Page 1

Social Entrepreneur

San Jose Grows Up

Mike Fox Leverages Retail Empire for Good, pg. 8

City Plans Jobs, Jobs, Jobs and Housing, pg. 20

THE

Green Glow: Apprised on Appraisals Sustainability as a ‘Megatrend’, pg. 22

Final Offer with Patrick Barber Around the House pg. 32

Registry

BAY AREA real estate JOURNAL

  

JULY/AUGUST 2010

T E C H N O L O G Y Here We Go Again pg. 12

The Shrinking Globe pg. 14

Chile Adds Spice pg. 15

Mix and Match pg. 16

Humble is Cool pg. 17


TECHNOLOGY

FEATURE PACKAGE SoMa So Hip, pg. 13 Virtually Real, pg. 14 Shake It Up, pg. 15 Spatial Creativity, pg. 16 Startups Trade Down, pg. 17

Above: Ubisoft Building in SoMa, San Francisco

Contents JULY/AUGUST 2010

4 News Desk A summary of recent planning

decisions from select cities, news about the industry and people on the move.

6 Commercial Market Report Toe in the Water

8 Retail Building Goodwill

10 Retail Da to Kapital

20 Development | San Jose Land Plan Grand Plan 22 Green

Are Your Sustainable?

24 Hot Lot | Mountain View Climbing a Mountain 25 Rob’s REality 26 REal People Events Around Town 29 Calendar of Events

12 Feature Package: Technology

30 Commercial Lease Report

18 Development | San Francisco A Better Day in the Neighborhood

31 Commercial Sales Report 32 Final Offer | Patrick Barber

ABOVE PHOTO BY JESUS NAVA


THE

Registry

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

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.

Letter from

Publisher

the Publisher

Vladimir Bosanac vb@theregistrysf.com

President Heather Bosanac 415.738.6434 heather@theregistrysf.com

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

Contributing Editor Jessica Saunders

Creative Director Jelena Krzanicki

Photographers Stefan Armijo, Jesus Nava

Writers Robert Celaschi, Michael Fitzhugh, Eugene Gilligan, David Herbert, Timothy Runde, John Sailors, Sharon Simonson, Stacey Thoyre, Sasha Vasilyuk

Contributors Maureen Futtner, Rob La Eace, John McNellis, David Meckley

Advertising 415.738.6434

Printer Bay Area Graphics www.bayareagraphics.com

News news@theregistrysf.com

Feedback letters@theregistrysf.com

Subscriptions subscriptions@theregistrysf.com

Correction A column that appeared in the June Registry, “Credit When Due,” contained a technical error in an example cited to illustrate how an energy-related federal tax credit works. The text should read: “For example, say Bob purchases a $6,000 solar panel for his home. If he uses 30 percent of his house for business, his credit is limited to 70 percent. That would be $1,260 ($6,000 multiplied by 30 percent and then by 70 percent). Conversely, if the business use of his home absorbs only 10 percent of its square footage, he would be eligible for the full credit of $1,800 (30 percent of $6,000).” The Registry regrets the error.

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Dear Reader, If there were an underlying theme for this issue, it is what columnist John McNellis writing on page 10 might call hope amidst the rubble. It is something that we are hearing more and more as companies and individuals try to sort out what can be salvaged from this economy. In his column titled “Da to Kapital,” McNellis makes that very point. Deals, while quite different from what was the norm a few years ago, are getting done, even if only in the retail segment. They may not be the best deals for both sides, but capitalism is efficiently enabling life to prosper. One side sheds an old coat and the other gains an opportunity to expand through a great acquisition. This has to happen before the equilibrium is restored again in [INSERT YOU LUCKY NUMBER HERE] years. As difficult as that lucky number is to prognosticate, McNellis reminds us at the end of his column that competition is alive and well in America, and it will deliver a correction sooner or later. In another twist of hope springs eternal, on page 6 in an article by Gene Gilligan titled “Toe in the Water,” banks seem to be getting in on the deal, too. Albeit very slowly. They’re doing their best to pick the winners, and as Gilligan points out, some commercial areas, multi-family in particular, are showing impressive stamina. While the risk aversion is measured, the changing attitudes do signal that something seems to be going right. In San Francisco in particular, that ray of hope may actually be coming from the small army of tech companies that keeps growing there. San Francisco is by no means a harbinger of great news, but it has emerged recently as a pocket of excellence. Younger talent wants to be there, and companies are taking note. This month’s feature is focused on technology, the backbone of the Bay Area’s industrial output, and it seems that San Francisco is capturing some of the glimmer of activity. For this small trend to catch on elsewhere, employment has to increase. Unfortunately, unemployment is not ebbing. A recent San Mateo County study by Beacon Economics even predicted that it won’t turn before 2015. If by extension we can conclude a similar outcome for the rest of the Bay Area, this does not bode well for our region in the near term. In the longer term, as unemployment shrinks, we should take note of the pace at which office space is consumed. But be wary of the impact technology

will have on the way business is conducted. There is a significant social evolution emerging in communications, as you will see on page 14 in John Sailors’s piece titled “Virtually Real.” One global architecture firm here in the Bay Area has transformed the way it conducts business around the globe by employing an industrial video conferencing technology to save costs and increase efficiency. This is not an isolated example, and it will ultimately impact how office space is managed. It will create an efficient workforce that only needs a desk on occasion when in need of in-person time. And in a world where the financials are driving strategy, one way to cut costs per employee is to squeeze more of them into tighter spaces. Technology enables that transition today, and in David Meckley’s column on page 15, we see how a regional health care company is making strides in matching technology and space allocations to employee function, practice and comfort. In the process it is slimming its local real estate footprint by more than 50 percent, which should capture anyone’s imagination on where this may be heading. The tectonic shifts in the industry may also be measured by the physical ones. In editor Sharon Simonson’s report on the rethink in Bay Area construction circles following the Chilean earthquake, we learn how engineers are viewing building performance in Chile, a first-world economy with building standards not far from our own. The discussion today about earthquakes has evolved from a focus on how to marshal emergency response and cleanup after the event to creating building and community resilience by preventing extensive damage in the first place, even if it costs a bit more upfront. The upshots may be changes in U.S. building standards and, perhaps more interesting, new impetus for market-based solutions to allow individual and company property owners to make real estate purchasing decisions based on an earthquake-resistance rating. Thank you very much again for your continued interest in our magazine. We welcome feedback and hope to hear from you. We can be reached at letters@theregistrysf.com. Best regards, Vladimir Bosanac


Contributors Maureen Futtner A Better Day in the Neighborhood, pg. 18 Maureen Futtner is a principal for Maureen Futtner & Associates, a San Francisco media and communications company that specializes in helping nonprofits and small businesses to tell their stories. Her clients range from statewide economic development organizations to neighborhood pop-up shops. She is also on the faculty of San Francisco State University’s College of Extended Learning, where she teaches marketing and communications for nonprofits. She is a former board member of San Francisco’s Central Market Community Benefit District and is currently working to improve the organization’s communications and outreach efforts.

Rob La Eace Old Dogs and New Tricks, pg. 25 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.

John McNellis Da to Kapital, pg. 10 John McNellis is a Palo Alto-based retail developer and property owner. He practiced law in San Francisco with Landels, Ripley and Diamond and co-founded McNellis Partners in 1982. A graduate of UC Berkeley and the University of California’s Hastings College of The Law, McNellis is a member of the Urban Land Institute and a founding member of both its Environmental Task Force and Environmental Coordinating Committee. He is also a member of the International Council of Shopping Centers. He has served as the chair of the ULI’s Small Scale Development Council and is a member of the ULI’s Board of Governors. He is also a lecturer for both the ULI and ICSC.

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 makeup 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.

NORTH

Stephen Austin, RPA

Regional Property Manager Boston Properties

Daniel Myers

Marc Cunningham President AllWest

Jeanne Myerson

Partner, Real Estate Practice President & Group Leader Chief Executive Officer Wendel, Rosen, The Swig Company Black & Dean LLP

Bruce Dorfman

Jesshill E. Love III

Daniel Huntsman,

Principal LEED AP Thompson | Dorfman President & Founding Principal Partners, LLC Huntsman Architectural Group

Anton Qiu

Principal TRI Commercial

Phil Williams, P.E., LEED AP Vice President Webcor Builders

Partner Ropers, Majeski, Kohn & Bentley

Paul Zeger

Principal, President & CEO Pacific Marketing Associates

SOUTH

Terry de la Cuesta, IIDA, LEED AP

Jennifer Dizon, CPA

Norman C. Hulberg, MAI

Robert Kraiss, CFM

Director of Healthcare Synergy 4 Health, a One Workplace Company

Audit & Advisory Partner Hood & Strong, LLP

Erik W. Doyle

President Cornish & Carey Commercial

Geoffrey C. Etnire

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

Michael W. Field

Director, Commercial Real Estate The Sobrato Organization

David Meckley Spatial Creativity, pg. 16

David Meckley is a principal at San Franciscobased Huntsman Architectural Group. He is an accredited professional under the U.S. Green Building Council’s Leadership in Energy and Environmental Design program, a leader in the Northern California Chapter of the International Interior Design Association and a Certified Interior Designer.

Director of Corporate Facilities & Real Estate President Adaptec, Inc. Hulberg & Associates, Inc.

Jody Quinton

Regional Manager DPR Construction, Inc.

Patricia Sausedo

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

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Jeffrey A. Weidell

Executive Vice President NorthMarq Capital

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News

Desk

PLANNING NEWS from around the Bay San Francisco Treasure Island A 15-year negotiation with the U.S. Navy to reach agreement on payment and other terms of the transfer of Treasure and Yerba Buena islands to local authorities is nearing a close. Jack Sylvan, director of joint development for the city of San Francisco, said the Board of Supervisors has unanimously endorsed the terms of an agreement with the federal government in anticipation of the islands’ redevelopment. A draft environmental impact report is expected sometime this summer. The EIR should be finalized a year later with infrastructure development beginning shortly thereafter. Treasure Island is a manmade island in the San Francisco Bay between San Francisco and Oakland and is connected to Yerba Buena Island by a short isthmus. Together the two have a land area of less than a single square mile. Sylvan spoke June 16 along with Kheay Loke of San Francisco’s Wilson Meany Sullivan at the Building Industry Conference Board in San Francisco. The BICB is a trade association for the design and construction industry. Wilson Meany is a member of the master development team for the more than $6 billion project, which is expected to take 15 years to fully execute. Other development partners include Lennar Homes and San Francisco’s StockBridge Capital, which often teams with Wilson Meany. The former military base is planned to accommodate as many as 8,000 homes, 500 hotel rooms, 170,000 square feet of retail and 310,000 square feet of adaptive reuse of historic properties. Three hundred acres of the 450-acre project are slated for parks and open space. The development team is expected to finance construction of $1.5 billion in infrastructure to support the massive plan, including roads, parks, a ferry terminal, fire and police stations, thousands of affordable housing units and the like. The land acquisition from the federal government alone is expected to cost in excess of $100 million. In exchange, the master developers, formally known as Treasure Island Community Development LLC, will have the right to develop themselves or to sell development rights to others for the housing and other commercial properties. “Our goal is to be the most sustainable large-scale project in the United States,” including a mission to be one of only two such U.S. developments that are carbon-neutral, Sylvan said.

