according to the authority’s December 2009 business plan. Another $4 billion to $5 billion is anticipated to come from local government and public-private partnerships for such things as transit-oriented development, station concessions and naming rights. The level of private participation is based on assumptions of a delivery model that shares risk and includes revenue guarantees for investors, as well as proof of public demand for high-speed rail service. Public-private partnerships have been used in the United States for more than 200 years, evolving into a number of different models such as design-build, design-build-operate-maintain and designfinance-build-operate-maintain. In the simplest model, a private company designs and builds the public project and turns it over to the local entity in exchange for a fee. Other models involve one or more private companies, or a consortium of companies, in different phases over the life of the project.

ph o t o b y C had Z i emendorf

By J e s s i c a S a u n d e r s


The more costly and complicated public projects lend themselves to the more sophisticated delivery models. Design-build-finance-operate-maintain is among the possibilities for California’s high-speed rail. Under this model, a special-purpose corporation would encompass development, infrastructure and operating companies, with financing provided through private debt and third-party private equity. Demand for service is a key point for investors and is one weakness for high-speed rail. Thousands of public-private partnerships are in operation today, but high-risk projects like bullet trains have no U.S. track record. It is easier for investors to see the inherent demand for an established public service such as a highway or an electric-power system. Investors interested in high-speed are concerned in particular about repayment based too heavily on revenue from ridership, according to a report prepared by high-speed-rail authority staff. Thirty companies still responded to the authority’s 2008 request for expressions of interest in the project. Investors’ return expectations varied depending on the method of repayment. Respondents were willing to consider 10 percent to 15 percent return on investment for repayment with public funds, and 15 percent to 25 percent for ridership-based compensation. The December 2009 business plan assumed an after-tax equity internal rate of return of 16 percent in calculating the total privatefunding capacity. The $10 billion to $12 billion private-funding level is based largely on the amount of project-based debt the authority estimated could be supported by future revenues. The rail system is projected to begin construction in 2012 and operations in 2020. The state projects a first-year surplus after operating and maintenance expenses of $370 million. That operating surplus rises to $4.7 billion in 2040. No investment terms have been specified by the high-speed rail authority as yet, CHSRA Deputy Director Jeff Barker said. If investors are unwilling to accept repayment through a share of future revenues, another option could be to offer a guarantee using public funds to make up any shortfall from the forecast revenue, according to CHSRA documents. The Proposition 1A bond measure passed in 2008, which authorized $9 billion for high-speed rail, explicitly prohibits any public operating subsidy, according to a report by Legislative Analyst’s Office. Barker said the authority has clarified its position on revenue assurances: Any guarantee would reimburse investors for capital costs alone, with operating and maintenance costs paid by fare revenue. Private-sector interest in California high-speed rail has increased “exponentially” since passage of the bond issue and the announcement that the project would receive $2.25 billion from the federal American Recovery and Reinvestment Act of 2009, Barker said. If some investors are cautious about public-private partnerships, the history of some P3 projects validates their concerns. The Eurotunnel, also known as the Channel Tunnel or “Chunnel” connecting Great Britain and France, was $9.7 billion in debt in 2005, 10 years into operation, partly due to overestimating traffic and other

costly miscalculations. The Eurotunnel showed a $1.9 million profit in 2009, according to news reports. Private toll-road operators in San Diego County declared bankruptcy in March. The San Diego Expressway L.P. is a Caltrans public-private partnership demonstration project that opened in November 2007. The highway connects Spring Valley with Otay Mesa. Backers of the South Bay Expressway LP and California Transportation Ventures Inc. cited a 25 percent drop in commuter traffic from Mexico, the recession and a contractor lawsuit in their court filings. Among the 20 largest unsecured creditors are Otay River Constructors, owed an estimated $408 million; Zurich North America, owed $1 million; and Caltrans Inc., owed nearly $400,000. All three claims are in dispute, however. Equity security holders include Macquarie 125 Holdings Inc. of Sydney, Australia, which holds 50 percent ownership in South Bay Expressway. Another Caltrans P3 demonstration project, State Route 91 Express Lanes in Orange County, was bought out by the Orange County Transportation Authority in 2003. The private road builder got the state to agree to stop upgrading nearby roads, saying it needed to maximize traffic to protect its investment, according to news reports. Huge congestion problems ensued, leading to sale to the county. Two other demonstration projects, including the Mid-State Tollway in Alameda and Contra Costa counties, were proposed but never built. Public-private partnerships are part of a general trend toward privatization of the public sector, said Robert Helsley, professor and chair of real-estate development at the University of California, Berkeley Haas School of Business.

Even for debt held by a private firm, if public funds will be used for repayment, then that obligation could be considered a balance-sheet liability for the municipality. “There are all kinds of motivations [for privatization.] Sometimes it is not clear why these activities are within government purview,” Helsley said. “Is there a rationale for a government doing something—for example operating a bridge? Tolls can control bridge access, and there is no reason why a government has to collect them.” In addition to turning over or outsourcing services and projects that don’t require government control, public-private partnerships also help public entities avoid or minimize debt because capital is typically raised through the private sector, Helsley said. “The level of public debt is a matter of sensitivity for all governments especially right now. This mechanism allows them to pursue new projects without taking on new debt or minimizing the amount of public debt involved,” he said. continued on page 23

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Infrastructure

No Port in the Storm

San Jose, Oakland airports struggle but San Francisco thrives.

O San Francisco has capitalized on growing international travel, which is generally more profitable than domestic short-haul.

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ff-base demand projections have proved disastrous for real-estate investors over the last 24 months. But such miscalculations are not limited to the private economy. The public sector also must make decisions about new bridges, roads, airports and government buildings based on projected end-user demand. When those expectations are wrong, government can find itself in a thick stew. Ask the city of San Jose. In 2000, nearly 14 million passengers used the city’s airport. Buoyed by the dot-com boom, the council adopted plans to invest $4.5 billion to improve and expand the facility in anticipation of continued growth. That growth has never materialized. In 2005, based on re-scaled expectations, the city re-configured its proposed capital investment and spent $1.3 billion to execute it. Now even that is proving problematic. Passenger traffic to and from San Jose has fallen steadily in the last decade and is expected to hit 8.0 million this year, a more than 40 percent decline from 2000, according to city staff reports. Airport revenue is $90 million less than projected based on six million expected passengers who never came. And like millions of private developers and property owners, San Jose is facing steeply increasing costs as debt payments kick in with the completion of airport construction. Beginning July 1, airport debt payments that airlines can be expected to help repay double to $40 million, then rise again to nearly $60 million in 2013. (The airport has additional debt that the airlines don’t support.) Yet, the airport’s ability to charge airlines more to pay for the new digs is well-contained. Demand for air service across the country is flat, and both San Francisco and Oakland airports have available capacity to support additional flights and carriers. Indeed, more than 50 percent of San Jose airport traffic is handled by a single carrier, Southwest Airlines Co. Should Southwest leave, both Oakland and SFO have capacity to accommodate all its needs, San Jose Aviation Director Bill Sherry told the San Jose City Council on March 8. Such a loss would radically increase San Jose’s costs to remaining carriers and make its problems considerably more serious.

By S h a r o n Sim o n s o n

“When economic times were good, airports were all doing well and thinking about demand in the future and building to that forecast,” said Seth Lehman, senior director for Fitch Ratings’ Global Infrastructure and Project Finance Group. Now airports find themselves with boom-level capacity and debt, and less flying activity to support it. “You have to issue a lot of bonds to build these facilities and that becomes your fixed costs,” Lehman said. To be fair, air travel generally has been hit hard by the economic recession and difficult to predict over the last decade, particularly in the Bay Area. U.S. domestic air travel fell 7.3 percent last year. It is expected to fall another 1 percent this year and to grow less than 1.5 percent in 2011, according to the Federal Aviation Administration. When San Jose began planning its airport expansion, Bay Area growth trends established from 1984 to 2000 showed that the region’s three airports would be handling some 80 million passengers by 2010. In fact, traffic peaked at 64 million in 2000, fell for a number of years to roughly 55 million then began to grow again, reaching only 60 million by 2007, according to aviation consultant SH&E in work prepared for the Regional Airport Planning Committee of the Association of Bay Area Governments. “This downturn was far greater than what we’ve seen in decades, and the drop in passengers was even greater than after 9-11,” Fitch’s Lehman said. Air traffic rebounded fairly quickly after the New York attack, pulling back up to peak levels by 2005. “This time around we think recovery will be slower, so rather than 3 or 4 percent annual growth rates, less than half that,” he said. In addition the downturn has hit both San Jose and Oakland disproportionately hard. Both lost more traffic on a percentage basis than the nation at large last year and the year before, he said. Oakland’s airport is facing its share of troubles, too. American Airlines and Continental Airlines have ceased service out of Oakland, as have Aloha Airlines, ATA Airlines Inc. and Skybus Airlines Inc., which all filed for bankruptcy and dissolved. Fitch, which has down-


ph o t o b y C had Z i emendorf

graded airport debt across the country, cut San Jose and Oakland ratings in 2009 and put a negative outlook on both airports’ debt, signifying ongoing concern about future downgrades. The airports’ debt remains investment grade. San Francisco International is the only Bay Area airport that has weathered the economic storm well. But it has done so at San Jose and Oakland’s expense, after surviving its own travails earlier this decade. Those problems were also brought on by $2.5 billion in capital investments, including a new $950 million international terminal unveiled in December 2000. Airline operating costs shot up just as the dot-com bust reduced traffic and revenue. But San Francisco has capitalized on growing international travel, which is generally more profitable than domestic short-haul. San Jose only has international flights to Mexico, and Oakland connects to Mexico. San Francisco also is benefitting from the intense competition among Southwest, Virgin America and jetBlue Airways. “It has shifted traffic to San Francisco because that is where the turf war is,” said Joshua Polston, the aviation project manager at the Oakland airport overseeing long-term planning and the capital program. “The airline business is brutal. They will even lose money for a period of time to wipe out a competitor.” “I think in the near future, one of them will shake out,” he adds. At January’s end, SFO held 68.4 percent of the regional air travel market, up from a low of approximately 55 percent in late 2003. San Jose held 14.2 percent, down from more than 20 percent in 2001-02. Oakland held 17.4 percent, down from about 25 percent from 2002 through 2007, according to the city of San Jose. The March 8 discussion of the San Jose council shines light on the political constraints that complicate San Jose’s situation and more broadly illustrates the difficulties governments face in trying to tap the private sector for major infrastructure operation. “What about alternatives like selling or privatizing the airport?” San Jose Mayor Chuck Reed asked Aviation Director Sherry immediately following Sherry’s sobering presentation to the council. “The odds of achieving it are probably not worth the time it would take to invest in it,” Sherry replied. Sherry emphasized throughout the more than threehour meeting that in their actions, reducing flights out of San Jose from 190 a day in 2007 to 125 a day now (down from 149 as recently as August), airlines are telling the city that the airport is not competitive—and that is before the cost of repaying the new debt kicks in. Sherry presented a detailed list of actions the council

could take to reduce airport overhead by more than $24 million annually to reduce airline operating costs. Those steps include outsourcing janitorial and police service and reducing fire service to FAA-set (rather than unionset) levels. Many steps mean crossing public employees. Not one of Sherry’s proposals received a full-throated endorsement from any of the council people. Meanwhile, restrictions on San Jose airport operations from 11:30 p.m. to 6:30 a.m. are strongly endorsed by people who live near the airport. But the curfew dampens demand from international carriers to operate out of San Jose and makes it harder for the airport to attract new service. International travelers often prefer to travel at night, leaving domestic destinations late in the evening to arrive at destinations by morning. The curfew also reduces the airport’s ability to be a testing ground for new service, which airlines sometimes initiate as red-eye flights. At the March 8 meeting, residents who live near the airport came out to speak against modifying the curfew. The ritual seemed a dull familiarity. In the last two decades, San Jose has spent $70 million and the FAA $100 million to mitigate airport noise in 2,700 homes in surrounding neighborhoods, Sherry told the council in a 15-page, single-spaced memo describing the airport’s situation. San Jose’s $70 million could have been used to pay down its debt, Sherry noted. n

“This downturn was far greater than what we’ve seen in decades, and the drop in passengers was even greater than after 9-11.” Seth Lehman senior director, Fitch Ratings Global Infrastructure and Project Finance Group

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Infrastructure

Connecting the Dots

New North Bay rail line should reduce transport friction and improve property values.