399 Fremont Street Chicago developer Fifield Realty Inc. wants the city of San Francisco to extend for an additional year the life of its entitlements to build a new apartment tower in the Rincon Hill neighborhood south of Market Street. The proposal envisions a 400-foot building with approximately 452 units and 238 off-street parking spaces, according to city documents. Construction and sales were originally expected to begin in 2008, according to the company’s Web site. Defined as an “ultra luxury” development by Fifield, Echelon on Rincon Hill is supposed to offer

sweeping views of the bay and the city itself. The matter, slated for consideration June 17, has been continued to the July 1 Planning Commission meeting. According to the city’s municipal planning code, the Planning Commission may revoke or extend the approvals with a maximum of 12 months for each extension.

527 Howard Street The San Francisco Planning Commission is to take up an application July 22 to develop a 1,400 square-foot medical cannabis dispensary on the ground floor of the existing building in the SoMa neighborhood. The approval would not allow smoking on site. Staff recommends the commission grant the application with conditions.

LOS GATOS The ritzy Silicon Valley Town of Los Gatos, nestled in the foothills of the Santa Cruz Mountains, is in the final stages of adopting an update to its existing general plan. The master land-use document would guide development in the community for the next decade. Based on the addition of an estimated 1,600 new housing units (only 170 of which are expected to be single-family detached), city staff and consultants project nearly 3,800 additional residents by 2020, up from an estimated 28,810 today. The proposed plan also contemplates nearly 420,000 new square feet of retail and service commercial space; 516,000 additional square feet of offices; and 8,000 new square feet of industrial development. Roughly half of the new housing, 750 units total, and half of the retail and office development, or 580,000 square feet, is slated for the so-called North Forty development site. The 44 acres on the southeast corner of state highways 17 and 85 are farmland today and are the largest remaining collection of contiguous parcels in the town with the potential for significant new development. The property is a stone’s throw from the Good Samaritan Hospital complex. The general plan update was initiated in early 2008.

SAN JOSE Age and today’s treatment technologies are driving change, including land-use change, to 2,600 acres of the present site of the San Jose/Santa Clara Water Pollution Control Plant at the southern end of the San Francisco Bay. Jennifer Garnett, a spokeswoman for the Environmental Services Department at the city of San Jose, says portions of the plant were built in the mid-1950s. That along with the region’s anticipated population growth, stricter federal regulations and better technology have persuaded the city to rebuild. Going forward the plant is to occupy 430 acres, down from 950 today. Land previously needed to buffer the plant is now available for redevelopment. A corner of the site abuts state Highway 237 and US 880, where retail, industrial and possibly institutional development are proposed. The rest would become wildlife habitat and nature and bike trails. Process remains, including an enviromental impact report, but Garnett says the department is eager for feedback from commercial interests, including those who seek the resources rendered by the plant: highly treated wastewater, energy and “Class A biosolids.”n

SENT to us Grant To Expand Oakland Ambassador Program A program funded by private businesses and employing local “ambassadors” to help improve downtown Oakland is to be expanded this summer thanks in part to a $20,000 grant from the Bank of America Charitable Foundation. The Lake Merritt/Uptown District Association and Downtown Oakland Association launched the ambassador program in March 2009, employing 20 maintenance and safety ambassadors. Since then the program has grown to 25 full-time positions. Last year, the district employed 20 young people as maintenance ambassador interns for a total of 2,400 hours. Several interns were hired as full-time ambassadors to help maintain public areas from the street curb to buildings’ property line. The districts plan to match the foundation grant to fund a safety and hospitality ambassador program projected to employ at least nine people in two 10-week programs for a total of 2,000 hours. Safety ambassadors patrol the districts, assisting citizens and reporting suspicious activity to law enforcement. “We have seen dramatic results in the past year since the adoption of the ambassador program, and the districts are committed to growing the program,” said Deborah Boyer, president of the Lake Merritt/Uptown District Association. The hospitality ambassador program is to begin in July.

Oakland Asset Trades for $60 a Foot Polidev International LLC has acquired the four-building, 205,000 square-foot Edgewater Park Plaza in Oakland for $12 million. Located at 7700 Edgewater Drive, Edgewater Park Plaza was approximately 40 percent leased at the time of closing and is currently home to more than 50 tenants, including the Girl Scouts

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of America. Executives with commercial real estate services and investment firm Grubb & Ellis Co. represented both parties in the sale. San Francisco-based Tiburon Capital LLC was the seller.

One Sansome Gets New Owner Barker Pacific Group and Prudential Real Estate Investors have formed a joint venture to assume ownership of San Francisco’s 43-story One Sansome Street tower. BPG will serve as the property manager, while PREI will be acting on behalf of institutional investors in an open-ended, commingled fund. The two plan significant improvements to the public areas. The 739,000 square-foot ClassA office tower known as Citigroup Center, recently certified as LEED Gold, is 75 percent leased. Barker Pacific has retained Meade Boutwell, Phil Tippett, Jak Churton and Cori Caso-English of CB Richard Ellis’ San Francisco office to manage leasing. PREI, the real estate investment business of Prudential Financial Inc., is a global real estate investment manager and advisor. Headquartered in Parsippany, N.J., PREI has offices worldwide including San Francisco. As of Dec. 31, PREI managed about $42.5 billion in gross real estate assets. Barker Pacific developed San Francisco’s 100 First Plaza, previously managed and owned 500 Sansome St., and still owns 1235 Mission St. and the Mission Capp Apartments in San Francisco’s Mission District. BPG has offices in Marin County and Los Angeles. The company develops and acquires institutional quality office, retail and residential projects.

Globe Trotters A pocket-sized, construction-cost guide published annually for nearly two decades by a Silicon Valley contractor has leapt to the electronic world and continued on page 27


PEOPLE on the move Gary Wells Joins Swinerton Interiors Gary Wells has been tapped by Swinerton Interiors to lead its business development efforts in Northern California. Wells brings more than 15 years’ experience in the retail and commercial real estate industries. Before joining Swinerton, Wells was president of San Jose-based commercial contractor Teamwrkx Construction. Wells will be based in Swinerton’s San Francisco office.

Smart Like A Fox Eric Fox, a partner with the South Bay’s Cassidy Turley CPS, will serve as next president of the board for the Association of Silicon Valley Brokers. The ASVB is an organization of real estate brokers and agents dedicated to high standards in industrial and commercial brokerage. Fox, who currently serves on the ASVB board, begins his 12-month term July 1. Fox is a leading Silicon Valley broker. In his real estate career, he has transacted approximately $2.6 billion in total value, leasing nearly 5.5 million square feet and selling more than 90 acres of land and more than 11.9 million square feet. ASVB membership may be granted to companies, branch offices or individuals physically located in Silicon Valley and engaged in the business of commercial real estate brokerage. Members must be state-licensed and accepted by the ASVB Membership Committee. The ASVB is comprised of approximately 650 members and roughly 150 companies, of which 115 are brokerage firms.

GVA Kidder Mathews Adds Veteran Broker to San Francisco Office Bay Area investment sales specialist and 26-year commercial real estate veteran Gary Barboro has joined the San Francisco office of GVA Kidder Mathews. He will be named vice president and will continue to focus on investment sales. During Barboro’s career, he has completed over $500 million in transactions and has been recognized numerous times as a top producer in the Bay Area. He spent the last 11 years at CB Richard Ellis, where he formed and led the San Francisco Private Client Group. Prior to CBRE, he was an associate director at Cushman & Wakefield Inc. where he focused on private capital investment sales.

Skyline Construction Promotes Zimmerman to EVP Skyline Construction has announced the promotion of Leina Zimmerman to the position of Executive Vice President of Sales and Marketing. Zimmerman has significant experience in the public and private sectors running commercial properties and facilities throughout the Bay Area and Central California. She will be expanding her current role in sales to become a part of the executive management team, where her responsibilities will include strategic planning, monitoring customer satisfaction, annual budget and tracking revenue; all the while continuing to develop new business.

High-Speed Rail Names New Leader The California High-Speed Rail Authority has named Roelof van Ark, a senior executive with more than 30 years experience as an engineer and manager, to be the agency’s chief executive officer. Van Ark, 58, was president of Alstom Transportation Inc., the North American subsidiary of France’s Alstom SA, makers of the world’s fastest trains. The authority’s board of directors voted to name van Ark to the job after an extensive search and candidate screening process. The authority approved an annual salary of $375,000. Van Ark is the second top manager since the authority was formed in 1996. He succeeds Mehdi Morshed, who retired after serving as executive director from 1998 to 2010. Van Ark spent more than 20 years as an executive, managing director, general manager, senior technical manager and senior project engineer for Siemens, the manufacturers of the popular ICE high-speed trains. He has worked in Germany, South Africa and most recently in Sacramento, where he served as president and chief executive of Siemens Transportation Systems from 1999 to 2002.

Veteran Professionals Return to Grubb Curtis R. Davies has returned to Grubb & Ellis Co. as a senior vice president in the hotels, golf and leisure practice group. Davies began his commercial real estate career with Grubb & Ellis in 1985 and spent 15 years at the company. In 2002, Davies founded The Davies Group, a hotel investment advisory and consulting firm, which he operated until returning to the company. Cory Meluskey-Kamian has rejoined Grubb & Ellis Co. as a portfolio manager. She will be responsible for overseeing approximately 700,000 square feet of space in the East Bay. Kamian spent the past five years as an assistant vice president at RREEF Management Inc., specializing in leasing and property management. Prior to joining RREEF in 2005, she spent four years with the Trammell Crow Co. as an industrial sales and leasing associate. Kamian worked at Grubb & Ellis from 1999 to 2001.

San Francisco Design Firm Adds Staff Melissa Pesci joins San Francisco architects hooksASD as a new designer. Prior continued on page 27

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COMMERCIAL MARKET REPORT

Toe in the Water Banks and other lenders scratch the commercial real estate rubble for signs of life. By Eugene Gilligan

I

t should be characterized as more of a trickle than a flood, but some banks are probing the market for opportunities in commercial and multifamily real estate. The increase is in large part due to many lenders’ beliefs that commercial-property fundamentals have finally bottomed and should improve, said Joan Uehler, senior vice president for KeyBank in Walnut Creek. “Lending on a property that is on the upswing is the safest,” Uehler said. Likening a property’s performance cycle to a V, Uehler notes that lending at the top of the V is least optimal. “You have nowhere to go but down,” she said. Bankers are re-establishing relationships with their best customers, said Farzin Emrani, managing director of Lucent Capital, a commercial real-estate financial services company that places debt and equity in the United States and Mexico. “Since the beginning of this year, there has been a notable change in attitude,” he said. “I am seeing some construction lenders returning to market, from both the national and regional banks,” said Bruce Dorfman, principal at Mill Valley-based multifamily owner and developer Thompson/ Dorfman Urban Residential Development.