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By R o b e r t C e l a s c h i

new 70-mile passenger-rail line through the heart of Marin and Sonoma counties, proposed for construction in the next four years, is shaking up the calculus of property values along its route. The Sonoma-Marin Area Rail Transit is to transverse 70 miles via 14 stations from Cloverdale to Larkspur. The latter station sits within walking distance of the Golden Gate Ferry terminal from which travelers can take ferries to San Francisco. As many as 5,300 passengers are expected to ride the rails every day. Coddington Enterprises, a real estate developer in Rohnert Park, wants one of the Santa Rosa stations moved to Coddingtown Mall, a regional shopping center anchored by Macy’s, J.C. Penney and Old Navy. Coddingtown, built in 1962 as the first regional mall in Sonoma County, is one of a half-dozen retail and commercial properties Coddington has built there. “They have given us some money directly to get our consultants to do a site plan and look at the possibility. Clearly they think it is an advantage to them to have a station near them,” said John Nemeth, SMART’s planning manager. Several years ago, Fireman’s Fund Insurance Co. lobbied hard for and got a station near its Novato campus. San Francisco’s John Stewart Co. plans to develop about 7.5 acres next to the downtown Santa Rosa station. Called New Railroad Square, the five-building project would include 88,000 square feet of commercial space, a 30,000-square-foot public market and 279 housing units, 68 of them priced as affordable housing. “Our work right now is trying to find financing in this kind of a market,” said chairman John Stewart. The company would build in phases, starting with rental housing and a public market. “We are hoping to have our entitlements by the end of the year,” Stewart said. “Our goal is to start construction in the summer of next year.”

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Stewart has sunk about $6 million into predevelopment work. The company would have moved ahead on the property even without the SMART train, Stewart said, “but we always viewed that the train coming in would be a definite value added.” Stewart already has an offer from national fitness chain Club One to fill 42,000 square feet. And even starting now, the condos wouldn’t hit the market until 2012 at the earliest. “The condo market at some point is going to return. Should we wait until then to get started?” Stewart said. Stewart is already building elsewhere. His firm in April started the first phase of the 800-unit replacement of San Francisco’s Hunters View public-housing development. In response to questions posed at public meetings during the environmental review, the transportation district has researched the likely impact of the rail line on property values. Three studies sponsored by the National Association of Realtors and the Urban Land Institute and conducted by the U.C. Berkeley Institute of Transportation Studies say the link between public-transit service and property values is mixed but generally positive. Those studies looked at Caltrain in Santa Clara County, Metrolink in Los Angeles County and the Coaster in San Diego County, measuring the effect on property within a halfmile of rail stations. In general, condominiums got the biggest boost in property values, though single-family homes also gained. Apartment complexes, on the other hand, showed little gain and in some cases even saw value decline. “Basically what gives value to being near transit is if you have a lot of congestion and can avoid that congestion and save some time by hopping on a train. Then, people will bid up the prices,” said Robert Cervero, one of the Berkeley professors who conducted the studies. The impact on commercial property was more pronounced. “The Santa Clara County study showed a 120 percent premium on commercial properties within onehalf mile of Caltrain stations,” a SMART report said. “The San Diego County study showed a similarly large 90 percent premium for downtown commercial properties within one-quarter mile of Coaster stations, but slightly negative impacts for commercial areas outside downtown.” Metrolink had a mixed impact: double-digit gains along the Antelope Valley and San Bernardino lines but a drop of 3.4 percent along the Ventura line and a stunning 29.8 percent discount along the Riverside line. Researchers speculated that poor redevelopment areas may have hurt the Riverside corridor. Stations have a negligible impact on property values past the half-mile mark, according to SMART. In all cases, Cervero warned against over-generalizing the study results. “I don’t know if I have done enough studies across enough cases to make the generalized statement that commercial


year, SMART was facing a budget gap of more than $150 million between what it has raised and what it needs to build out the project . “It is likely that part of the project will have to be phased in later,” Nemeth said. “We’re in the process of refining our cost estimates over the next few months. We will have a few more months of sales tax under our belts to see where that goes.” The SMART trains won’t likely ever go farther north than the original route. SMART owns track only as far north as Healdsburg, and it had to get an agreement with the North Coast Rail Authority to extend service to Cloverdale. A more likely expansion would be a few miles on the south end to Corte Madera, Nemeth said. The Metropolitan Transportation Commission’s long-range plan calls for passenger rail service along the Highway 37 corridor by 2050. n

Sonoma-Marin Rail Transit: Proposed Stations

Cloverdale

Healdsburg Windsor Jennings Ave

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will always receive the bigger benefit than residential,” he said. “We have tremendous knowledge gaps in this area.” In general, sources see the Sonoma-Marin train creating more demand for housing toward the north end, where it is more affordable, and more demand for commercial development toward the south end where there are more employers. Going north to south, the 2009 median price for housing was $262,000 in Cloverdale, $397,000 in Petaluma, $475,000 in Novato, $605,000 in San Rafael, and $1.08 million in Larkspur. A train would let workers commute from Sonoma County and avoid congestion on Highway 101. Marin County doesn’t offer much room for new development, but the SMART train could make existing buildings more desirable. “My feeling is one of the drawbacks of the Marin County community is affordable housing for workers,” said Haden Ongaro, manager of the Cornish & Carey Commercial brokerage office in Larkspur. “Because we are not connected to BART, employers often ask, ‘Where will I draw my employees from? Will these people really drive down from Cotati or some of the areas where you have a chance of buying a cheaper home?” Several towns on the SMART route are reviewing their master plans and may consider allowing higher development densities nearer stations. The town of Windsor is working on a development plan for the area within a halfmile of its SMART station, funded in part by SMART and the Metropolitan Transportation Commission. The plan could include high-density affordable housing aimed at households with up to 120 percent of the median income and possibly a multistory parking garage with ground-floor retail, said town manager Matt Mullan. The North Bay Association of Realtors supported the ballot measure to fund SMART as a way of expanding the transportation matrix in the two counties. But the association isn’t predicting a surge in housing demand. “We weren’t going to presuppose what a consumer or potential homebuyer feels about the SMART train,” said Kathy Hayes, executive vice president. While some people might be attracted to the transportation option, others might be put off by the noise of 28 trains a day passing through. The association has included the SMART trains in its disclosure and disclaimer advisory for prospective home buyers. “It is significant enough to make sure that both the buyers and sellers are aware of the activity,” Hayes said. Right now it’s still unclear how soon the trains will start running and how far. Ideally, the entire $590 million line would open in the fall of 2014, but the district faces some financial hurdles. Its funding comes from a quarter-cent sales tax approved in 2008, right before the economy took a dive. With consumers tightening their belts, revenue from the tax hasn’t met projections. At the start of this

“Basically what gives value to being near transit is if you have a lot of congestion and can avoid that congestion and save some time by hopping on a train.” Robert Cervero director, University of California Transportation Center


Infrastructure

Down Under

The Central Subway project offers the promise of progress though some see only political payoff. “It has the potential to become San Francisco’s version of the Big Dig.” Howard Wong San Francisco architect

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By G e o r g e C a l y s

fter years of planning, design and seeking funding, San Francisco is poised to commence construction on the Central Subway with utility relocation beginning along Fourth Street. Linking the Third Street T line to Chinatown, the 1.7 mile underground connection will be the largest infrastructure project undertaken in the city since the construction of BART and the Muni Metro in the 1970s. With planned completion in 2018, the subway is touted by the city’s transit agency as a key component of San Francisco’s publictransit future. Critics are less sure this mega-project will deliver all that has been promised. At $1.57 billion, the new subway’s price tag is twice Muni’s annual budget of $761 million. The Central Subway’s genesis was the 1989 Loma Prieta earthquake. Among the structures damaged in that seismic event was San Francisco’s Embarcadero Freeway. An ill-conceived stretch of elevated road that cut the historic waterfront from the rest of the city, the freeway was long considered an urban-planning scar. When the collapsed freeway was cleared, the Embarcadero was returned to its original use, a grand boulevard serving as the city’s living room. But not everyone was pleased with the freeway’s removal: Chinatown business interests saw it as the primary entry point into their district. To placate those interests, which were also politically active, the city agreed to expand Muni Metro via an underground subway. The benefits of the Central Subway as put forth by Muni’s parent, the San Francisco Municipal Transportation Agency, are many. As Phase 2 of the Third Street T line, the Central Subway will complete a north-south transit corridor through the city’s underserved Eastern Neighborhoods. Running below Stockton, one of the city’s busiest streets, the subway would relieve congestion and reduce transit-travel times. SFMTA estimates that by 2030, T Line ridership could reach 76,000 a day. But some question SFMTA claims. Howard Wong, a local architect with advocacy organization SaveMuni, notes that this is the largest project ever undertaken by SFMTA. It “has the potential to become San Francisco’s version of the [Boston] Big Dig,” Wong says. It also will disrupt commerce along

its path during construction that will consume much of the next decade. But Central Subway Project Manager John Funghi says SFMTA is up to the task. The agency has the capacity to build the improvements properly, he says, and is “well-poised to deal with cost overruns,” which could become an issue for transit service generally. The $1.57 billion includes $320 million for contingencies, the unforeseen conditions that always occur on large underground projects, Funghi says. While that sounds like a healthy cushion, Wong cautions that in the complex mix of federal, state and local funding, all cost overruns have to be borne by the local agency, in this case, SFMTA. That fact was made amply clear in a Jan. 10 letter to SFMTA from the Federal Transit Agency, which dispenses the large federal sums necessary for most light-rail projects like the Central Subway. The FTA is on the hook for nearly $1 billion. Considering that SFMTA projects budget deficits this year and next, any project-cost overruns could quickly become serious. There are other troubling issues as well. The cost of building and operating the Central Subway could impact other

LEGEND Surface Subway Surface Subway

Existing T Third Alignment (Phase 1) Central Subway Alignment (Phase 2) Central Subway North Beach Tunnel Extension Central Subway Stations T Third Stations BART and Muni Metro Stations Caltrain BART Surface to Subway Portal


Muni operations negatively. The Muni system has undergone service cutbacks due to declining revenues over the last several years. Some fear the additional cost burden of a new underground line could cause further cuts throughout the rest of the system. In its Jan. 10 letter, the Federal Transit Agency specifically asked SFMTA to demonstrate how that scenario will be avoided. Project manager Funghi said the answer to that question will be provided “over the next 18 months.” Station locations also are problematic, with unwieldy transfers to other lines. There is only one Chinatown station, at Washington and Stockton. That is also the end of the line, leaving the rest of Chinatown and, for that matter, North Beach with no service at all. The Union Square station has two entry points—one at Geary and one at O’Farrell, according to the preliminary drawings. But there is no direct connection from the Central Subway to any of Market Street’s underground lines. In other words, the large number of people who now make transit connections between Stockton and Market will find it more difficult to do so. In fact, the Union Square station as now designed is 95 feet underground (eight to nine stories), and riders who wish to transfer will have to ascend 95 feet, walk a block and then descend to the Powell Street station. It’s hardly a convenient transfer, particularly in the rain. Disruption from station construction also may be devastating to businesses. Stations, unlike the majority of the subway tunnel, will be constructed using the “cut and cover” method—that is, a large excavation will be made, a temporary roadway built over it, and station construction will occur beneath that roadway. The resultant disruption to small businesses in Chinatown and major retailers in Union Square will be significant. SFMTA has not made it clear how long that disruption will last. Less than 40 years ago, a similar disruption to business was experienced along Market Street when BART and Muni Metro were constructed; much of Market Street still has not recovered economically from that project. Wong fears that “the small businesses in Chinatown, unlike the corporate-owned retailers of Union Square, don’t have the resources to weather this kind of disruption.” Transit times may actually increase not decrease. They include not only the time spent riding a subway, but also the time to walk to a station and wait for a train. SaveMuni performed this calculation for several different trips on the proposed subway and compared the transit time to today’s bus travel. While the subway train travels much more quickly than a bus, when walking and waiting are factored in, the calculated trip time actually increases. There is no question that the Stockton corridor is one of the city’s busiest and needs a good transit solution. Yet the criticisms of the proposed project are significant. The federal government is keeping its funding of $942 million, or about two thirds of the total, contingent on further clarifications. And it seems more apparent that the present Central Subway solution, which was borne out of a political payoff nearly 20 years ago, is not a scenario that plays well for the largest number of people. n

The Private Trough continued from page 17

Helsley believes cost is another motivation behind P3s. Private companies can build and operate public projects up to 30 percent cheaper than the public sector, mostly due to competition, though non-union labor is also perceived to be a factor, he said. Not everyone agrees that private companies are pricecompetitive within PPPs, however. San Francisco attorney Samuel Niece notes that because public entities can raise money through tax-free bonds, ultimately their debt costs are lower than those of private companies. Private firms that raise taxable debt for public projects ultimately pass those costs on to the public entity, he said.

P3s have a cost advantage for a city doing it itself, because public entities can raise money through taxfree bonds, ultimately their debt costs are lower than those of private companies. “P3s have a cost advantage for a city doing it itself,” said Niece of Howrey LLP, who advises contractors involved in public-private partnerships on their contractual obligations. “Eventually cities can incur so much debt their bond ratings go to hell in a hand-basket. This is a way to avoid incurring more bonded indebtedness.” But even that advantage is not what it used to be. In some cases, credit-rating agencies are beginning to consider debt associated with public-private partnerships as “off-the-books financing” that can affect government credit ratings. Even for debt held by a private firm, if public funds will be used for repayment, then that P3 obligation could be considered a balance-sheet liability for the municipality, Niece said. “It is not as clear as the cheerleaders will tell you,” he said. “[Partnerships] are sometimes an attractive alternative that a public entity should consider, but they are not always the best thing.” n

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Quaking in His Boots Federal military base closures, other public safety cuts are setting up the Bay Area for big problems. By Rob La Eace

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Hit a bunker-sized pothole on Van Ness, or visit one of the dilapidated local parks, and you’ll realize exactly where we are.

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n Oct. 17, 1989, at 5:04 p.m., the San Francisco Giants and Oakland A’s baseball teams were gearing up to play game three of the World Series when the festivities were rudely interrupted by a tiny little seismic event now known as the Loma Prieta earthquake. What is important to appreciate about this event is that the Bay Area had some great resources available at the time, resources that might be described as life-safety infrastructure. Back then, we had the Presidio Army base, laden with heavy equipment and troops, and Letterman Hospital, filled with some of the Army’s top trauma specialists. Both are now gone. Alameda Naval Air Station, home to the aircraft carrier U.S.S. Hornet, the 303rd Attack Squadron and thousands of enlisted troops, was once one of the Navy’s most important West Coast installations. Treasure Island, which housed 3,000 able-bodied sailors ready to leap into action at a moment’s notice, closed in 1997. Fort Ord, which was home to the 7th Light Infantry Division and served as a basic training camp to the National Guard and Reservists, was shuttered in 1994. I could go on, but I think you get the point. We used to have a lot of helping hands around that we no longer have. So what’s this mean? For me, it’s reason for concern. The Bay Area rests on top of several major fault lines, and the odds are greater for, than they are against, a catastrophic seismic event. I am, for the most part, a very positive person. In looking at our current condition, however, I cannot help but feel a deep misgiving. The Bay Area’s infrastructure, indeed our national infrastructure, is languishing. Hit a bunker-sized pothole on Van Ness, or visit one of the dilapidated local parks, and you’ll realize exactly where we are. But that is only the obvious. The less obvious losses are those described above. When it comes to parks or roads, the local gentry usually complain long enough for our local politicos to respond. But some pieces of our infrastructure are slipping away—or will shortly do so, and they are never coming back. It is the nature of the political beast. In times of feast, our cities spend both wisely and foolishly. Yet, few notice, and fewer care. The cups overfloweth. “Bartender, a round for everyone!” However, when we fall upon hard times and budgets tighten, everyone watches closely what goes away. The problem with cities and counties is that during tough times, they make cuts to essential infrastructure, which is understandable. But when times are good again, these reductions are somehow forgotten. The schools and clinics that closed are never re-

opened, and the police units and fire stations that are browned out never hit the streets again. The budget money is no longer allocated, and they simply learn how to do more with less…or do they? This affects our health, our quality of life, and certainly our property values. Property values? You betcha. Next time you see a homeowner’s insurance application, note closely the section where it asks how far away the closest firehouse is, or the distance of the nearest fire hydrant to your home. Have you ever had a buyer make you very aware of the most recent crime statistics for a neighborhood in which he is interested? Hop on the San Francisco Police Department Web site, and you can see an overhead crime map of your neighborhood with the ability to narrow your search by genre of crime. It’s an eye-opener. And just find a group of soccer moms at the local Starbucks, introduce the topic of school districts, and watch ’em go! There’s no doubt that whatever happens in your public school system, good and bad, affects home prices. “OK, I get it,” you may say. “But, we’re in hard times, and we only have so much money.” Agreed. But we must remain vigilant regarding where our money goes in good times and bad. For example, did you know that San Francisco’s main public library branch has a full time social worker to deal with homeless people? Yes, while our city bats around the idea of how many bus lines it should eliminate, or how many teachers it can keep in class rooms, it has found great value in turning the public library into a homeless shelter. Does anyone besides me see anything wrong with this? Some may disagree, but no matter where you stand, we all need to pay attention to what’s going on around us. Years ago, to save money, the city shut down the hook and ladder fire truck 20—in the remote, sleepy neighborhood of Midtown Terrace. The truck’s main job at a fire is to ladder the building and to perform necessary rescue. This action left station 20 with only an Engine. Those living in the vicinity fought the closure to no avail. The politicians promised the locals that they would place a 35’ ladder on Engine 20 (so that it could still reach all the roofs in the area) and staff Engine 20 with a fifth firefighter (so that it would not be short-staffed to perform rescues). Well, Engine 20 operates today with only 4 firefighters, which some may argue is sufficient, yet the point is that if nobody pays attention, things just go away. And they don’t come back. n Rob La Eace can be reached at 415-290-7228 or rob@roblaeace.com.


employment

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don’t have to tell you that times are tough. Six months ago, my best client in the architectural, engineering and construction space told me that his market had contracted a staggering 85 percent. So, even if things are better today, there are still too many shops chasing too few deals. And, good shops, too. So, for those running with this elite pack, how do you convince an owner that yours is the firm when everyone on the RFP list (never mind the short-list) has great history, great designers (builders, engineers), and a brochure full of happy clients? How can you differentiate your firm from your worthy competitors? Short answer: You can’t. Because as much as we all believe that our firm is clearly better, so does everyone else who does similar work at a similar level. If we are honest with ourselves, we have to acknowledge that our competitors can probably do as good a job as we can on most of the projects for which we interview. There…I said it. In a market place where even high-value, deep professional skills and years of experience have become virtually commoditized, there is no real professional differentiation. So what do you do? Throw in the towel? Save the cost associated with preparing for an interview and email your presentation to the selection committee, hoping the phone rings? Of course not. Although the way many firms present themselves at interviews, they might as well. Because standing out with a selection committee is about connection, not content. No matter how well-organized your thoughts, or how dazzling your images, or what time of day you interview, or whom you follow or precede, no selection committee will remember much of what you say. And, if you basically narrate a slide show, they certainly won’t remember you. But, even their remembering is not what you are after. What you have to do to succeed in this and every business communication is to develop or deepen a relationship. No group hugs, I promise, but you do have to give your listeners a reason to want to know you better. The reason people pursue relationships is because there is something in it for the pursuer—explicitly. This means that in an apples-to-apples interview (when every short-listed firm has an equal chance), your job is to convince the selection committee that your firm is committed to solving their problems and meeting their objectives, not to getting the job because you need the work. One practical implication of the need to connect is that everything you say (ideas/content), everything you do (how you use your body and voice and how available you are), and everything you show (images, models, animated video clips, etc.) had better be driven by the business and human needs of the people on that committee. Does a five-minute recitation of your company’s mission and history really express a radical sensitivity to this owner’s organizational objectives? Does slide after slide (or video after video) of beautiful buildings really express your crystal clarity of the demands and realities of the client’s project? Does mumbling to the floor in a darkened room really say, “You want to work with us because you want to work with me?” The other profound implication of the need to connect is that you have to go beyond talking. Yep, we have to listen, too. How do you listen when you are expected to do all the talk-

The Heard Mentality Getting work in today’s hyper-competitive environment means listening and connecting better than anyone else. By Dan Sapp

ing until the question and answer period? First, the ideas you share, your core message and supporting ideas must convince this committee that you are radically tuned in to their project and their objective. This radical other focus is a powerful form of listening that dramatically helps you to connect. Second, everything about yourself, the pace of you speech, the silences you create, the way your body and voice express passion, authority and a willingness to work hard—physically—tell them that you know what they need and that you will deliver. I’ve said it before, I’ll say it again, everything you say, everything you do and everything you show suggests that you listen… even when they aren’t talking. Human beings are unique. You are unique. You are fully differentiated right out of the hatch. The experience people have of working with you is wildly different from the experience they will have of working with someone else, even if he or she knows what you know and does what you do. If you want differentiation, look inside, not outside. Because when the best of who you are drives your ability to connect and drive relationships forward, you become a clear version of your personal brand, that unique, differentiated, value-added resource for which your clients are begging. Your job is not to give a great presentation or conduct a stellar interview. Your job as a business communicator is to convince a selection committee that a relationship with you is the key to the success of their project. When their needs drive everything you say, do and show, then you are communicating on purpose, and differentiation becomes as easy as who you are. n Dan Sapp can be reached at 415.332.6646 or dsapp@dansappinc.com.

The reason people pursue relationships is because there is something in it for the pursuer— explicitly.


design

Working Design San Francisco nonprofit’s award-winning interior tries to say and do it all.

or nearly 30 years, San Francisco’s Russ historic building stood as the tallest west of Chicago. Today, a more modern landmark sits on the building’s 13th floor: one of just three LEED Platinumcertified commercial interiors in San Francisco. The project, headquarters for the nonprofit ClimateWorks Foundation, is a showpiece on a mission. ClimateWorks is a global philanthropic foundation headquartered in San Francisco with offices throughout the world. Backed by a $160 million annual operating budget, it funds, coordinates and guides its partners to develop strategies to aggressively reduce greenhousegas emissions. “It’s about making a case for the fact that you can make buildings that use 60 percent less energy than a typical office space, and the quality of the workspace is actually better,” said William Leddy, a principal at Leddy Maytum Stacy Architects in San Francisco.