A first-quarter report from the Mortgage Bankers Association paints a mixed picture. At March’s end, commercial and multi-family loan originations were 12 percent higher than during the same period in 2009, including banks, life insurers and the securitization market. However, that figure was 26 percent lower than the fourth quarter of 2009. The MBA attributes most of the drop to the industry’s customary push to close deals at year end. Commercial bank lending alone fell 4 percent in comparison to last year’s first quarter, according to the MBA. In addition, any year-over-year comparison should be evaluated in light of a larger context: 2009’s first quarter saw the lowest level of loan originations since the MBA began tracking the data in 2002, said Jamie Woodwell, the organization’s vice president of commercial real estate research. Overall, the demand for commercial real estate loans remains at a very subdued level, he said. Matthew Anderson, managing director at Oakland research firm Foresight Analytics, also urges cautions. Anderson does not believe a large number of regional and community banks will greatly expand

“Since the beginning of this year, there has been a notable change in attitude.” Farzin Emrani, managing director, Lucent Capital

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their commercial real estate loan portfolios in the near term. Regulatory agencies including the Federal Reserve and the Federal Deposit Insurance Corp. warned these banks in 2006 about their commercial real estate loan concentrations. While they were not penalized for that exposure, they were advised that banks with high commercial real-estate loan concentrations would receive close scrutiny. When loans on owner-occupied buildings are included, 3,000 banks have concentrations high enough to concern regulatory authorities. Without owner-occupied buildings, which regulatory authorities do not include in their count, the number falls to 2,000. Regulators are still closely monitoring the situation, Anderson said: “I haven’t seen a softening of their stance.” Overall, the United States has about 8,000 banks. Another challenge that banks face are rising delinquency rates on commercial mortgages, Anderson said. From a low point of 1 percent in the third quarter of 2006, delinquencies are now at 6 percent. His company expects this figure to grow, reaching 7.5 percent or 8 percent by mid-2011 before declining. The delinquency rate during the last severe real estate downturn in the early 1990s was about 9 percent. Banks are also going to face approximately $1.4 trillion worth of commercial real estate loans coming due from this year through 2014, with fully a quarter of the properties having a mortgage balance that exceeds the property value. The absence of regional and community banks means that funding for smaller and mid-sized real estate transactions, in particular, will be hard to come by, Anderson said. However, some larger banks with assets of $100 billion and more are re-entering the commercial real estate lending space, as well as another player who has been absent of late, life-insurance companies, he said. However, those lenders are mostly focused on funding the acquisition and re-financing of trophy assets. “We’re talking about rock-solid, safe properties, with stable rental income,” Anderson said. In addition, published reports and industry sources note that the securitization market is beginning to show signs of life, though activity remains far below highs and lenders are skittish. Banks that do re-enter the commercial lending arena will have an advantage, Dorfman argues: “Those lenders will have their pick of the best developers of the best properties in the best submarkets.” However, loan terms that banks are now offering are very conservative, with loan-to-cost ratios theoretically up to 70 percent, but in fact ranging from 55 percent to 60 percent of true cost, Dorfman said. At those levels, a development project is unlikely to make financial sense. At the peak of the market, loan-to-cost ratios were in the 80 percent neighborhood, he said. However, conservative loan terms are typical at the beginning of a lending cycle, Dorfman said, and as more lenders enter the market, they will become more accommodating to borrowers to win business. “If we see a combination of real rent growth, some flexibility on the part of lenders and lower yield requirements on the part of equity sources, it may be time to start developing again in the second half of this year,” he said. Dorfman does not hesitate when asked what property types attract the most attention from lenders: Multifamily. “Housing is a basic necessity,” he said. Uehler agrees, calling the multifamily sector “the most resilient.” Retail assets are at the other side of the lending spectrum. “It’s a sector that has been overbuilt, and there is more square footage than needed,” she said. But Lucent Capital’s Emrani sees both retail and office properties getting some love from lenders. Retail rents have fallen so much that if loans are underwritten to those values, those loans should be solid. “Rents should not fall any lower,” he said. n


Building Goodwill Silicon Valley nonprofit advances its charitable mission by incorporating technology to expand, improve its retail empire. By Sasha Vasilyuk

I

n October 2008, as the world watched its financial meltdown, Michael Fox, a former beverage-industry executive, landed a job as the chief executive of Goodwill Industries of Silicon Valley. The nonprofit was facing a $1.6 million annual operating loss and an image that appealed to a part of the population that simply didn’t have another choice when it came to shopping. “The Goodwill staff were demoralized and having a tough time asserting their brand name and making it relevant to the community,” said former Assemblyman and now Goodwill board member Jim Cunneen. “They needed a new leader.” Amidst a deepening recession that cut both jobs and profits across the nation, Goodwill’s new leader recognized an economic opportunity for his independent arm of Goodwill to rise again. Eighteen months later, Goodwill Industries of Silicon Valley, which employs more than 500 people and services more than 3,000 through its vocational programs for youth and homeless veterans, is starting to run more like a business. With a healthy $1.2 million in reserves, profits are growing. Its strategic expansion plans include two new stores annually for the next three years. Its newest outlet is expected to open in the affluent Silver Creek area of San Jose in less than 30 days. “Thrift right now is a $7.5 billion opportunity, and Goodwill is at the center of it,” said Fox, citing a report by Goodwill International. “I think there is a change in psychology where people are looking for value for their money.” For Goodwill of Silicon Valley, its retail stores have traditionally been the largest source of income, but their overcrowded, musty look hadn’t seen a facelift in years. More importantly, the stores were not equipped with any point-of-sale or merchandise-tracking systems standard in mainstream clothing stores across the country. That meant that when someone donated an item good enough to resell, a staff member simply put a sticker on it with a handwritten arbitrary price, Fox said. The item was never tagged, so there was no way to track what customers bought or to create reports on what items sold well and what did not. For Fox, who was used to running sophisticated, multimillion-dollar sales operations, that was unacceptable. “When I was in the beverage business, the information resources showed us exactly what everybody was buying, in what package and what brand,” said Fox. “Now I’m able to apply a lot of what I did there—

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clean stores, product on the shelves, favorable price points and information management.” Applying business concepts to running a nonprofit is becoming much more common, said Sandra Miniutti, vice president at Charity Navigator, a Web site that tracks the financial health of American nonprofit organizations. “The sector is changing a lot and becoming much more professional,” Miniutti said. “It’s not unusual to find a charity president with an MBA. The benefit of having someone move from business to a nonprofit is that they can help the nonprofit to ramp up, concentrating on their finances and their policies and procedures that they may not have considered before.” That is exactly what Fox did with Goodwill. Having first refinanced its short-term debt to long-term, the chief executive was able to start investing in the infrastructure of the organization’s 15 retail stores located across markets from Hollister to San Carlos. First, he rolled out a back-room system that lets staff set uniform prices and a point-of-sale system that then collects the data through scanned tags. Being able to analyze what sells has enabled a more efficient, shopper-friendly system of pricing and organizing the stores. “Having that information and having gone in and re-priced all our stuff has been huge,” Fox said. “Now we can create shelf space based on sales and that has grown our business.” The analysis also helped the new CEO determine more cost-effective practices. For instance, Goodwill lowered its expenses by reducing the amount of salvage the charity was buying from the Target Corp. and increasing the revenue made from donated items by $1.5 million. Goodwill’s retail stores sell only the best quality items, which is about 30 percent of what is donated, Fox said. The rest is sold wholesale and shipped off to countries like Morocco, where clothes are sold or turned back into textiles used throughout Africa and Pakistan, which has a particular affinity for second-hand shoes. The organization also makes money by providing services such as electronic waste recycling, furniture subassembly for companies, mattress and carpet recycling and even the recently added document shredding service. But even with all that, their retail stores brought in more than $16.7 million in 2009, the biggest chunk by far in Goodwill’s $21.2 million total earnings and a slight increase from the previous year.


“Applying business concepts to running a nonprofit is becoming much more common.” Sandra Miniutti, vice president, Charity Navigator

That is why Fox’s next step in the charity’s overhaul was to rebrand and upgrade the stores themselves. “We wanted to be very careful to not turn off existing shoppers but also to attract a younger demographic,” he said. The Goodwill store on San Jose’s Almaden Expressway is already showing off the new look: free WiFi, TV monitors to play music videos, wider aisles, new shopping carts and even a seating area in the book section. There is also new signage and even seasonal sales sections. Doesn’t sound like the old, sad Goodwill? It isn’t. “You walk in and you think you’re walking into a very nice Ross store,” said Fox. “It’s well worth it because it attracts more customers that normally wouldn’t shop at Goodwill.” In fact, Fox plans to update the look of the Santa Clara store next month and upgrade two more existing outlets annually. So far, its best-performing stores have been in Willow Glen, Mountain View and Palo Alto. The charity’s retail sales average about $103 a square foot a year. Goodwill generally looks for spaces in the 10,000 squarefoot to 12,000 square-foot range and is currently eyeing San Jose, Santa Clara and the border of Milpitas and San Jose. Fox is also hoping the growing demand and Goodwill’s new look will make it more desirable to shopping malls, which have traditionally eschewed the charity’s overtures. Some might ask if America’s newfound focus on thrift is strong enough to outlast the recession. Jon Stansbury, a partner with Terranomics Retail Services, a Burlingame-based retail brokerage firm, is one believer it will. “Discounters have had a good opportunity to bring new customers inside their door who wouldn’t have ordinarily been their customers prior to the recession,” he said. “I would submit that this has been a deep and long enough recession where these shopping habits will likely be continued.” Even if the charity’s retail sales turn sour with better economic times, Goodwill can always turn to selling its 16-acre North Seventh Street campus in San Jose for housing, an idea that circulated a few years ago when housing prospects looked brighter. No matter what, Fox doesn’t seem like a guy who would give up easily if conditions worsened for his charity. Even the newest Goodwill store that burned down last year only two months after opening in San Jose’s Alum Rock neighborhood didn’t dampen his spirit. That store is slated to reopen this fall. “Mike launched a strategy that is taking advantage of the times,” said Cunneen. “It’s a classic turnaround story.” n


RETAIL

Da to Kapital Retail landlord finds hope amidst the rubble. By John McNellis

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Properly viewed, $4 a foot a year is still good news—it’s proof that deals are finally clearing, that the miracle of capitalism is still working for us.