“They wanted the space to communicate their values in a very powerful way.” William Leddy, principal, Leddy Maytum Stacy Architects

Top to bottom: Water feature dividing main office area and workstations Main office area Reception area

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Backed by the William and Flora Hewlett Foundation, The David and Lucile Packard Foundation and the McKnight Foundation, ClimateWorks supports projects in China, India, Europe, the United States and Latin America. In China, its partners have done extensive work with the industrial ministry to reduce industrial emissions. In Europe and stateside, it is—among other projects—working to update building codes to encourage the engineering of energy-efficient buildings. Because buildings account for 38 percent of all carbon-dioxide emissions in the U.S., according to the U.S. Green Building Council, ClimateWorks’ need for new offices offered a perfect chance to lead by example. That included attending to all the details necessary to meet the stringent requirements for LEED Platinum. LEED, a national program created by the USGBC, benchmarks the design, construction and operation of high-performance green buildings. Just 46 commercial

t o p and o pp o site b o tt o m ph o t o s b y C had Z i emendorf

F

By Michael Fitzhugh


o the r ph o t o s b y B ruce D amonte

interior projects in San Francisco have achieved LEED certification to date. Platinum certification is the most difficult to achieve because it requires the most points in a broad evaluation that examines everything from a project’s siting to its energy efficiency and materials. Built in two phases between December 2008 and April 2010, the $2 million ClimateWorks project aims to create an office environment connected to the natural world that the organization is trying to protect. “We wanted to exemplify what is possible,” said ClimateWorks Office Manager Mary Alice Stadum, who oversaw the 235 Montgomery St. project with Nolen Boyer, formerly at Jones Lang LaSalle Americas and now with brokerage Grubb & Ellis. To do that, the nonprofit turned to Leddy and James Jenkins, president of GCI San Francisco, the project’s lead contractor. “They wanted a space that would support their work on the one hand by creating inviting and flexible space and to make sure the people they have working there look forward to coming to work every day,” said Leddy. “They also wanted the space to communicate their values in a very powerful way.” As part of their mission, Leddy and Jenkins persuaded building owner Shorenstein Properties LLC to allow them to tear out an extensive heating, ventilation and cooling system installed by the previous tenant so ClimateWorks could rely on natural ventilation and ceiling fans instead. Shorenstein saw value in the expensive system but was eventually convinced that a LEED-CI Platinum designation would be even more marketable. A natural ventilation system enabled by the Russ Building’s operable windows and narrow floor plates allows ClimateWorks to reduce its HVAC energy consumption by 59 percent compared to a typical California office interior. The move also saved an estimated $150,000 in construction costs, Jenkins said. “There’s sort of a component of back-to-the-future here in a certain sense. Air conditioning became prevalent after World War II,” said Leddy. “It had a huge impact on the way high-rise buildings were made— from size of floor plates, to type of glass used and real estate values. Prior to the war, buildings like the Russ were not built to rely on extensive mechanical systems.” A desire to conserve and reflect the natural world and its resources permeates almost every element of the project. Wastewater generation is reduced 35 percent through the use of low-flow fixtures. In the project’s first phase of about 10,000 square feet, faux clouds on the ceilings, shaped from recycled fabric stretched across frames of recycled aluminum, shield light fixtures. A self-contained brook gurgles between common space areas and the open, low-walled cubicles. Recycled and renewable materials evidence focus and resourcefulness by Jenkins. Wood long ago salvaged from a warehouse once owned by the defunct San Francisco clothier ESPRIT, which had been sitting in storage, has been used to create ceilings and walls in some areas.

Where new wood was used, nearly three-quarters of it was harvested from sources certified as sustainable by the Forest Stewardship Council. The conference tables and many countertops employ Paperstone, a surface made from 100 percent post-consumer recycled office paper. Almost a third of the interior materials were manufactured regionally, including carpets from Southern California’s Bentley Carpet Mills and cabinetry from Richmond-based Tamalpais Cabinets. The building’s narrow floor plates also help create an environment in which no workspace or office is far from natural daylight. For early mornings and evenings, high efficiency auto-dimming lights balance outdoor and indoor lighting. To help better connect ClimateWorks’ employees to the natural world and create a better space, Jenkins employed panels and yet more “clouds” to hide trappings of our modern lives such as ceiling-mounted Ethernet cable trays. These conservation themes and environmentally sensitive materials are also extended to the project’s second phase, which adds roughly 10,000 square feet of office space and is also on track to secure LEEDCI Platinum. From simple choices, like site selection, to more complex deployments of sensor-controlled heating and lighting systems, Leddy and GCI leveraged every advantage available to them. The overall approach is one Leddy calls “biophilic design”, a school of thought that embraces the positive contributions of natural systems and processes in man-made buildings. “If you create environments that connect people in some way to the natural world, there are benefits. Our challenge at ClimateWorks was that here we have people working on behalf of the environment, but they’re sitting on the 13th floor of a building in downtown San Francisco,” he said. The main obstacle was to create something that would be truly new while maintaining a connection to the Russ Building’s historic character, all while trying to land a rare LEED Commercial Interior Platinum rating, said Jenkins. “You have to be crafty,” he said. n

Top to bottom: View of reception from main conference room James Jenkins and William Leddy

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Legal | Residential

Home Grown Judge rules that Pleasanton housing limits violate state law. By Todd Williams

L

ast month, Alameda County Superior Court Judge Frank Roesch struck down the City of Pleasanton’s voter-approved housing cap, ruling it violated state housing element law and was void. The decision in Urban Habitat Program v. City of Pleasanton not only declared the cap unenforceable, but Judge Roesch ordered the city to rezone sufficient sites to accommodate its share of the region’s housing needs—which translates to approximately 3,300 units—prior to approving any more nonresidential building permits. The city is still considering whether to appeal the ruling or to ask the court to modify it. By request of the parties, Judge Roesch issued a temporary stay while they engaged in settlement negotiations. No further court orders are expected before late April.

The case illustrates that a city’s land-use authority is not unchecked. Pleasanton voters adopted Measure GG in 1996. The act prohibited the city council from permitting construction of more than 29,000 housing units, from 1996 to—as the judge put it—“the end of time.” The cap could only be amended by voters. Voters passed Measures PP and QQ in 2008 reaffirming the cap and making clear that the city council had no discretion to waive it. The city also adopted an annual growth-management ordinance that limited the number of units that could be approved per year to 350. In 2006, Pleasanton resident Sandra De Gregorio and Urban Habitat Program, a social-equity advocacy group, challenged Measure GG and the city’s growth-management law. The suit alleged that the cap and annual limits conflicted with the city’s obligation under state housing element law to accommodate its fair share of the region’s housing needs as determined by the Association of Bay Area Governments and its regional housing needs allocation process. The suit also claimed that the city failed to zone adequate land sites to satisfy its housing-needs allocation. Under state law, a city is not required to actually construct housing units to meet its allocation. But it must take planning and zoning action to make sufficient sites available to accommodate the allocation. That includes affordable housing for all residents’ income levels. For the current housing element planning period from 2007 through 2014, Pleasanton’s housing allocation is 3,277 units. With approximately 27,000 units already built, the town’s 29,000-unit housing cap would prevent the full housing allocation from being built.

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Last year, Attorney General Jerry Brown intervened. He alleged that the housing cap contributed to traffic congestion, urban sprawl outside Pleasanton and increased greenhouse-gas emissions from longer commutes because the cap forced people who worked in Pleasanton to live elsewhere. The city’s general plan projected it would double its workforce by 2025, while its residential capacity would remain largely unchanged due to the cap. Judge Roesch, in striking down the overall cap, found that Measure GG was pre-empted by state law because the cap precludes the city from accommodating its housing-needs allocation. Even though the city had not yet reached the cap, the court found that Pleasanton could not comply with state law because its local law would not allow it to approve the number of housing units needed to satisfy its housing responsibilities. The judge rejected the city’s argument that voters, who approved the cap, should be given an opportunity to amend it themselves. The judge also found that the city violated state law by failing to zone adequate sites to accommodate its current housing allocation. The city tried to avoid this conclusion by adopting an ordinance rezoning sites in Hacienda Business Park in late 2009 to allow residential development. However, Judge Roesch found the action inadequate because the ordinance still required additional discretionary approvals by the city, that “vitiates any actual remedial effect of the Ordinance…and is an obvious disincentive to developers,” the judge said. This additional processing could take “from one year to forever,” he added. The court did not overturn the city’s annual growth limitation, finding that the city saved it by adopting an exception—during the pendency of the case—allowing the annual maximum to be exceeded if necessary to meet its housing allocation. The seriousness of the ruling is reflected in the remedy imposed on the city. First, the judge ordered the city to remove the voter-approved cap from all its planning documents, including the city’s general plan, and to no longer enforce it. Second, it must implement “non-illusory zoning changes” to accommodate the unmet housing-needs allocation by making zoning and land-use changes “such that they are without condition or need of future discretionary approval.” In addition, the court barred the city from issuing any nonresidential building permits, with some exceptions, until the city’s general plan is brought into compliance with state law. As a superior court ruling, Judge Roesch’s decision is not precedential on other courts. However, it sounds an alarm for cities with strict residential growth caps or annual residential building permit limits at odds with state-mandated housing allocation. The case also illustrates that a city’s land-use authority is not unchecked and demonstrates the attorney general’s willingness to pressure cities perceived to be pushing off their housing responsibilities. In 2009, the California Court of Appeal, in City of Irvine v. Southern California Association of Governments, held that cities may not challenge their housing-needs allocations in court. Taken together with the Pleasanton case, these decisions suggest that neither a city council nor a city’s electorate can ignore a housing allocation or demand that their community bar additional growth. By implication, the Pleasanton case could also impact commercial and industrial areas because compliance may involve rezoning such areas to residential use in addition to increasing residential densities. n Todd Williams can be reached at 925-937-3600 or twilliams@mmblaw.com


Planning news

continued from page 6

Fremont 2400-2450 Durham Rd. The Fremont Planning Commission approved a proposal to allow developers to build traditional single-family homes at a planned residential development instead of detached condominiums as earlier approved. The project’s density does not change. San Jose developer Robson Homes plans to build 48 units on the site in south Fremont just off Interstate 680. The proposal requires a new vesting tentative map and a major amendment to the planned district precise plan.

Palo Alto 1700 Embarcadero The City Council cleared the way for a new four-story, 147-room hotel and restaurant at 1700 Embarcadero Road. The project calls for demolishing the current restaurant on the site, Ming’s Chinese Cuisine & Bar, and rebuilding it. The council approved a zoning change for the project from planned community to service commercial, along with a negative declaration under CEQA. It is the second hotel considered by the council since the city in 2005 amended zoning ordinances to allow greater density for hotels. The plan calls for a new 118,000-square-foot hotel with a maximum height of 50 feet plus a 5,600-square-foot restaurant, one level of underground parking and a new surface parking lot. n

Sent to us

continued from page 6

East Bay Tree Company Recognized Again Hayward-based Arborwell has been awarded Diamond Certification for the third consecutive year by American Ratings Corp. The tree-management company was rated highest in quality in ongoing customer-satisfaction.

Bigge gets Bigger California’s largest crane rental-fleet owner has expanded its operated-and-maintained crane-rental business from Northern California to seven Western States. Bigge rents its fleet nationwide on a bare-lease basis. With operated-andmaintained rentals, Bigge Crane and Rigging Co. provides trained operators and expert rigging crews to assist in the crane’s operation. Bigge had been limited to offering operated-and-maintained crane rental in the San Francisco Bay Area. It now makes its entire fleet available on an operatedand-maintained basis in Northern and Southern California, Oregon, Washington, Nevada, Idaho, Utah and Arizona.

Forecast: Office Vacancy to Peak in Late 2010 National office vacancy rates should top out in the second half then rebound with new employment, according to a new forecast from brokerage Grubb & Ellis. Based on patterns set in the commercial market downturn of the early 2000s, office vacancy can be expected to reach its acme two or three quarters after payroll employment reaches its trough.

Atherton School Recognized for Green The Michael J. Homer Science & Student Life Center has been designated one of the Top Ten Green projects for 2010 by the American Institute of Architects’ Committee on the Environment. The center was designed by San Francisco’s Leddy Maytum Stacy Architects. It is also the first U.S. school to achieve a LEED Platinum rating from the U.S. Green Building Council.

San Mateo Company to Manage Marin Asset

Most Buyers Ever of Foreclosed California Homes

Sares Regis Group of Northern California will manage one of the largest office properties in Marin County. Situated on 35 acres in San Rafael, Marine Commons has two buildings with 456,000 rentable square feet of Class A offices. In addition to managing the property’s day-to-day operations and leasing program, the San Mateo-based real estate development company will explore strategic options to maximize property value.

Third-party purchases at foreclosure sales in California hit a new record in March, crossing 4,000 properties for the first time with the combined purchases totaling more than $840 million, according to new data from Discovery Bay-based ForeclosureRadar.com.

Real Estate Investors See Rebound A new survey of global real-estate investors representing institutional and private capital finds that most believe U.S. property markets have hit bottom and will begin recovery in the next 12 months. Two out of three expressed a desire to expand their portfolios in the next year. Respondents view Latin America and the Pacific region including Australia and New Zealand as already on the upswing. The United States and Asia are at the market’s bottom, while the Middle East, Eastern and Western Europe and Canada were all still viewed as in the down part of the cycle. The findings spring from Colliers International’s inaugural Global Investor Sentiment Survey. The results were compiled from the responses of 244 institutional and private global investors with a total investment portfolio exceeding $300 billion. “Many investors expressed the view that real estate cycles are now shorter and more severe than historical norms,” said Ross Moore, director of market and economic research for Colliers.

Tax Credits Entice Home Buyers Santa Clara County homes sales jumped nearly 50 percent in March compared to February with buyers closing on 1,239 homes including single-family, townhouses and condos, according to data from MLSListings Inc. The average sales price was $647,153, more than 3 percent above February’s and 25 percent more than the same month last year. “Eligible buyers are rushing to get into contract before the federal tax credit expires” April 30, said Karl Lee, president of the Santa Clara County Association of Realtors. Buyers who close a home purchase after the federal tax credit goes away may still be eligible for $10,000 in California tax credits. The state tax credit expires when the allocated funds are gone.

San Francisco Office Market Faring Better Than Most

For those properties that banks take back at foreclosure sale, bank-set opening bids were an average 31 percent above market value, clearly removing any possibility of an investor purchase, the information company said. Foreclosure sales increased 24 percent from February, with nearly 80 percent of homes going back to a bank and the remainder sold to third parties, primarily investors, the company said. Lenders filed 1,260 notices of default in Alameda County in March and foreclosed on nearly 600 homes, selling 108 to third parties. In San Francisco County, they filed 226 notices of default and foreclosed on 74 properties, selling 11 to third parties. In San Mateo County, lenders filed 398 default notices, foreclosed on 233 and sold 37 to third parties. In Santa Clara County, lenders filed 1,082 notices of default and foreclosed on 434 homes, selling 118 to third parties.

Commercial Investors Still Expect Rising Loan Sales Despite a frustrating year for most would-be buyers of nonperforming loans, investors remain optimistic that conditions will swing their way this year and next. That’s according to a new survey of real estate investment and opportunity funds, private-equity funds, institutional investors and real estate developers by Ernst & Young’s Real Estate Distress Services Group. More than half of those surveyed think they will find opportunity this year, with 40 percent predicting success in the second half. Most want whole loans backed by offices, industrial and multifamily properties. None favored residential mortgagebacked securities loans. So far, loan sellers remain elusive, E&Y reports.

Mergers, Acquisitions Projected to Rise in Architecture, Engineering Despite a recent slowing in merger-and-acquisition activity among architecture, engineering, planning and environmental consulting firms, the majority of those firms are considering a merger or acquisition in the next five years, according to ZweigWhite’s 2010 Merger & Acquisition Survey of Architecture, Engineering, Planning & Environmental Consulting Firms.

San Francisco is one of a handful of gateway U.S. office markets showing notable signs of improvement, according to Jones Lang LaSalle. In a review of firstquarter activity, the brokerage and global real-estate-services company reported increased tenant activity in San Francisco with asking rents for prime Class A space inching up even as market-wide demand remains negative.

While the percentage of firms reporting that they are currently considering an acquisition, sale or merger declined from 2009, three-quarters of firms responding to the survey said that their strategic plans involve a merger and/or acquisition in the next five years. The M&A mood is being engendered in part by limited organic growth opportunities, said Steve Gido, a principal with ZweigWhite Financial Advisory Services.

“Optimism may be ahead of fundamentals, but better alignment should be established by year-end,” said Colin Yasukochi, JLL research director for the Northwest United States.

ZweigWhite is a full-service consulting, information and education firm specializing in business-management services for architecture, engineering and environmental consulting firms.

Rental rates in primary markets like New York and San Francisco showed minor adjustment in the quarter, compared with drops up to 20 percent last year, the company said. It predicted rents would stabilize and possibly grow in some market segments. The green-technology industry is supporting growth on San Francisco’s Peninsula and in Silicon Valley. Small-cap technology companies that have received new venture capital also are expected to drive demand in the next six months in Silicon Valley, Austin, Boston and Denver. Nationally, the first quarter also brought more recovery signs. While the office vacancy rate rose by 20 basis points to 18.3 percent, the rate of increase was substantially below increases experienced in 2009.

Homebuilder Starts Construction on New Units Regis Homes of Northern California had begun work on the final 42-unit phase of Altaire, a residential community with 103 homes in Palo Alto. Since opening in spring 2009, the developer has sold 50 homes in the project. The new units are to start delivery this summer. Altaire is part of the 12-acre Taube-Koret Campus for Jewish Life, a $270 million multi-generational living and recreational center. The two- and three-story townhome community is designed by the Steinberg Group. Units are priced starting in the high $600,000s. n ma y 2 0 1 0

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Real S C E N E

O F

T H E

S E E N

Right: David Meckley, Hunstman Architectural Group, delivering an award to Collin Burry, Julia Campbell & Rhonda Petrov, Gensler

Sixth Annual IIDA Awards Fox Theater, Oakland March 25, 2010 Design-industry event planners, take note: The International Interior Design Association knows how to throw a good party! Key ingredients include a fantastic and slightly off-beat venue, an open bar, copious (if slightly odd) noshes, a steady supply of humor and loads of old friends...

Below: Fae Urban, Herman Miller, presenting the Student Design Awards

For a complete review of the night, please visit www.theregistrysf.com/RTRE_iida_awards_oakland.html

Above right: Gary Nichols and Douglas Booth, NicholsBooth Architects Right: Cheryl Durst, IIDA; Tony Smith, Teknion

P h o t o s b y M ar i ell H a y es

Below: Collin Burry, Gensler; David Meckley, Huntsman Architectural Group

Above: IIDA Northern California Honor Awards committee

Above: Vahe Markosian, senior at San Jose State receiving the First Place Student Design Award Right: Event emcees Brian Graham, Brian Graham Designs, and Tom DiRenzo, CRI

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theregistrysf.com 31


activity

Reports commercial leases

Address

City

Lease Sq. Ft.

Tenant/Rep/Brokerage

Landlord/Rep/Brokerage

Notes

Alameda County SITCOM Furniture, 2050 Williams St

San Leandro

75,000

Portfolio Productions Inc/Dba Sitcom

2050 San Leandro Partners, LLC/Jay Hagglund & Paul Beckwith (Cassidy Turley/BT Commercial-Oakland)

Industrial Lease Transaction

2802 W Winton Ave

Hayward

66,535

Schenker, Inc/Flagler Real Estate Services, LLC

Winton Industrial Center/Rick Keely & Greig Lagomarsino (Colliers International-Oakland)

New Lease, 39M

3525 Arden Rd

Hayward

66,048

Mimeo, Inc/Greig Lagomarsino, SIOR & Joe Yamin (Colliers International-Oakland)

DCT Industrial/Greig Lagomarsino, SIOR & Joe Yamin (Colliers International-Oakland)

New Lease, 66M

28300 Industrial Blvd

Hayward

58,400

Rivermills, Inc/Kristoph Lodge & Randy Scott (Cornish & Carey Commercial)

Christensen Holdings LLP

Industrial

50,000

Pilot Air Freight/Jeff Starkovich & Tom Damaschino (Cassidy Turley/ BT Commercial-Oakland)

ProLogis/ProLogis

Renewal, 36M, Warehouse Lease Transaction

48,960

GE Supply/Conor Famulener (CB Richard Ellis)

David Himy/Joyce Cunningham (Cassidy Turley/BT Commercial-Oakland)

66M, Warehouse Lease Transaction

Zinus Inc/Cornish & Carey Commercial-Hayward

AMB Property Corporation/Sam Higgins (Cassidy Turley/BT Commercial-Oakland)

Warehouse Lease Transaction

Corporate Avenue Distribution C, 26300-26312 Hayward Corporate Ave Crocker South Industrial Park, Hayward 1533-1575 Zephyr Ave AMB Wiegman, 3071130799 Wiegman Rd

Hayward

47,878

Hayward Gateway Center, 26511-26553 Danti Ct, Bldg M

Hayward

46,080

CDS Moving Equipment, Inc/John Wentzel (CIF Group)

Invesco Real Estate, TX/Jeff Starkovich & Jay Hagglund (Cassidy Turley/BT Commercial-Oakland)

84M, Warehouse Lease Transaction

26511-26553 Danti Ct

Hayward

46,080

CDS Moving Equipment, Inc/Todd Severson, SIOR (Colliers International-Oakland)

Invesco Realty Advisors/Cassidy Turley/BT Commercial

New Lease, 84M

47467 Fremont Blvd

Fremont

42,711

Volterra Semiconductor Corporation/Jim Abarta (Colliers International-Pleasanton)

ProLogis/Jim Abarta (Colliers International-Pleasanton)

Industrial

Social Security Administration

CIM Group/Ken Meyersieck, Trent Holsman & Scott Greenwood (Colliers International-Oakland)

New Lease, 120M

Western Tool & Supply/Andrew Zink, Chip Wiser & Mark Sweeney (Cornish & Carey Commercial)

Napa/Livermore Properties

Office

Mobile Mini, Inc/Robert Ferraro (CB Richard Ellis)

Sunnyvale Lumber/Michael Karp & Dan Persyn (Cassidy Turley/BT Commercial-Oakland)

63M, Industrial Lease Transaction

2100 Franklin St

Oakland

151 & 203 Lawrence Dr

Livermore

OLD WARM SPRINGS, 44580 Old Warm Springs Blvd

Fremont

Davis Industrial Park, 1955-1977 Davis St

San Leandro

25,920

Allergy Research Group/Sam Higgins (Cassidy Turley/BT Commercial-Oakland)

AMB/AMB/Douglas McGregor

42M, Warehouse Lease Transaction

31398 Huntwood Ave

Hayward

24,100

Delphon Holdings/Kevin Hatcher & Mark Maguire (Colliers International-Oakland)

RREEF/Kevin Hatcher & Mark Maguire (Colliers International-Oakland)

Renewal, 76M

23,948

Specialized Laundry Services, Inc/ Lee & Associates-Oakland

Sig Lateiner/Paul Beckwith (Cassidy Turley/BT Commercial-Oakland)