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n Red Square, Russia stages day-long parades to display its military might; troops, tanks and world-ending rockets endlessly rumble past somber dignitaries. In capitalism’s Red Square—the Las Vegas Convention Center—the flaunting is the same, only the object is different. In Vegas, it’s all about the money. When the International Council of Shopping Centers thunders into town with its parade of tens of thousands of deal-twirling brokers, tenants and developers, the Convention Center has everything but Moscow’s snowy review stand. If not Putin, Mikhail Prokhorov would feel right at home. In the days of irrational exuberance, a cell phone was as useful as a can with a string at this annual gathering. The buzzing roar of 50,000 attendees convincing themselves they were making deals drowned out every phone in the ZIP code (the Convention Center has seven such codes; it’s bigger than Florida). If you needed a phone fix, you borrowed someone’s compass and hiked for the exit. That was three years ago. This year you could carry on a whispered call from anywhere in the hall. Why? A senior spokesman for the nation’s bestknown investment-sales brokerage explained it thus: “The 2000s were off the charts in terms of our annual volumes. Let’s say our gross volume—adding up all the sales we did—for the 25-year period from 1975 to 2000 averaged $100 a year. For the 2000s, that volume was $400 a year, four times higher. This year our volume is $50, half of what we did in our historical normal period, an eighth of what we were doing a couple years ago.” Investment sales off nationally by 87 percent neatly explains the hall’s improved acoustics, but causes one to question why 30,000 still bothered to attend. Was everyone really getting leases done or, stealing Samuel Johnson’s remark about second marriages, was this another example of hope triumphing over experience? Looking at the lease as half-signed, this year was better than last, some renovation deals were being made and that shell-shocked look so popular last year has at last gone out of vogue. “Are you talking or are you making deals,” someone asked. “We’re talking about making deals…in 2012,” came the reply. “Nothing new walked into our booth,” said a national grocery executive. “Every deal we saw was a reuse of an empty box.” And that’s how it seemed to be going for everyone. No new site plans, no new ground-ups and no new deals in the “path of growth,” the developer’s euphemism for “a mile outside of town.” Instead, the professionals seem to be slowly picking up crippled,

de-anchored centers and, even more slowly, finding tenants for their empty storefronts. While “rehab is for quitters” may be the old drinker’s joke, this year every property owner out there is trying to rehab his way back to prosperity. 2010’s only real winners are the national discounters who are scooping up leases from here to Kennebunkport at rents that wouldn’t make sense if your grandmother gave you the building (back to why deal flow is off 87 percent). “What kind of deals are you making out there,” a discounter was asked. “Four dollars a foot…a year, as-is, in major Midwest markets. We’re seeing the best intersections in town with empty boxes on three of four corners, and we’d take any one. The landlords are crushing each other to make a deal with us.” But properly viewed, $4 a foot a year is still good news—it’s proof that deals are finally clearing, that the miracle of capitalism is still working for us. Four dollars a foot is better than nada and, at that rent, the tenants can’t help but do great. Their profits will soar, and they will soon enough be chasing new deals at higher rents. Even property sales are slowly returning. We attended the auction of a five-acre vacant car dealership in Vacaville with a pinch of retail appeal and some prospects of a brighter future a few years out. The lender had foreclosed its $6.5 million note 14 months ago and listed the property for $3.5 million. No takers. After a year of nothing, they reduced their price to $1.8 million. No takers, but at least some nibbling in the millionish range. At the end of the listing day, the lender was willing to accept $1 million, not a penny less; there were still no takers. The clever, including your correspondent, thought the elevator was dropping a few more floors. So the lender punted the listing and put the property out to auction a few weeks ago. The crowd of about 40—a few real-estate types, mostly car guys— was enthusiastic, and the auctioneer promised us a “heck of an auction.” Then he put everyone to sleep reading five minutes’ worth of fine print. The main point: This property is selling so as-is that if you even think about calling us after the closing, we get your first-born. Finally, just like at the county fair or every charity auction you’ve ever attended, he kicked in his motor voice. In a couple minutes it was over. He blew past our maximum price ($800,000) in about 10 seconds. The bidding came down to two car guys, one wanting it $25,000 worse than the other, paying $1.3 million. I’m not sure it ever really left, but competition is back. And, yes, had he been more limber, your correspondent might have kicked himself for not buying the site for $1 million. n


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T E C H N O L O G Y


T E C H N O L O G Y

SoMa So Hip San Francisco’s South of Market, sandwiched between Mission Bay and the Financial District, is blossoming. By Michael Fitzhugh

an Francisco’s South of Market district, the hottest place for startups to call home before the 2001 dot-com bust, is regaining luster as both early-stage and established technology companies cautiously spread their wings. Two factors are driving leasing growth in the area, a oncegritty but now-polished ground zero for startups, says Mike McCarthy, senior vice president of the SoMa team at Colliers International: a cultural synergy that makes SoMa a good fit for tech workers and flight from pricier Silicon Valley locales. Migration has been especially pronounced from the significantly more expensive city of Palo Alto, he says. Small startup companies favor SoMa’s brick-and-timber spaces with open floor plans, tailor-made for collaborative project work, while bigger companies are finding plenty of Class A space to suit their needs. At the same time, the intellectual capital that many companies want resides with people who like the SoMa experience—engineers, entrepreneurs and other digi-media wonks who enjoy being near each other. In the last nine months, tech companies Twitter Inc., Yelp Inc., Ubisoft Entertainment SA and UStream Inc. have all rented significant amounts of space or broadened their footprints in SoMa. Ubisoft, one of the world’s largest video-game developers, signed a seven-year lease renewal for 42,000 square feet at 625 Third St. where it has been housed since 1996 and will expand to a total of 62,000 square feet by the end of the year, according to Studley, a tenant-advisory broker that represented Ubisoft in the transaction. UStream Inc., a live video-streaming company, renewed its lease for just over 24,000 square feet at 475 Brannan St. in May. Zynga, represented by Colliers, is still looking for 150,000 square feet to replace a smaller space that currently houses the company. Meanwhile, less tech-centric outfits are also finding SoMa attractive. International law firm Greenberg Traurig earlier this year signed a nearly 30,000 squarefoot sublease for space at 153 Townsend St., and the San Francisco Municipal Transportation Agency leased just more than 23,000 square feet at 651 Brannan St. in the first quarter, according to Studley. Vacancy in the SoMa East submarket is 14 percent, with 4.13 million square feet of occupied space out of a total inventory of 4.8 million square feet in 40 buildings, according to Colliers. Vacancy in the SoMa West submarket is 25.1 percent, with 1.75 million square feet of occupied space out of a total inventory of 2.34 million square feet in 23 buildings. SoMa space has rented for square-foot rates in the low to mid $30s, full service, although competition for a handful of spaces is starting to drive that figure up, brokers said.

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There has been a shift in attitude about SoMa, said Justin Hildebrandt, vice president of acquisitions at Kennedy Associates Real Estate Investment Advisors, which facilitated the sale of SoMa’s 303 Second St. to Los Angeles-based Kilroy Realty Corp. Kilroy paid $237 million in April for the 732,000 square-foot property, about the same price as the complex drew in November 2005 when it last sold. “It’s accepted to be in SoMa now,” Hildebrandt said. Established corporate tenants like money manager BlackRock Inc. and software and services company Symantec Corp. are in SoMa, showing that Market Street isn’t as important a divider as it once was, Hildebrandt says. Tenants are choosing it for access to amenities, intellectual capital and transportation options, Hildebrandt said. “If you’re in the Transamerica building, that could easily add 20 minutes to your commute if you’re going to the Valley.” Less division also means there’s more parity in lease pricing between SoMa and the Financial district than in years past. Tenant growth today is not the helter-skelter rampage of the dot-com days, said Colliers’ McCarthy. “Now, driven by past failures and experiences and a little more governance from their VCs, tenants are seeking a little less square footage. Instead of 10-year deals for 100,000 square feet, you see two- to three-year deals for 30,000 to 50,000 square feet,” he said. When the 2008 financial crisis hit, “the tech firms really hunkered down,” said McCarthy’s colleague Carter Kennedy. “They signed short leases, and it seemed like they had learned their lesson. Some of them are now experiencing great growth yet are still being conservative” in their leasing. “We’re seeing some companies doubling their head-count from last year. I think that’s indicative of what’s going on,” said Kennedy. Proximity to Mission Bay’s contingent of life-science ventures is another advantage of SoMa’s location, said Stephen Bartelmez, president and chief executive of BetaStem Therapeutics Inc. Bartelmez moved the company to San Francisco in June 2007 after the legal climate in Florida, where it was founded, became hostile to human embryonic stem-cell research. After working in incubator space at 665 3rd St., he determined the company would need to show its independence, partially by securing its own lab, to draw investors down the line. With the help of Janice Hennessey of brokerage GVA Kidder Mathews, BetaStem found an affordable laboratory space under 2,000 square feet at 300 Brannan St. “Scientifically, this is a great spot for a stem-cell company because all the technical expertise is here, primarily at Mission Bay,” said Bartelmez. “There’s a nice feel here,” he adds. n

P hoto C O U R T E S Y O F J esus nava

"There's a nice feel here." Stephen Bartelmez, president and chief executive, BetaStem Therapeutics Inc.

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T E C H N O L O G Y

Architecture firm creates long-distance ‘collaboration rooms’ by combining information technologies. By John Sailors

echnology marries design in HOK’s new advanced collaboration rooms. The global architectural and engineering firm with offices in San Francisco has combined videoconferencing technology from San Jose’s Cisco Systems Inc. and a system from Georgia-based PolyVision Corp. to allow architects and planners in 14 of its 23 offices to work together without stepping outdoors. The result is a case study of the benefits that companies can reap from evolving information technologies. It also offers a glimpse into the emerging world of virtual real estate where people are spending more and more of their time. At the heart of HOK’s conference rooms is PolyVision’s Thunder technology—basically a smart whiteboard, or flip-chart, system, said Jonathan Chung, a senior associate who oversees information technology in the San Francisco office. The whiteboard technology allows architects to share, and more importantly, collaborate on designs. Meeting participants in different rooms can add their own markups to drawings and display images, video, documents and views of their desktops.  HOK began to look at the concept a year and a half ago while designing the King Abdullah University of Science and Technology in Saudi Arabia. Involving several hundred people in 11 offices, it was the largest project the firm had ever undertaken and included the pursuit of advanced certification from the U.S. Green Building Council’s Leadership in Energy and Environmental Design program.  About halfway through the job, the firm invested in a precursor to the current rooms, which used only the PolyVision system. Quickly the teams were having collaboration sessions 24 hours a day between the United States, Paris and Saudi Arabia. The results in terms of faster progress and less travel led HOK to add Cisco’s videoconferencing equipment and to set up the rooms at offices globally, including San Francisco, the St. Louis headquarters, Chicago, London, Hong Kong and Singapore. The Beijing and Shanghai offices have PolyVision systems alone.  PolyVision is owned by Steelcase Inc., a global office-furniture company with $3.4 billion in annual revenue. The HOK meeting rooms would be convincing in any science-fiction movie. The quality of audio and video makes the remote participants seem as if they were in the next room, separated by only a window. The main collaboration room in the San Francisco office, which has two such rooms, features a large conference table, four large flat-panel screens on one wall and projectors and a camera built into the ceiling. The room can hold about 20 people. The conference table has a spot to mount a physical

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The quality of audio and video makes the remote participants seem as if they were in the next room, separated by only a window. model of a building or facility, and a video camera embedded in the ceiling brings an aerial view to life on one screen; it is effectively a diagram on which one could draw. And center on the wall is a Cisco Telepresence videoconferencing screen with three hardly noticeable cameras built into the top. To create a more natural feel, HOK did its best to hide the cameras and other potentially jarring technology, Chung said. The cost of the conference rooms varies depending on location, but Chung estimates they run about $100,000 apiece.  The added capability speeds projects considerably, said Edward McCrary, an HOK managing principal. He gave an example of a hospital project in Singapore in which teams there and in the United States would meet to exchange progress at the beginning and end of each side’s day. “You share what you did all day. They work on it for a day, and by the time you come in the next day you’ve gotten two days’ progress in 24 hours,” McCrary said. That compares with sending teams to Singapore at a significant travel cost. The firm is now asking staff to log the time they spend using each collaboration room to get an even clearer picture of the cost-savings that result. But the rooms offer benefits besides cutting travel. HOK says it had long touted a broad range of expertise from across the firm, but until now that came at a premium because the company had to fly the experts around to different offices. With the virtual meeting rooms, conferences can be arranged easily and cheaply. What’s more, people anywhere in the world—say on a laptop at an airport—can participate in the PolyVision side of a meeting, accessing the system via Web browser. Possible future applications include setting major clients up with systems—an idea clients have jumped to after seeing the rooms in use. Privately held HOK, with 2009 revenue of $496 million, is one of the largest U.S.-based architectural firms in the world.  While a virtual conferencing system would seem designed to keep people apart, at least physically, the effect is quite the opposite. Staff is able to meet more frequently and for more purposes than before with the costs of travel erased. HOK is also able to carry out substantial internal business such as administration and human-resources tasks using the rooms. Still, business travel is not dead. These systems will not replace travel 100 percent, the firm says. People still need the face-to-face and personal touch. But conferencing and collaboration systems are giving companies the ability to pick and choose their travel and at the same time unprecedented opportunities to work between locations. n

P hoto C O U R T E S Y O F H O K

Virtually Real


T E C H N O L O G Y

Shake I t

Up

Bay Area engineers are flocking to Chile to learn the lessons of one of the largest earthquakes in decades. By Sharon Simonson

he February earthquake in Chile, the fifth-largest worldwide since 1900, has preoccupied Northern California engineers. Funded by public and private sources, those who make a living by understanding how the built environment behaves in temblors have converged on the South American country. They are there to study how modern buildings and infrastructure have fared in a society, geography and economy not so far from California’s, including local building codes. The news is good and bad. Since large earthquakes in 1960 and 1985, Chile implemented significant mitigation to combat earthquake loss, according to scientists who visited on behalf of the American Society of Civil Engineers. Overall, by the ultimate measure, the fallout in Chile was far smaller than expected by a quake of such magnitude; in all, 521 people died, according to the U.S. Geological Survey. In comparison, even though the Chile earthquake was larger, Haiti’s quake on Jan. 12 killed more than 220,000 people. Chile’s performance is testimony to the effectiveness of stringent building regulations and a true measure of success, engineers said. But other, perhaps less-satisfying lessons also are being learned. Not every structure has done well. In particular, the widespread failure of a certain class of modern, mid-rise building is “raising eyebrows,” as one researcher put it. Estimates of the total number of such building failures remain rough. But facts are emerging: dozens of these structures did not perform well; the governing construction codes are not so different from our own; the reasons aren’t fully understood; and the economic losses loom large. The implications for the Bay Area are illuminating. In Chile, total economic losses are approaching $30 billion in a $150 billion economy, according to the U.S. State Department. That does not include another $1 billion the government expects to spend on relief. In 2008, the San Francisco Planning + Urban Research Association estimated that Northern California had more than 3 million buildings with a total value of $1 trillion. “The potential for damage today far exceeds the damage wrought by the 1906 event,” SPUR concludes in the opening paragraphs of its study, “The Resilient City.” How likely Northern California is to receive a quake of like proportions to Chile’s is debatable. Chile’s was exceptionally long and strong and affected a wide geographic swath. That said, California has the greatest seismic risk of any American state, according to the Pacific Earthquake Engineering Research Center at the University of California, Berkeley. Jack Moehle, a civil engineering professor at Berkeley and a founding director of PEER, has traveled to Chile. Overall, the country is proving “quite resilient,” he said. But that is not the full story. “They have some problems with the building code, and that translates to here,” Moehle said. “I think there are revisions we need to make.” In particular, concrete buildings from 10 stories to 25 stories tall, typically residential condominiums, “were very severely damaged,” Moehle said. “Those buildings were designed pretty much by the same building code we use in the United States.”

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Engineers also see in Chile what might be called creeping complacency. As years pass between earthquakes, people forget lessons. Older professionals leave and young engineers begin to suggest designs, such as thinner, taller walls, that depart from the tried-and-true. Between earthquakes, as memory fades of dollar losses, financial engineering can trump structural. The Chile earthquake also is forcing debates the engineering profession has struggled with for decades, said William Holmes, a principal with San Francisco engineers Rutherford & Chekene and a building-code expert. Holmes traveled with Moehle to Chile as part of a team sponsored by the Earthquake Engineering Research Institute with a grant from the National Science Foundation. Questions are flying about how well the public understands the purpose of the building code, which is to preserve life, not property, he said. Property owners, especially private individuals, may not fully comprehend the financial implications of that standard: Absent insurance, losses are theirs to bear. In addition, there are questions of tolerance for failure. Engineers understand that a small percent of buildings will fail in earthquakes; such failure is considered normal. But what is an acceptable failure rate for the public at large? “We are wondering how much it is understood in this country that performance is always on a bell curve, so that if we had 1 percent or 0.5 percent of the buildings in this country perform badly after an earthquake, would the public accept that?” Holmes said. “In Chile, people are starting to say maybe the code should start to protect more against [property] damage.” High-rise condominiums present special problems. Insuring their mix of common and private ownership is complex. That’s especially true of structural components, like columns that travel a building’s height, passing through multiple homes and common areas. “It is hard to get an association for a condominium to agree to do something,” Holmes said. “The insurance industry also is not set up to provide comprehensive seismic insurance for a condominium building.” Solutions are knotty and not limited to a private concern. In “The Resilient City,” SPUR notes the social and economic costs if earthquake recovery is halting and slow. Codes that protect life don’t address property investment integral to resilience. Holmes and SPUR note the virtue of harnessing the power of supply and demand. “We would love to put seismic safety into the marketplace,” Holmes said. Theoretically, a market could be based on a rating system and each building ranked. But that is not easy. “Many of the leading engineers are developing the methodology to rank these buildings,” Moehle said. SPUR’s interest drives credibility and introduces community debate. “But until those ranking mechanisms are accepted by the community, there is no way to create a market,” Moehle said, and “I don’t know of any programs that are really moving this agenda forward.” n

"Those buildings were designed pretty much by the same building code we use in the United States." Jack Moehle, founding director, Pacific Earthquake Engineering Research Center, University of California, Berkeley

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T E C H N O L O G Y

A Bay Area health care company employs technology for a trial to put 1,100 staffers where 650 went before. By David Meckley

For years, everybody has tossed about words like hoteling, virtual offIces”and the paperless ofFice”with knowing abandon. Yet most attempts to achieve these visions have been limited.

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few years ago, a large health care company bought seven existing office buildings in the Bay Area. Until that point, the organization had leased or owned 750,000 square feet of office space in various locations. The goal was to cut occupancy costs by reducing the amount of space leased by 366,000 square feet. The organization, a Bay Area household name, commissioned a real-estate services firm to study how much of its current office space was actually occupied at any given time. It turned out that nearly half of it was going unused at any moment. Some staff were working at locations other than their base office; some were telecommuting or traveling; and some were out due to illness or vacation. The organization wanted to experiment with alternative workplace strategies that would not only allow the newly acquired buildings to accommodate more staff, but also free up space devoted to individual workspaces for more interactive work environments. For years, everybody has tossed about words like “hoteling,” “virtual offices” and the “paperless office” with knowing abandon. Yet most attempts to achieve these visions have been limited, primarily to workers not so tied to their computers such as sales personnel. The main reason is that technology had not caught up with the vision; it just wasn’t mobile enough. But recent innovations are finally helping to realize the promise for a wide range of knowledge workers. Obviously, it is not a moment too soon, given the economic pressures of today. Lighter laptops and the advent of the smart phone have untethered workers from their cubes. At the same time, the building-information modeling software that designers use for architectural work and integrated project delivery turns out to greatly enhance the space programming process as well, allowing interior architects and designers to calculate spatial needs for the modern office more accurately. And just as people today use technology to reserve a restaurant table or book a Zipcar for the night’s outing, the same kind of software allows workers to reserve an office space. This means more efficient workspace utilization, reducing square footage and cutting utility costs. The health care company’s analysis revealed that its staff fell into four work-style categories. “Anchors” spent virtually all their work hours at the office. “Resident mobiles” worked in the office most of the time, but spent much time in meetings or worked in one location for a set period of time before moving elsewhere to work on a different project. “Mobiles” typically worked in a variety of offices and traveled frequently. The fourth category, the “Telecommuters,” were assigned to work at home and came into the office only occasionally. Technology helped the organization understand how an alternative workplace system would work. It proved essential to convincing users to agree to the idea of not necessarily having a personal, fixed workspace. First the design team created a three-dimensional concept board that showed how the existing office space could be reworked to meet user needs—in particular, to provide more space for collaborative work, which executives and staff both felt was essential. After further conversation with the client, the designers created detailed three-dimensional drawings using Google’s SketchUp modeling software. The three-dimensional views showed how a hypothetical floor plan would work in the existing space and how the proposed changes could allow more than 1,100 workers to fit into a space that traditionally would have housed about 650, with more conference and collaboration

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R ender i ng C ourtesy of H unstman A rch i tectural G roup

Spatial Creativity


Startups Trade Down space. The space would have three zones: one for individual workspaces, one for flexible teaming and one for shared support spaces. Autodesk’s Revit building-modeling software also proved essential during the programming process. Specific types of spaces can be precategorized, so that when the client asks for changes to a particular kind of space, those changes can be automatically propagated in similar spaces throughout the design. Additionally, because Revit stores and uses information from building systems and components, much like a database, it allows architects and designers to quickly provide clients drawings and 3D models based on information collected through the project. It helped that the user group selected to participate in the prototype was the organization’s information-technology group; they were highly familiar with technology that enables fluid methods of working, such as voice-over-IP telephone systems, wireless networking and Cisco WebEx online conferencing. They were also sold on the potential energy savings. If 48 percent of office space goes empty, then the company is paying 48 percent more for phones, lighting and air conditioning than strictly required. And, of course, sustainability and cost savings remain key selling tools to many corporations and institutions. Early attempts to implement alternative workplaces often failed because companies took advantage of the cost savings from decreased square footage without giving employees anything back. Staff tended to see that as a taking with no trade-off for the loss of personal or dedicated workspace. Organizations that are most successful reinvest some of the savings in either better work environments and/or better technology for individual workers. For this project, the company provided each of the different types of worker with appropriate technologies. Mobiles and Telecommuters needed the most portable technologies, such as smart-phones and laptops. Resident Mobiles needed technology within the facility that allowed them to easily move around such as mobile storage and programmable phone system. Anchors are assigned to fixed workstations with traditional office technologies, such as desktop computers and standard phones. As a bonus, all workers have access to advanced technologies incorporated into the now-plentiful interactive group workspaces. The more mobile staff reserve office space in the building on an asneeded basis—for a few hours or several weeks—using a customized version of ARCHIBUS, a Web-based real estate and space-management application. ARCHIBUS allows the organization to track how people actually use the space over a period of time, which will help determine how to fine-tune the process and whether to expand or contract the program. This kind of technology is familiar to many workers because of the widespread popularity of the OpenTable dining reservation system and the auto-sharing system. You can book your office from your phone. After two years of development, this May, the health care organization implemented its prototype alternative workplace strategy in one of its East Bay buildings to test the concept with approximately 800 workers, 350 of which are designated as mobile workers. Stay tuned for the postmortem. n David Meckley can be reached at 415.394.1212 or dmeckley@huntsmanag.com.