60M, Industrial Lease Transaction

21,792

Thai Golden Spice/Townsend Commercial Real Estate

PS Business Parks/Rick Keely & Joe Yamin (Colliers International-Oakland)

New Lease, 62M

21,482

Shipping International/Adan Martinez & Jeff Starkovich (Cassidy Turley/ BT Commercial-Oakland)

AC Transit/Jim Bohar & James Morris (Cushman & Wakefield-Oak)

62M, Warehouse Lease Transaction

Unitog, 33483 Western Ave

Union City

2349 Industrial Pkwy West

Hayward

30,416 28,400 27,518

Fruitvale Business Center, 901-1001 66th Ave

Oakland

4569 Las Positas Rd

Livermore

20,595

Ferrotec (USA) Corporation/Hitoshi Takahashi (Colliers International-San Jose)

Arroyo/Livermore Business Park/Michael Lloyd, SIOR (Colliers International-Pleasanton)

Industrial, Renewal

2705 Merced St

San Leandro

19,800

ePoly Star/Cassidy Turley/BT Commercial

Lowenberg Corporation/Greig Lagomarsino, SIOR, Kevin Hatcher & Mark Maguire (Colliers International-Oakland)

Renewal, 6M

1345 Doolittle Dr

San Leandro

19,670

Rolls Royce Engine Services/Equis

AMB Property Corporation/Greig Lagomarsino, SIOR & Casey Ricksen (Colliers International-Oakland)

Renewal, 39M

Coliseum Business Park, 5701-5725 International Blvd

Oakland

19,500

Richard Diaz/Adam Peterson (Cassidy Turley/ BT Commercial-Oakland)

Seth Jacobson/Gary Fracchia & Brian Collins (Cassidy Turley/BT Commercial-Oakland)

24M, Industrial Lease Transaction

1461 Doolittle Dr

San Leandro

18,246

KCI USA, Inc/Jones Lang LaSalle

RREEF/Greig Lagomarsino, SIOR, Mark Maguire & Kevin Hatcher (Colliers International-Oakland)

New Lease, 63M

427-435 13th St

Oakland

17,174

Rumsey Engineers/Aileen Dolby (Colliers International-Oakland)

Leslie Building Associates/Ken Meyersieck & Benjamin Harrison (Colliers International-Oakland)

New Lease, 72M

Legacy Partners/Bill Nork, Bill Banker & Dan Pivnick (Cornish & Carey Commercial)

Office

1015 Atlantic Ave

Alameda

16,608

Dynamic Graphics/Bill Nork, Bill Banker & Dan Pivnick (Cornish & Carey Commercial)

563 Julie Ann Way

Oakland

16,500

Collective Wellness/GVA Kidder Matthews

Cypress Properties/Mark Maguire (Colliers International-Oakland)

New Lease, 36M

2800 Main St

Walnut Creek

42,300

24 Hour Fitness/Terranomics/ James Chung & Mike Costa

Chicago Inland Empire, LLC

240M, Retail Lease Transaction

Marina Bay Waterfront Bus Park, 1401 Marina Way S

Richmond

32,745

American Legion

Virtual Development/Tony Beatty & Cynthia Lee (Cassidy Turley/BT Commercial-Oakland)

Office Lease Transaction

Empire Business Park, 701 Willow Pass Rd

Pittsburg

14,400

Fort Knox/Pittsburg, LLC

M/M Don & Lonne Carr/Eric Rehn, CCIM (Cassidy Turley/BT Commercial-Walnut Creek)

1M, Warehouse Lease Transaction

San Rafael

12,000

PW Marketing, Inc/Jerry Suyderhoud (Orion Partners)

Paul & Theresa Descolso/George Wagner & Vesa Becam (Keegan & Coppin Co., Inc)

Industrial/Gross

Clairmail

Seagate Properties, Inc/Steven Leonard & Trevor Buck (Cassidy Turley/BT Commercial-San Rafael)

60M, Office Lease Transaction Office Lease/ Full Service

Contra Costa County

Marin County 2145 E. Francisco Blvd San Rafael Corporate Center, 781 Lincoln Ave

San Rafael

11,837

100 Drakes Landing, Suites 190, 250 & 255

Greenbrae

10,404

Marin Healthcare District/Jeffrey Wilmore (Keegan & Coppin Co., Inc)

Drakes Landing Office Park LP

475 Brannan

San Francisco

24,554

USTREAM, Inc/John Cashin (Cornish and Carey Commercial)

PRU and SKS Brannan Associates/SOMA Team (Colliers International)

475 Brannan

San Francisco

18,480

3VR Security, Inc/Shap Roder & Luke Ogelsby (CB Richard Ellis)

PRU and SKS Brannan Associates/SOMA Team (Colliers International)

989 Market St

San Francisco

13,362

Dick Blick, Inc

989 Market Street LLC/Julie Taylor & Tracy Chiao (Cornish & Carey Commercial)

Office

National Industries City, 30-90 Dorman Ave

San Francisco

Plan It Earth/Harrigan Weidenmuller Co, SF

Harrigan Weidenmuller Co, SF/Scott Mason (Cassidy Turley/BT Commercial-Burlingame)

60M, Warehouse Lease Transaction

San Francisco County

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11,544


commercial Leases City

Lease Sq. Ft.

Tenant/Rep/Brokerage

Landlord/Rep/Brokerage

201 Gateway Blvd

South San Francisco

74,210

Solazyme/Ben Stern & Randy Scott (Cornish & Carey Commercial)

Fibrogen/Ben Stern & Randy Scott (Cornish & Carey Commercial)

R&D

Bayshore Technology Park, 2800 Bridge Pkwy

Redwood Shores

48,384

Shutterfly

Prudential Investment Mgmt/Randy Keller & Mike Moran (Cassidy Turley/BT Commercial-Burlingame)

Renewal, Office Lease Transaction

Bayshore Technology Park, 3000 Bridge Pkwy

Redwood Shores

48,384

Shutterfly

Prudential Investment Mgmt/Randy Keller & Mike Moran (Cassidy Turley/BT Commercial-Burlingame)

Renewal, Office Lease Transaction

1380 Willow Rd

Menlo Park

33,792

Pacific Biosciences of California, Inc/Kristoph Lodge AMB Property & Randy Scott (Cornish & Carey) Commercial)

Bayshore Technology Park, 3400 Bridge Pkwy

Redwood Shores

25,560

Imperva/CPS-Corfac International/Eric Fox

Prudential Investment Mgmt/Randy Keller & Mike Moran (Cassidy Turley/BT Commercial-Burlingame)

45M, Office Lease Transaction

Bayhill I, 900 Cherry Ave

San Bruno

17,390

Inquira/Clarke Funkhouser & Kevin Waldman (Cassidy Turley/BT Commercial-Burlingame)

CREA/David Wright & Brad Werner (CB Richard Ellis)

28M, Office Lease Transaction

500 Carlton Ct, 500 Carlton Ct

South San Francisco

16,532

Matagrano Inc/Marshall Hydorn (Cassidy Turley/BT Commercial-Burlingame)

John C. Nickel/Marshall Hydorn (Cassidy Turley/BT Commercial-Burlingame)

19M, Warehouse Lease Transaction

Willow Park, 1105-1195 Hamilton Ct

Menlo Park

11,904

Lightning Direct/Marc Pope (Cassidy Turley/BT Commerical-Burlingame)

AMB Property Corporation/Mike Cobb & Andrew Guglielmi (Colliers International)

23M, Warehouse Lease Transaction

Toy's R Us Center, 150 El Camino Real

Sunnyvale

44,795

24 Hour Fitness USA, Inc/Mike Costa & James Chung (Terranomics)

Safeway

180M, Retail Lease Transaction

Parkmoor Plaza, 1523 Parkmoor Ave

San Jose

25,000

Big Lots Stores, Inc/Jon Stansbury (Terranomics)

ISCM/Great America Parkway LLC/John Razumich (Imwalle Properties)

120M, Retail Lease Transaction

385-399 Sherman Ave

Palo Alto

21,722

PSI Systems, Inc/Kevin Cunningham & Howie Dallmar (Cornish & Carey Commercial)

MF Sherman

Office

Shoreline Technology Park, 2023 Stierlin Ct

Mountain View

20,956

Smith Micro/Dan Persyn (Cassidy Turley/BT Commercial-Palo Alto)

HCP/Mark Pearson (Cresa Partners-Palo Alto)

48M, R&D Lease Transaction

2000 University Ave

East Palo Alto

14,685

Burr, Pilger & Mayer/Mark Daschbach & Jack Troedson (Cornish & Carey Commercial)

DLA Piper US, LLP

Office

North First Corporate Center, 41-61 Daggett Dr

San Jose

13,297

Centipede Systems, Inc

South Bay Development Company/Kalil Jenab & Aaron Fritz, CCIM (Cassidy Turley/BT Commercial-Palo Alto)

64M, R&D Lease Transaction

3075 Oakmead Village, 3075 Oakmead Village Dr

Santa Clara

12,616

Promex

James S. Lindsley/Kalil Jenab (Cassidy Turley/BT Commercial-Palo Alto)

R&D Lease Transaction

2044 Concourse, 2044 Concourse Dr

San Jose

ZL Technologies, Inc/Tyler Hooper (Cassidy Turley/BT Commercial-Palo Alto)

DT Research, Inc

Renewal, 24M, R&D Lease Transaction

Sonoma County

R&D Lease6M

1010 Shiloh Rd

Windsor

60,000

Alexander Valley Cellars, LLC/Shawn Johnson (Keegan & Coppin Co., Inc.)

Constellation Wines US, Inc/Mike Flitner (Keegan & Coppin Co., Inc)

Industrial Lease/ Gross

1201 Piner Rd, 1201 Piner Rd

Santa Rosa

17,000

Habitat For Humanity/Paul Schwartz (Cassidy Turley/BT Commercial-Santa Rosa)

Pine Creek Properties

63M, Retail Lease Transaction

539 Martin Ave

Rohnert Park

Arcturus UAV, LLC/Gil Saydah (Keegan & Coppin Co, Inc)

Marc 3 Associates/Gil Saydah (Keegan & Coppin Co, Inc)

Industrial Lease/ Gross

Kandy Business Park, 368 Blodgett St

Cotati

New Metal Kustomz/Dennis Brisken & Richard Henderson (Cassidy Turley BT Commercial-Santa Rosa)

Kandy Investments/Sommer Oates Assoc/Dennis Brisken & 60M, Warehouse Richard Henderson (Cassidy Turley/BT Commercial-Santa Rosa) Lease Transaction

Address

Notes

San Mateo County

Office

Santa Clara County

12,500

14,610 10,200

commercial sales Address

City

Property Size

Buyer

Seller

Price

Product Type

Brokers

Alameda County $12,300,000 (Reported by LoopNet) Hospitality

Sheraton Brand Renovation Required, Seller Financing

Susan Lowenburg (Lowenberg Associates, LP)

$4,480,000 (Reported by LoopNet)

Industrial

N/A

Donald Fredrick

John & Lia McKenzie

2,400,000

Multi-Family

N/A

San Ramon Valley Bible Church

Gabe Arechaederra (Rasap Franklin II LLC)

3,650,000

Office

N/A

CONHC LLC

Scott Myers & Patricia Smoot

2,700,000

Retail

Forrest Gherlone and Mike Zylstra (Cornish & Carey Commercial-Walnut Creek)

5990 Stoneridge Mall Rd

Pleasanton

86,756

JP Sethi, Pleasanton Lodging LP Mesa West

2086 Burroughs

San Leandro

62,000

Zhi Zong Sun, E Poly Star Inc.