In keeping with America’s newfound love of the inexpensive, fledgling companies are counting pennies when it comes to furniture. By Michael Fitzhugh s the startup scene heats up in San Francisco’s South of Market, young companies are buying plenty of new desks, chairs and tables. But whether they’re outfitting offices for the first time or upgrading, a desire remains to stay lean and spend little money. One result is a persistent demand for modern but inexpensive furnishings. Many of the most desirable plug-and-play furnished sublease spaces have disappeared since last October when startups really began to bloom again, said Malou Carreon, owner of the Burlingame-based facilities consultancy Get Going. Carreon, who specializes in helping small, early-stage SoMa startups, said she often buys Ikea or inexpensive Chinese-made furnishings for clients who want to be up-and-running as quickly as possible. The products are not made for the long haul, but they are often the right fit for small and fast-growing companies in their early years, she said. On the downside, she notes, “It is not the kind of furniture you want to keep.” It isn’t sturdy, it’s occasionally packed without the necessary hardware and requires plenty of assembly. But even after startup companies upgrade to better commercial furnishings, they’re often still looking to save money. High-end designers are responding to that demand with a variety of solutions that minimize hardware outlays while maximizing modular designs that support collaboration. Sensing an opportunity, high-end designers such as Knoll, Teknion and Herman Miller have all brought lower-end products to market. “They know that Ikea has been furnishing a lot of the startups here in the SoMa area,” said Carreon. Brian Wilson, a workplace consultant for Steelcase Inc., which has offices in SoMa itself, has observed the scene from the vantage point of his own offices. Steelcase products are better suited for companies that are still reliant on venture capital but are more established than a brand-new startup, he said. The company offers a “starter package,” which is not a traditional full work station but includes a work surface, a power source and storage space. Based on a 10-year life expectancy for office furnishings, the notion is that they can build on the starter kit rather than buying furniture with the intent of ultimately throwing it away, he said. “They are still cost conscious in the second round when they are moving up from Ikea, but there is a necessity to think about managing their offices better,” he said. Andrew Sullivan, president of MG West, a prominent Bay Area furniture supplier with a San Francisco showroom, said, “What we’re seeing is a move toward very efficient space usage with a high density per square foot.” Linked desks are supporting project collaborations and mentoring. Storage space is becoming less important as employees’ personal effects and reference materials are increasingly digitized. And the partitions that once separated work spaces into cubes? Out the window. “It is geared toward a much more mobile workforce. People don’t feel the need for a proprietary work station,” Sullivan said. “People are investing in a good chair and good technology infrastructure.” Despite the slow improvement in the larger economy, there is still a hunger to economize. “Everyone asks for used furniture,” said Sullivan. “But the used stuff is usually all eight to 10 years old and mostly cubes. Anything that is contemporary in current design and in demand isn’t on the used market.” In keeping with the larger American cultural shift away from excess and toward austerity, spare is in, and cable tangles are out. Cord management systems like Knoll’s Fence, which hides communications cables behind easily removable covers, are growing in popularity at companies such as San Francisco-based Yelp Inc., says Peter Cracknell, Knoll’s regional manager. “In the dot-com days there was an emphasis on attracting people with the aesthetics. Today there’s more emphasis on the office as a business tool,” he said. n

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"Ikea has been furnishing a lot of the startups here in the soma area." Malou Carreon, owner, facilities consultancy Get Going

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DEVELOPMENT | SAN FRANCISCO

A Better Day in the Neighborhood San Francisco’s battered Mid-Market seeks to find itself through a vision of creative endeavor. By Maureen Futtner

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Below: Concert Series in Mint Plaza

"Behind the plywood of the boarded-up stores was a growing arts scene. We thought, 'what if we worked with the performing and visual artists to activate these vacant commercial spaces?" Daniel Hurtado, executive director of the Central Market CBD

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group of concerned stakeholders from San Francisco’s Mid-Market area met in a basement in 2005. They were desperate to make baseline improvements to their gritty neighborhood. Two years later, the Central Market Community Benefit District’s work has surpassed expectations. They have not only cleaned up the area and attracted high-profile restaurants but are catalyzing a vision for a vibrant arts district. With the presentation of the area’s own arts festival this fall and the city’s recently announced $11.5 million loan fund dedicated to its arts and culture, Central Market is at the nexus of change. The middle stretch of Market, from 5th to 9th streets, has been in decline since the 1970s. A battery of economic downturns, significant quality-of-life issues and crime, combined with cheap liquor stores and porn shops, resulted in a boarded-up underbelly of urban living. To address these challenges, Central Market community members looked to the formation of a community benefit district, or CBD. After seeing the success of business improvement districts, or BIDs, in several San Francisco neighborhoods, the activists created this special propertyassessment enclave to offer services beyond those provided by the city. “If property owners were assessing themselves to improve places like Union Square, why couldn’t we do the same in our little slice of San Francisco?” says Bernadette Walter of publishing company John Wiley & Sons Inc. Wiley’s offices at 989 Market St. are in the heart of the district. Walter was one of the district’s early advocates. BIDs or CBDs are locally based nonprofits managed by a board of stakeholders. Turns out, property owners in Central Market were clamoring to do something, as an impressive 70 percent of them voted in favor of forming the CBD. Underway by January 2008, the Central Market CBD implemented cleaning and maintenance activities, such as power-washing and litter abatement. The CBD also manages the Community Guides program, a public-safety and social service-outreach effort. Walter is grateful for the guides. “From 9 to 5, they’re on the street doing everything from clearing sidewalk obstructions to offering residents information on local food programs,” she says. The safety and cleaning services have filled a tremendous gap in city services. In 2009, among the nearly 30 types of incidents the CBD tracks and handles from sidewalk trash to illegal drug use, the programs on a monthly average addressed 150 graffiti tags, 110 social-service outreach calls and 20 incidents of illegal vending. The changes in the district have arrived on the heels of completion of such high-profile developments as the new Federal Building on 7th Street, just within the bounds of the CBD, and the SOMA Grand residences, which are located nearby. At the same time, long-term efforts to


P hoto C O U R T E S Y O F E duardo S ol é r

Left: Art in Storefronts; Image of Paul Hayes’ “Giant Ghosts”

restore the Old Mint Building at 5th and Market streets at a cost of $95 million continue. The goal is to transform the historic property into a repository of the Bay Area’s history. In addition, the CBD’s creation coincided with the formation of a visionary new open space that previously had been a public street, Mint Plaza. Before its renovation, this right-of-way was a congested alley. With leadership from nonprofit Friends of Mint Plaza, the passage is now a European-style pedestrian piazza. “Mint Plaza couldn’t be the welcoming space it is without the cleaning and safety services the CBD provides,” says Katie O’Brien, president of the CBD board of directors. As part of its promotional activities, the CBD also presents a series of free, mid-week concerts in the district, many of which are held on Mint Plaza. “Providing free music concerts to the community is a wonderful benefit for Central Market,” says O’Brien. “In this, one of the most densely populated areas of the city, it is vitally important to provide open space and cultural experiences that will enrich the surrounding neighborhood.” With the area’s improvements, the city’s ever-intrepid restaurateurs have begun to move in. Since the opening of Chez Papa on Mint Plaza in 2008, many other restaurants have followed. The variety runs the gamut, from Miss Saigon Vietnamese restaurant to the wiener-haus Showdogs to Passion Café, a French bistro with a rooftop deck. “Once Mint Plaza was in place and the CBD established its effective services, an anchor restaurant like Chez Papa comes in and proves this area can be a destination,” says Daniel Hurtado, executive director of the CBD. Still, the Great Recession has taken its toll on Central Market. Along with a number of smaller shops, longtime retail tenant Pearl Art Supply closed at the end of last year. The hit was a double whammy: “Not only did we lose Pearl,” says Hurtado, “but we also lost Pearl’s general manager who had been a dedicated CBD board member.” But, in a classic “if-life-gives-you-lemons” turn, the vacant storefronts presented an opportunity. As the recession gripped the area and rents decreased, artists of all stripes began filling the now-affordable loft spaces and warehouses. “Behind the plywood of the boarded-up stores was a growing arts scene. We thought, ‘What if we worked with the performing and visual artists to activate these vacant com-

mercial spaces?’” Hurtado says. The Art in Storefronts program was born. A citysponsored project in collaboration with commissioned artists and community groups such as the CBD, Art in Storefronts animated empty windows up and down Central Market with creative installations and dynamic artworks. The project resulted in a number of collaborations. After learning about the CBD’s work, the Art Institute of California–San Francisco, located on Market near 8th Street, wanted to help. The college’s advanced graphic-design students created street banners celebrating the area’s vibrant arts scene. The Art in Storefronts project also helped give birth to the first Central Market Arts Festival, which launches in late September. The CBD will present the three-week festival, kicking off with outdoor performances on Mint Plaza and featuring well-known Bay Area arts organizations, such as Alonzo King’s Lines Ballet, KUNST-STOFF dance company and CounterPULSE performance space. Hurtado acknowledges there is still much to accomplish, noting the continued challenge of attracting retail tenants to the corridor. The CBD is working with the city’s Office of Economic and Workforce Development to bring small businesses, he says. Hurtado argues that takers could find themselves on the ground floor of the district’s economic revival. While a person in his position might be expected to take such a posture, Hurtado’s statement may not be hyperbole. He points to the proposed CityPlace project, a 250,000 square-foot shopping center from developer Urban Realty, as an indication that Central Market is undergoing a renaissance. Blick Art Materials, a retail art supplier, also has signed a lease at 1020-1028 Market St., despite Pearl Art Supply’s departure. With plans for the September arts festival filling his calendar, Hurtado is sanguine about the area’s future. “The artists are committed to the neighborhood; the restaurants are committed to the neighborhood; the CBD, with its property owners, merchants and residents, is committed to the neighborhood. We’ve got our critical mass, and there’s no turning back.” n

Maureen Futtner can be reached at 415.637.3280 or info@maureenfuttner.com.