554 Bancroft Ave

San Leandro

18 Units

115 Ryan Industrial Ct

San Ramon

16,320

1801 Willow Pass Rd

Concord

Contra Costa County

15,125

San Francisco County 245 California St

San Francisco

165,133

Lexington Cal Street LP

Camfex Associates LP

18,000,000

Office

N/A

550 Montgomery St

San Francisco

94,000

Downtown Property Holdings

Lurie Family

$35,000,000 (Reported by LoopNet)

Office

Eastdil Secured

7500 Buena Vista Ave

San Francisco

35 Units

Rebecca Sterling Bishop

Bing Holdings Inc.

6,800,000

Multi-Family

N/A

Fred Thoits

James Blake (MPB Associates Undisclosed Loan was LLC) $3,000,000

Office

N/A

Industrial

Kalil Jenab (Cassidy Turley/ BT Commercial)

San Mateo County 420 Cowper St

Palo Alto

18,564

Santa Clara County 3240 Scott Blvd

Santa Clara

44,600

Axin LLC, Perviz Gurad (WHIZZ Mike Sanford (Locon Santa Systems) Clara LLC)

4,470,000

For-Sale Transaction Data provided by:


$5

Numbers $0

by the

-$5

-$10 -$15

Split Personality

PEOPLE on the move

-$25

Commercial Mtgs

Multifamily

Construction &

Unsecured

Total CRE

(Nonres.) Mtgs Land Real Loans CRE Change in Commercial Estate Lending

Q409 v. Q309 (Organized by bank size)

$10 $5 $0 in billions

A strange bifurcation is developing in today’s capital markets: Even as banks and insurers struggle to deal with billions of dollars in delinquent commercial-real-estate debt, many are adopting an increasingly aggressive approach to new lending. “Capital markets are back. Lenders are out there, and they are looking for deals,” Dave Christensen, a senior vice president in San Francisco for Grubb & Ellis, told the Northern California chapter of The Counselors of Real Estate on April 8. “Banks are looking to build deposits and to take market share.” At the same time, everyone knows that underwriting has grown much more stringent in the last two years. That means lenders are extending credit to a rarified pool. For hotels, for instance, that means the only ones getting money are branded outlets in central business districts, and it is based on current cash flow with very little income growth projected for the next two years, Christensen said. But will today’s lender conservatism last? That’s a big question, says Matthew Anderson, a partner at Oakland’s Foresight Analytics, a real estate market consulting and forecasting firm. It will be interesting to see, “if competition forces lenders to loosen terms and get more aggressive on loan-to-value,” Anderson says. Whatever happens, he adds, it “will be a big driver of prices.” Commercial real estate lending in the fourth quarter reflects banks’ schizophrenia. According to Foresight numbers, the nation’s largest banks (those with assets of more than $100 billion apiece) increased their commercial-mortgage lending by $5 billion in the last quarter of 2009 compared to the previous three months. They also upped the value of their multifamily property mortgages by $1.2 billion. Mid-sized banks with assets of $100 million to $1 billion did much the same thing, increasing commercial mortgage lending by $3.2 billion. “I’m not sure we can call that a huge trend yet,” Anderson says. “There could be some noise in the data.”

-$20

-$5 -$10 -$15 -$20 -$25

Commercial Mtgs (Nonres.)

Multifamily Mtgs

Construction & Land Loans

Unsecured CRE

Total CRE

Bank size by assets:

n n

> $100 B $10 B to $100 B

n $1 B to $10 B  100 MM to $1 B n $

n $0 to $100 MM Sources: FDIC, Foresight Analytics

That said, U.S. banks as a group cut their exposure to commercial real estate lending of all types by more than $50 billion in the fourth quarter alone. He does not expect underwriting to soften anytime soon, Anderson says, if for no other reason than that regulators are watching banks’ exposure to commercial real estate closely indeed. n

continued from page 7

The Mark Company Hires Project Manager

WRNS Studio Announces Staff Changes

Sarah Hardy has joined The Mark Company, a real estate sales and marketing, research and product-design firm with offices in San Francisco and Los Angeles. Hardy began her career at New York-based The Sunshine Group Ltd. When The Sunshine Group merged to become Corcoran Sunshine Group, Hardy helped launch the predevelopment team and served as a senior project manager. She worked closely with top architects and designers including Phillippe Starck and Rockwell Group.

WRNS Studio has expanded the ranks of its San Francisco headquarters and Irvine office. Cathryn Barrett joins as director of interior design. She brings 25 years experience designing commercial and institutional interiors in the United States, Europe and Southeast Asia. At WRNS, she is responsible for developing and coordinating interior design concepts and establishing the character and nature of interior spaces, finishes, fixtures, furnishings and graphics.

At The Mark Company, Hardy is responsible for ongoing development and execution of all creative sales and marketing tools, sales center and model-home programming and management of outside vendors.

Brad Thompson brings eight years professional experience and a background in consumer goods marketing to his new position as marketing coordinator at WRNS. Previously, he was field-marketing manager at Bon Appétit Management Co. He also worked at Arup North America managing production of bid/marketing proposals with international teams.

Lawyer Joins Colliers International Matthew Dorband has joined Colliers International’s Occupier Services Group as vice president. Dorband most recently served as a regional director at Quickstart Global, which specializes in assisting companies with international expansions. At Colliers, he will assist in the business development efforts of Colliers Occupier Services Group.

hooksASD Announces New Addition to Staff Designer Anne Zettle has joined hooksASD. Prior to joining hooksASD, Zettle worked in the interiors industry as a sales representative for Odegard in San Francisco.

Jones Lang Beefs Up Tenant Advisory Jason Volpe has joined Jones Lang LaSalle as a senior vice president on its San Francisco tenant-representation team. Before joining JLL, Volpe was with Studley in Chicago and San Francisco, specializing in real estate acquisition, disposition and lease consulting for corporate and government clients. Before joining Studley, Volpe was an attorney practicing commercial real-estate litigation in Chicago where he participated in more than 200 lawsuits involving real-estate development and transactions.

34 theregistrysf.com

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Also, bringing more than 20 years experience, John Sherwood has joined WRNS as project director for the Western Sector Park Development Plan, the first significant phase of the Orange County Great Park developed on 1,300 acres of the retired El Toro Marine Air Corps Station near Irvine. In addition, senior technical architect Richard Potter has retired from WRNS. Potter specialized in the design and construction of healthcare and research facilities.

Newmeyer & Dillion Elects Partner, Adds Litigator in Walnut Creek Newmeyer & Dillion LLP has elected J. Brian Morrow (top) as a new partner in its litigation group. Joining the firm as an associate in Walnut Creek is construction-litigation lawyer Ivo G. Daniele (bottom). Morrow’s practice encompasses construction law, real estate litigation, business litigation and insurance law. Daniele brings experience representing contractors in both public and private works of improvement, as well as owners and contractors involving claims on large infrastructure projects such as bridges and roadways. n


10 Calendar

january february march april may june july august september october november december

1

IIDA Northern California Chapter will host a Student Portfolio Workshop from 10 a.m. - 2:30 p.m. at Gensler, 225 West Santa Clara St., #1100, San Jose. Lunch and refreshments will be served. Members $0 and non-members $20. RSVP to student.rsvp@iida-nc.org.

3

CREW Silicon Valley will host the Mulligan & Margaritas Scramble Golf Tournament starting at 10 a.m. at La Rinconada Country Club, 14595 Clear View Dr., Los Gatos. Cost is $225 per golfer, $900 per foursome and $65 for awards-dinner only ticket. Register online at crewsv.org. For additional information, contact Chris Blair at 785.832.1808 or chrisb@crewnetwork.org or Kirsten Grado at 408.453.7464 or Kirsten.grado@cbre.com. ULI San Francisco will host Staying in the Game with Connie Moore from 5 p.m.- 7 p.m. at Sens Restaurant, Embarcadero 4, Promenade Level, San Francisco. Visit ulisf.org for more information. AIA San Francisco will host a Career Strategy Roundtable: Results Every Time You Talk – Differentiation for the AEC Professional from 12 p.m. – 1 p.m. at AIA San Francisco, 130 Sutter St., Ste. 600, San Francisco. RSVP to rsvp@aiasf.org.

4

NAIOP San Francisco Bay Area Chapter will host the 21st Annual Real Estate Challenge from 11 a.m. – 1:30 p.m. at Four Seasons, 757 Market St., San Francisco. This is a members-only event. Register online at naiopsfba.org. BOMA Oakland/East Bay will host a Social Media and Business seminar from 8:30 a.m. – 10:15 a.m. at Shorenstein, 555 12th St., Oakland. Advanced ticket cost is $5 for members and $25 for non-members. At the door cost is $10 for members and $30 for non-members. Contact 510.893.8780 or Robert at Robert@bomaoeb.org for further details.

BOMA San Francisco will host a Member Benefit Review from 11:45 a.m. - 1 p.m. at BOMA Conference Room, 233 Sansome St., 8th floor Conference Room. This event is open to everyone. You must register online at bomasf.org. SPUR will host an evening symposium called The Humanitarian and National Security Effects of Climate Change starting at 6 p.m. at 654 Mission St., San Francisco. Members $0 and non-members $5. Visit spur.org for more information.

5

ULI San Francisco and SFHAC will host the SFHAC Housing Summit 2010 from 7:30 a.m. - 10:30 a.m. at Yerba Buena Center for the Arts, 701 Mission St., San Francisco. Register online at ulisf.org. ULI San Francisco YLG will host Kickin’ the Bricks: Tour of Strata at Mission Bay from 4 p.m. - 6:15 p.m. at Strata, 1201 4th St., San Francisco. Cost is $10 and this event is for ULI Young Leaders Group members only. Register online at ulisf.org.

6

SPUR will host a walking tour called Explore the Oakland Food Trail starting at 10 a.m. at 654 Mission St., San Francisco. This is a members-only event and the cost is $10. Visit spur.org for more information. AIA San Francisco will host a Design Awards Gala from 6 p.m. – 9 p.m. at San Francisco War Memorial & Performing Arts Center, Green Room, 401 Van Ness Ave., San Francisco. Members $50 and non-members $65. RSVP to rsvp@aiasf.org.

BOMA Silicon Valley will host a membership luncheon from 11:30 a.m. – 1:30 p.m. at San Jose Holiday Inn, 1740 North First St., San Jose. Principal members and guests $30, associate members $50 and non-members $75. Register online at boma-sv.org. CoreNet Northern California Chapter will host a Sacramento meeting. Visit nocal.corenetglobal.org/CORENETGLOBAL/NorthernCalifornia/Home/ for more info.

11

ULI East Bay and CCIM will host Commercial Real Estate Tsunami from 2 p.m. - 5:30 p.m. at Sequoyah Country Club, 4550 Heafey Rd., Oakland. Register online at ulisf.org or call 800.321.5011. SPUR’s Young Urbanists will host an evening event called “Nightlife in SF: The death of fun or urban peace?” starting at 6 p.m. at 654 Mission St., San Francisco. Members $0 and non-members $20. Visit spur.org for more info.