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DEVELOPMENT | SAN JOSE

Land Plan Grand Plan The Bay Area’s largest city is carving a future map featuring dozens of high-density living nodes near transit, shopping and daily amenities. By Robert Celaschi

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All in all, the plan contemplates 39 percent growth in housing, or 120,000 new units, and 127 percent growth in employment, or 470,000 new jobs.

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ince the mid-20th century San Jose has been building homes for people who commute to jobs someplace else. Usually that someplace else is a more prosperous community like Palo Alto or Mountain View, someplace with far more jobs than employed residents. San Jose city officials have complained bitterly that the imbalance undermines their local tax base and overburdens city services while benefitting more jobs-heavy communities. And for years, the city’s land-planning has aimed to correct the perceived inequity. A new general plan for San Jose, now well above a million residents, promises to take the fight out for the next 30 years and to upend regional projections showing the city’s jobshousing imbalance continuing unabated. All in all, the plan contemplates 39 percent growth in housing, or 120,000 new units, and 127 percent growth in employment, or 470,000 new jobs. The housing would be overwhelmingly multistory and densely packed. “There is no such thing any more as a traditional singlefamily neighborhood that would be built in San Jose,” said Tom Armstrong, vice president of HMH, a San Jose land-use planning and engineering firm. If that sounds like hyperbole from an outside observer, the view from inside city government isn’t much different. “There may still be opportunities for the occasional house or subdivision to happen, but we have come to the end of the era of 200-acre swaths of single-family housing,” said Laurel Prevetti, the city’s deputy director of planning services. The document emerging from a 36-member community task force that has met more than 40 times since 2007 concentrates housing in 73 villages large, medium and small, and along major transportation corridors. Plans for neighborhood villages have up to 500 housing units; commercially centered villages as many as 2,500 units; and transit-centered villages typically near light-rail stations are planned to have up to 7,500 homes apiece. Each variety also comes in smaller nodes, some of fewer than 100 housing units each. More mixed-used development would connect the major hubs along five “grand boulevards” embellished with extra landscaping and wider sidewalks. The villages would mix retail, food markets, offices, public services, housing, places of worship, public parks and plazas. Roadways are supposed to be “complete streets,” accessible to pedestrians and bicyclists as well as motorists and transit users. Ten existing specific-plan areas remain in place, the largest being North San Jose with just over 25,000 new housing units. Downtown is included as well, with an expected 10,000 new condos, townhomes and apartments. In some ways, the plan, Envision 2040, continues trends that have been in place for years. The city added multifamily and single-family housing at about the same pace up to the 1990s. By 2000, though, multifamily-housing units had opened up a wide lead. By 2007, nearly three times as many multifamily units as single-family homes were built in the city. 

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“I think this update is a natural extension of the evolution of the city,” said Erik Schoennauer, a land-use consultant and task-force member. “The last general plan focused on channeling our growth inward, containing sprawl and revitalizing neighborhoods, promoting transit ridership. This general plan does the same thing, but takes it a step further. The overriding objective is to make the city as fiscally, economically and environmentally sustainable as possible.” But in other ways, the 2040 plan aims for radical change. It seeks to boost bike ridership tenfold, for instance, and to cut the number of vehicle-miles traveled in the city by 40 percent, said task-force member Shiloh Ballard, director of housing and community development at the Silicon Valley Leadership Group. On the commercial real estate side, the city is grappling with the anticipated jobs mix. High-tech products and services are expected to keep driving job growth, but it’s difficult to predict the next wave of innovation in the valley, Prevetti said. It may include industries that don’t yet exist. The plan currently contemplates as much as 55 million square feet of new industrial, office, retail, institutional and research and development space, divided among subcategories such as large and small shopping centers and mid- and high-rise offices. Mostly, the city just wants jobs. In 1990, San Jose had 78 jobs for every 100 employed residents. The rest of San Jose’s working residents had to commute outside their hometown. The dot-com boom pulled the ratio tantalizingly close to 1, but by 2006 it had slipped back to 89 jobs per 100 employed residents. By comparison, Menlo Park has nearly two jobs for every employed resident, according to the Association of Bay Area Governments.  And people keep coming. Santa Clara County is projected to get 30 percent of regional population growth through 2040 and San Jose about two-thirds of the county’s growth, or about 470,000 people. But the city is expected to get only about 281,000 new jobs in the same period. The 2040 plan aims to make the forecast wrong. The plan clearly alters the business landscape. “Higher values will always be derived from housing,” said Michael Van Every, executive vice president in San Jose for housing developer Republic Urban Properties and a member of the citizen task force that has helped draft Envision 2040. That makes the plan something of a lottery for landowners. Those who might want to switch land from commercial to residential use are likely the losers.  “If you are in Coyote Valley or South San Jose and you have an office building, you’d better make tenant improvements because it is going to be an office building for a very long time,” Van Every said. “That being said, if you are within an area that is transit-oriented development for housing, as long as you are willing to do maximum densities with mixed-use, I think staff will welcome you with open arms.” From a construction standpoint it makes sense, said Neil Struthers, chief executive of the Santa Clara & San Benito


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M A P C O U R T E S Y O F C I T Y O F S A N J O S E ; D epartment of P lann i ng , B u i ld i ng and C ode E nforcement ;

Counties Building & Construction Trades Council, and also a task-force member. Commercial buildings can be torn down or converted to homes. “Once you put residential on land, that’s it. It’s very hard to change the land use,” he said. The plan should be in final-draft form by September. Then comes an environmental impact report, probably by the end of this year, Prevetti said. That sets up another round of public review and comment. The City Council should finally get to vote in June 2011. Not everyone likes the plan’s focus on jobs. The Committee for Green Foothills, a Palo Alto group, worries about the jobshousing ratio getting too high. “I can see how they might want to balance it, but if they reverse it they create the same problem for somebody else,” said Brian Schmidt, the group’s legislative advocate. Everywhere north of San Jose is already cramped for housing, while Morgan Hill, Gilroy and Hollister to San Jose’s south have strict residential growth limits. “Those workers will have to live even further away and commute in, most likely from the Central Valley,” Schmidt said in a letter to the task force. He urged a safeguard, so that if job growth ever outpaces housing, development of new areas for jobs would stop until housing catches up. San Jose engineer Armstrong postulated that the formula to import jobs and export housing could mean more freeway congestion.

Without endorsing that specific idea, task force members agreed that the details of implementation are critical. Will the city phase in the changes gradually, or demand instant change? “The one challenge and risk is allowing enough flexibility and to come up with a logical and reasonable way to transition into the new general-plan policy,” Schoennauer said. “If we don’t get that right, we risk discouraging investment, both on the job side and the housing side.” A lot of that depends on a developer’s mindset, Prevetti countered. For those who have been in line with San Jose’s changing priorities in recent years, Envision 2040 will seem like the next logical step. For those who are trying to hang on to the old models, it will feel like the city has flipped a switch. But the plan is a 30-year vision, not a set of detailed instructions. “Often it’s the little decisions that are made daily or monthly that the general plan is informing. It creates expectations and processes that are used to shape the city,” said Andrew Crabtree, principal planner with the city. Past general plans have obviously strongly influenced San Jose’s growth patterns. The current plan is expected to do much the same. “Our downtown is really different than it was 20 years ago, or even 10 years ago,” said Crabtree. “Revitalizing downtown was one of the major strategies” in our last general plan. n

Above: San Jose is updating its land-use plan for the next thirty years. Here is a sample of what is proposed in and around downtown.

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GREEN

Are you Sustainable? Past environmental disasters like the Deepwater Horizon oil spill have generated powerful fundamental shifts in business methods and approach. By Timothy P. Runde and Stacey Thoyre

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ith so much attention focused on green building, it’s easy to miss the real story: Sustainability, a much larger and more powerful force. Dubbed an emerging “megatrend” in the May Harvard Business Review, sustainability is profoundly changing the way corporations do business and consumers behave. The trend is global and cuts across industries, touching retail giant Wal-Mart Stores Inc., landlord Tishman Speyer and Oakland health care company Kaiser Permanente. Seventy percent of commercial real-estate executives cite sustainability as a critical business issue and 89 percent consider it in their real estate decisions, according to the 2009 annual survey by global real estate services company Jones Lang LaSalle. But what is sustainability, and how does it differ from green building? Green building describes a process (building green) and a product (a green building). Sustainability, on the other hand, is the underlying principle that gives rise to expressions as diverse as green building, farmers’ markets, hybrid cars, solar panels, cap-and-trade legislation, sustainability product indices, responsible property investing, clean-tech investment and countless others. In a Venn diagram, green building, corporate social responsibility, conservation, environmentalism and the local food movement would all be sustainability subsets. For all that, sustainability remains ill-defined. Many definitions have evolved but not a universal one. In a business setting, sustainability often is expressed as a triple bottom line concept. The social and environmental benefits and costs of an activity must be reconciled alongside economic costs and benefits. Sustainability considers intergenerational equity and implies stewardship of collective resources. While the most obvious example of sustainability in real estate is green building, its effects are impacting virtually the entire built environment. As individuals and corporations continue to adopt sustainability principles and practices, land use and location preferences will be affected. This ubiquitous impact flows from real estate’s unique characteristics: it is locationspecific and immobile; difficult to cost-effectively alter; and created to house human activity, personal and work-related. If green building is an indication, market conditions can change rapidly. Last year alone, the square footage of San Francisco office space certified under the Leadership in Energy and Environmental Design grew by more than 800 percent. Quickly changing conditions add to real estate risk of obsolescence. Real estate is resource-intensive to construct and operate. Some estimates peg buildings for 40 percent of energy consumption in the United States and 73 percent of carbon-dioxide emissions due to electricity consumption. Ceres, a nonprofit aimed at integrating sustainability into capital markets, and its United Nations partner are about to add construction and real estate to the sector-specific guidelines in the widely used sustainability reporting framework known as the Global Reporting Initiative. Clearly, positioning real estate to maximize financial returns requires that an owner understand sustainability. For 22 theregistrysf.com