12

BOMA Silicon Valley will host an Emerald Award workshop starting at 12 p.m. at BOMA Silicon Valley Office, 63 Metro Dr., San Jose. This is a free event. Registration required at boma-sv.org. IFMA Silicon Valley Chapter will host a Collaboration Tools luncheon from 11:30 a.m. - 1 p.m. at NetApp, 1345 Crossman, Bldg. 7, Quincy 2 and 3, Sunnyvale. Members $20 and non-members $30. Contact Joy Dunn at 408.226.0190 or admin@ifmasv.org with questions. CREW San Francisco will host a networking event starting at 5 p.m. Visit crewsf.org for more information. USGBC Northern California Chapter will host the Silicon Valley Branch 2nd Anniversary Celebration and Green Building Expo from 5:30 p.m.- 8:30 p.m. at Santa Clara University, 500 El Camino Real, Bannan Hall, Santa Clara. Members $15 and non-members $30. Contact Michael. foster@sanjoseca.gov for more information or register online at usgbc-ncc.org. USGBC Northern California Chapter will host BAyLUG: Living Building Challenge v2.0 – A Visionary Path to a Restorative Future from 5:30 p.m. – 8 p.m. at Charles Salter Offices, 130 Sutter St., Sixth Floor, San Francisco. Members $5 and non-members $10. For more information contact ryan@ebsconsultants.net or register online at usgbc-ncc.org.

13

USGBC Northern California Chapter will host a LEED AP Interior Design and Construction Exam Prep workshop from 8:30 a.m. - 5 p.m. at Haworth Showroom, 555 Mission St., Ste. 1950, San Francisco.Contact info@usgbcncc.org or register online at usgbc-ncc.org for more info. BOMA Oakland/East Bay will host a luncheon with the Mayor of Walnut Creek. Visit bomaoeb.org for more info. BOMA Young Professionals will host the 3rd Annual Spring Boat Cruise from 5:15 p.m. – 8:15 p.m. Cost is $40 per person and includes 2 drinks, appetizers and raffle prizes. Register online at bomasf.org or contact Wendy de Lara at 415.362.2662 ext 110 or wendyd@boma.com for more information. ULI South Bay will host an event called How to Capitalize on PPP’s from 5:30 p.m.- 7 p.m. at Legacy Partner’s America Center, 6001 and 6201 America Ct. Dr. Great American Pkwy @ 237, San Jose. Register online at ulisf.org or call 800.321.5011. AIA San Francisco will host an event called Trail Planning for California Communities starting at 6:30 p.m. at AIA San Francisco, 130 Sutter St., Ste. 600, San Francisco. This event is free for students and ASLA and AIA members with advance registration; $10 at the door. Contact admin@asla-ncc.org for more information.

14

ULI San Francisco will host a Breakfast Tour of One Hawthorne from 8 a.m. - 9:30 a.m. at One Hawthorne Sales and Design Center, 654 Howard St., San Francisco. Register online at ulisf.org or call 800.321.5011. BOMA Silicon Valley will host a Fundamental of Real Property Administration Accelerated course from 8:30 a.m. – 5:30 p.m. at BOMA Silicon Valley Office, 63 Metro Dr., San Jose. Visit boma-sv.org for more information. CREW East Bay will host a brown bag luncheon called Environmental Risk Evaluations and Due Diligence in Real Estate Transactions from 12 p.m. - 1 p.m. at Cooper, White & Cooper LLP, 1333 N. California Blvd., Ste. 450, Walnut Creek. This is a free members-only event. RSVP to Holly Neber at hneber@aeiconsultants.com or Brenda Hummel at bhummel@cwclaw.com.

17

BOMA San Francisco will host the 24th Annual Spring Golf Classic from 8:30 a.m. – 7 p.m. at Marin Country Club, 500 Country Club Dr., Novato. This event is for members only and the cost is $275. Register online at bomasf.org.

17

BOMA San Francisco will host a Wine Tour at the 24th Annual Spring Golf Classic at Marin Country Club from 10:30 a.m. – 7 p.m. This event is for members only and the cost is $250. Visit 3 local wineries in the comfort of a luxury tour bus, picnic along the way, then return to join the golfers for a post round dinner reception. Register online at bomasf.org. AIA San Francisco will host a Career Strategy Roundtable: Informal Peer-to-Peer Discussion from 12 p.m. – 1 p.m. at AIA San Francisco, 130 Sutter St., Ste. 600, San Francisco. RSVP to rsvp@aiasf.org.

18

IIDA Northern California Chapter will host a Fresno City Center Happy Hour Mixer from 5:30 p.m. - 7:30 p.m. at The Daily Grill Patio, Palm and Nees. Members $0 and non-members $5. For more information, visit iida-nc.org.

20

USGBC Northern California Chapter will host a Sustainable Communities Best Practices Forum: Bridging the Gap between Green Building and Urban Planning from 4 p.m. - 5:30 p.m. at Morrison & Foerster LLP, 425 Market St., 33rd floor, San Francisco. For more information contact nlowy@uli.org or register online at usgbc-ncc.org. CREW East Bay will host a Mayor’s Panel luncheon. This event is open to the public. Visit eastbaycrew.org for more information. BOMA Oakland/East Bay Young Professionals will host a mixer. Visit bomaoeb.org for more information. CoreNet Northern California Chapter will host a chapter meeting. Visit nocal.corenetglobal.org/CORENETGLOBAL/NorthernCalifornia/Home/ for more information. ULI San Francisco will host a Sustainable Communities Best Practices Forum from 4 p.m. – 5:30 p.m. at Morrison & Foerster LLP, 425 Market St., 33rd Floor, San Francisco. Register online at ulisf.org or call 800.321.5011.

21

USGBC Northern California Chapter will host a LEED Green Associate Exam Prep workshop from 8:30 a.m. - 5 p.m. at San Jose City Hall, 200 East Santa Clara St., W-118-120, San Jose. For more information contact info@ usgbc-ncc.org or register online at usgbc-ncc.org.

21

IFMA Silicon Valley Chapter will host an Annual Golf Tournament starting at 12:30 p.m. at Cinnabar Hills, 23600 McKean Rd., San Jose. Contact Joy Dunn at 408.226.0190 or admin@ifmasv.org with questions.

25

CREW San Francisco will host a CREW Sponsorship Chapter and National Network meeting starting at 8:30 a.m. at CB Richard Ellis, 101 California, 44th floor, San Francisco. Contact Julie Germain at Julie.germain@ cbre.com or 415.772.0210 with questions. SPUR’s Young Urbanists will host an evening event called Ballots and Brews starting at 6 p.m. at 654 Mission St., San Francisco. Members $0 and non-members $20. Visit spur.org for more information.

26

IFMA Silicon Valley Chapter will host a monthly meeting called C Level View of FM from 5 p.m. - 8 p.m. at SAP, 3420 Hillview Ave., Palo Alto. Members $0 and nonmembers $60. Contact Joy Dunn at 408.226.0190 or admin@ifmasv.org with questions.

27

BOMA San Francisco will host a membership luncheon from 11:30 a.m. – 1:30 p.m. at The City Club, Main Dining Room, 155 Sansome St., 11th floor, San Francisco. Members $55 and non-members $70. Register online at bomasf.org. NAIOP San Francisco Bay Area Chapter will host a webinar called 12 Strategies to Prosper in the Months and Years Ahead from 10 a.m. - 11:30 a.m. at Marcus & Millichap, 750 Battery, Fifth Floor, San Francisco. This is a free event for members-only. Visit naiopsfba.org for more information. NAIOP Silicon Valley Chapter will host a Developer Hall of Fame Dinner honoring Carl Berg from 5:30 p.m. - 9 p.m. Visit naiopsv.org for more information or call 408.294.5682.

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theregistrysf.com 35


FinalOffeR A Man And His Mission

Carl Berg

By Sharon Simonson

It’s hard to imagine Carl Berg, a self-made billionaire and leader

How was your life growing up?

of one of Silicon Valley’s largest commercial real estate empires,

CB

as a brass-knuckles competitor. The memory of his father’s death more than 60 years earlier still brings a catch to Berg’s voice. But if success as a capitalist is premised on being deeply competitive, Berg must be. He spent his childhood in a tiny New Mexico town. Today he is consistently ranked among Forbes’ 400 richest Americans. Berg is chairman and chief executive of Mission West Properties, a Cupertino-based public real estate investment trust that owns 8 million square feet of commercial office and research and development space in Silicon Valley. His first Silicon Valley commercial real estate investment was in 1965 when he and three partners including fellow valley real estate titan John A. Sobrato bought industrial land in Sunnyvale. Less than five years later, he and John Sobrato were commercial property developers and among the pioneers in the valley’s industrialization. The partnership lasted until 1978 when Berg nearly left real estate to pursue his other business passion: venture-capital investing. Today he has 100 venture investments. His past ventures include the Amdahl Corp., Sun Microsystems and Integrated Device Technologies. His current passion is Cytotech, a company that is pursuing a cure for cancer. As Berg tells it, his history from small-town boy to the Forbes list consists of a series of beneficial chance meetings engineered by Berg. He met his first significant employer at a local hotel where he sought work during college because he believed Wall Street investment bankers stayed there. Sobrato called him one day at his office after Berg moved to San Jose in the early 1960s upon learning San Jose was one of the fastest-growing U.S. cities. While Berg still thrives on his entrepreneurial pulse and has no plans to retire, he is not entirely sanguine about Silicon Valley’s future or that of the United States. The cost of doing business will drive companies to shrink their valley footprint more and more, he believes. Manufacturing will continue to shrivel. Slowly the middle class is being driven from the business ranks. Still, he says, it remains among the best places in the world to live, and if anything can save the region from itself, it may just be the climate and geography. Berg is being recognized for his achievements by NAIOP Silicon Valley at its May 27 Silicon Valley Developers Hall of Fame Dinner.

36 theregistrysf.com

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My dad was in the construction business. He was a heavy equipment operator in Tucumcari, N.M. My brother and I nearly every day in the summertime would walk about a mile down to a Safeway store and that’s where my dad would come over the overpass from work on his way home. My dad would play catch with my brother and I. We went on lots of vacations and every year we’d go to Colorado to visit with our relatives. My dad was killed in 1948 in a cave-in on a construction project. My mom was a school teacher, so after my dad got killed she stared teaching school again. She taught for 45 years, the fourth grade. She died last year at 97. I attended the University of New Mexico in Albuquerque and got a degree in business administration. How did you come to Northern California? CB I was working for a developer in El Paso who built homes, apartments, commercial and industrial buildings. One day we got into a fight and I quit. I looked it up in the newspaper in 1962 and the two fastest-growing cities in the United States were Las Vegas and San Jose. I got a job running a small home mortgage company. One day I got a call from John [A.] Sobrato. In 1969, John and I decided to quit selling housings and go into industrial development. The electronics industry was just getting started. Why did you and John Sobrato end your partnership? CB In 1978 we were really doing well in the real estate business. We owned everything 50-50. John wanted to go into more the high-end buildings, and I preferred the low-end because I always thought that if the economy went bad, the low-end would be easier to lease. That worked for a while but then later, no. I was thinking about getting out of the real estate business and doing venture capital entirely. We decided to split up all of our buildings. We had done very well in the real estate business, but I have done extremely well in venture capital. You were one of the few who did not get caught up in the overheated days in 2006 and 2007. Why? CB I knew commercial real estate would crash. In 2007, I was certain the prices were unbelievably unrealistic, but I also thought after two or three years, it would all be over. There will always be manufacturing in Silicon Valley, but it’s not going to be the same. I think we will keep management, sales and marketing but I don’t think we will keep the massive R&D projects. The quality of people in India and China and the cost for them, you can’t compete in the world market if you are paying our prices. [The Bay Area] is still the best place on earth to live but the real question is: Can we survive with our current standard of living? Things are going to get better from where they are, but it’s going to take a long time, and it’s not going to be the Silicon Valley glory days. What do you see for the future of Mission West? CB The key is the dividend. Based on what I know there will be no change in the dividend in 2010 and probably through 2011. But I’m concerned that a big percentage of buildings in Silicon Valley today may never be occupied again. For 35 years in business there has never been a time I felt my buildings wouldn’t be rented. I have buildings in Fremont on the market for 30 cents a square foot, and I have gotten no calls and no serious interest. n



The Registry May 2010 Issue