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example, now that one in four square feet of offices in downtown San Francisco is certified under LEED, what kind of competitive disadvantage do brown buildings face? How many brown buildings do you want in your portfolio in an environment of increasingly common and stringent green building codes and market forces like Ceres that are pressuring institutional investors to adopt sustainability principles? Will McMansions in the suburbs retain their value if Generation Y prefers urban centers and transit-oriented development? What if consumers react to sustainability imperatives by permanently reducing how much they buy or where they shop? A structural shift to lower levels of consumption would increase retail vacancy and suppress rents, causing devaluation. One doesn’t have to agree with the principle of sustainability to heed its influence. What gives sustainability its traction relies on basic issues of supply versus demand. Global population is projected to increase nearly 40 percent to 9.2 billion people by 2050, according to the U.S. Census Bureau. Much of this population growth will occur in developing nations like Brazil, India and China, where consumption rates are expected to increase dramatically to levels akin to those of developed nations. With Earth’s finite resources, this type of increased demand will certainly have significant repercussions. In the past, technology eased some supply constraints, most notably the Green Revolution that—temporarily at least—alleviated world hunger through industrialized agriculture beginning in the 1940s. The problem is that technological fixes often create unintended consequences such as the resultant water crisis that now faces many of the countries that benefitted the most from the Green Revolution. In addition, recent events, such as Hurricane Katrina and the Deepwater Horizon catastrophes, have illuminated the limits and risks of modern technology and intensified public awareness of the true costs of the Western lifestyle. These costs, as well as the unintended and unanticipated water crisis caused by the Green Revolution, are examples of

Green building describes a process and a product. Sustainability, on the other hand, is the underlying principle that gives rise to expressions as diverse as green building, farmers’ markets, hybrid cars...


what economists call externalities—the effects of an activity not anticipated or paid for at the time of the event. In 1989, the Exxon Valdez prompted the formation of Ceres, whose initial goal was ensuring that companies be held more accountable for the environmental and social impacts of their businesses. For Lee Scott, the former chief executive of Wal-Mart, Hurricane Katrina was the defining moment that precipitated the welldocumented transformation in the retailer’s business model to embrace sustainability. It is difficult not to draw parallels between Katrina in 2005 and the Deepwater Horizon disaster in 2010 but the differences illuminate more. Even considering human contribution to climate change and the inadequacies of the New Orleans levy system, Katrina was a disaster of primarily natural origin. The Deepwater Horizon catastrophe is of purely human origin. It is impossible to deny the externalities of our current way of life when we see 24/7 streaming video of the gushing oil and image after image of devastated marshland, coastline and wildlife. Deepwater Horizon prompts larger questions about the

real costs of oil exploration and exploitation. Even to those not sympathetic to environmental advocacy, the link from the horrific damage to the gulf ’s ecosystem to the assault on the economic system is overwhelming. Jobs have been and will be lost; local economies will be crushed; shareholders face significant losses. The Exxon Valdez experience suggests years, more likely decades, for recovery. From a business standpoint, it makes sense to ponder: If the Valdez spill launched the creation of Ceres, which via its Investor Network on Climate Risk now encompasses $9.8 trillion of investment capital, and Katrina prompted the largest global retailer to fundamentally change its business model to embrace sustainability, what changes will occur due to Deepwater Horizon? Certainly, we will see increased interest and financial support for clean technology and alternative-energy sources. But the strongest—and most lasting—effects may derive from the individual consumers who realize that we, as a society, cannot continue viewing and using our resources—people and planet— in the way we have. Whether today’s corporations follow suit and hasten adoption of sustainability principles with a focus on the three bottom lines is unknown. For those of us betting on the power of human sensibility and the collective effect of consumers and businesses betting with their feet, the smart money would seem to be on sustainability. n Timothy P. Runde, MAI, LEED AP is a partner with CarneghiBlum & Partners and has been appraising commercial real estate in the San Francisco Bay Area since 1989. Stacey Thoyre, a published writer who is educated in risk management and finance, has worked in the Risk Management accounts division of Marsh & McLennan. They have been married for more than 20 years.


HOT LOT | MOUNTAIN VIEW

Climbing a Mountain A prime tract in Mountain View is ripe for redevelopment. By David Herbert

Mountain View’s City Council has been wishing for years to redevelop the corner into a high-end project akin to San Jose’s outdoor luxury shopping mecca Santana Row. Those high hopes have kept previous projects from going forward. From the mid-1990s until 2008, the council repeatedly blocked Home Depot’s attempts to set up shop. Town fathers demurred the store was too blue-collar for such a prominent location. They privately feared that it would attract the same small army of day laborers who patrol the Home Depot in East Palo Alto. A big-box store would have been a step up from the Sears outlet, especially in terms of sales-tax revenues, but it didn’t fit the council’s grandiose vision. Some on the council aren’t sold on Merlone Geier’s proposal either. Mayor Ronit Bryant led the charge against Home Depot in 2008. Today, Bryant says she won’t sign off on the company’s plans until it makes changes that fit into a long-term vision for the entire 56 acres. Merlone Geier’s latest proposal is no good, she said, because it only uses 11 of the company’s 15 available acres. The idea that Mountain View, long the more blue-collar brother of neighboring Palo Alto, should hold out for a high-end development strikes some as overly ambitious. Fred Thoits, the Palo Alto scion of the farming family that owned the tract for decades and sold the 15 acres to Merlone Geier, has long decried the council’s ambitions. In 2008, he scoffed: “That shopping center is never going to be the Stanford Mall or Valley Fair.” Last year, as he prepared to sell the land to Merlone Geier, he dismissed the council’s plan to redevelop the whole 56 acres as a “pipe dream,” in part because 12 separate owners lay claim to slices. Still, Mountain View has come of age in recent years, driven in no small measure by the prestige of Google as one of its corporate members. “The community has gotten a little bit more sophisticated,” said Ellis Berns, the city’s economic development manager. “We have a better idea about what we are looking for.” Two big hurdles remain for any redevelopment of the shopping center. First is the disintegrated ownership of the 56-acre plot, which makes the comprehensive redevelopment that Bryant wants more difficult. The second is the city council itself and just how picky it wants to be. The lead players all have different answers as to when the council will come around on the plans. Grehl predicts the project will be approved by March 2011. “I think with a few additional conversations they’ll see what a great project it is,” he said. But if Bryant and the rest of the council insist on revisions, it will almost certainly push that date back. The council is tied up in budget meetings all summer, and the soonest Merlone Geier will be able to present a new plan is the fall, said Peter Gilli, the city’s zoning administrator. Bryant is in no hurry. “Thriving, exciting places don’t just happen,” she said. “This will take as long as it takes. This is an important part of our city, and we need to get it right.” n

“The traffic on the two roads is immense, and you couple that with the great demographics in the city and what we viewed as a great deal of need for a revitalized retail hub.” Mike Grehl, vice president and partner, Merlone Geier

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P H O T O C O U R T E S Y O F J E S U S N AVA

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ountain View’s San Antonio Shopping Center isn’t much of a gateway for a city that boasts employers like Google Inc., LinkedIn and Intuit among its corporate residents. The 56acre complex combines a dilapidated Sears, several lightly used surface parking lots and a commercial hodgepodge of Wal-Mart, BevMo, Jo Ann’s Fabrics and a host of smaller retail chains. But the shopping center, which sits on the city’s western border at El Camino Real and San Antonio Road, may soon be getting a long overdue facelift. Merlone Geier Partners, a San Francisco- and San Diego-based real estate company, purchased 15 acres of the plot in February for $40 million, paying all cash. The site currently houses Sears, Rite Aid and several sprawling parking lots. Under the most-recent plan proposed by Merlone Geier, the company would redevelop 11 acres to include three four-story apartment buildings with 325 units, underground parking, a 65,000-square-foot Safeway, a 17,200-square-foot Rite Aid and roughly 10,000 square feet of retail shopping. With two partners who attended Stanford University and other family ties to the Bay Area, Mike Grehl, a vice president and partner for Merlone Geier, says the site has long been on the company’s radar as an ideal candidate for redevelopment and repositioning, Merlone Geier specialties. Grehl estimates the ultimate development value at $250 million, including the land cost. “The traffic on the two roads is immense,” he said, “and you couple that with the great demographics in the city and what we viewed as a great deal of need for a revitalized retail hub.” Merlone Geier, which counts institutions including college endowments among its financial partners, sold San Jose’s redeveloped Westgate Mall, a 637,000 square-foot center, to Federal Realty Investment Trust for nearly $100 million in the spring of 2004.


Old Dogs and New Tricks By Rob La Eace

I

n 1968, the U.S. involvement in the Vietnam war was escalating. Martin Luther King Jr. and Robert Kennedy were assassinated. The Packers tromped the Raiders in Super Bowl II; Richard Nixon announced his bid for the presidential nomination. And “Bullitt,” the thriller feature starring Steve McQueen barreling through the streets of San Francisco, won an Oscar. At the same time McQueen screeched his nowfamous green Mustang Fastback around town, Richard Bastoni, an aspiring young principal of his own brokerage, Evans Pacific, was racing his ’68 Cadillac Deville from appointment to appointment—no doubt with much more regard for public safety. He was a new San Francisco agent, and as anybody who was around in those times will tell you, you had to hustle. The plugged-in, techsavvy agents of the moment may struggle to imagine what it was like to sell property sans Blackberrys, iPhones, PCs, virtual tours, email, voicemail, the World Wide Web, laser printers, scanners, blogs, digital cameras, electronic multiple listing services and all the other technology that we take for granted today. But it obviously can be done, and based on anecdote, done pretty well. Today, an agent can enter a listing into the fully electronic and real-time San Francisco MLS with the click of a button. Home buyers in Hong Kong and Moscow can see the property details and countless color photos, then email questions to an agent or even make an appointment. In 1968, there was a slightly less efficient way of getting the word out. Offices would receive paper listing slips twice a week. If you had a listing that you wanted included, you submitted it to the MLS by mail. Later, the multiple slips were replaced with a weekly listing book. This phonebook-like desk reference compiled all active, pending, withdrawn and sold properties for the county. Each listing had no more than one poorquality, black-and-white photo. I’ve seen some of these photos, and they’re not worth a thousand words. On Saturdays, agents doing “floor time” would get the Sunday paper early, then note all of the new listings advertised, Bastoni says. Sometimes the ads would not have an associated address, so the agents would call listing agents to gather the information. The Sunday paper also did not have a proper open house or real estate section. The property advertisements were found in the want ads. We don’t think twice about our trusty cell phones today, but imagine (or remember if you’re old enough), what it was like to check in from the road three to four times a day to see if you had messages. With no voicemail or answering machines, connecting via telephone with another person could be an all-day pursuit. This drastically slowed the speed of business, Bastoni said. “And without faxes or emails, if a seller was out of town when a buyer wished to make an offer, you’d need to make the offer good for five or six days.” Fast forward to 1986. The U.S. began maneuvers off the Libyan coast. Martin Luther King Jr. Day was nationally observed for the first time. The Bears, aided by William “Refrigerator” Perry crushed the Patriots

to win Super Bowl XX. The Iran-Contra scandal exploded; space shuttle Challenger fell from the sky; and Microsoft made its initial public offering of stock. At the same time, English-born and -bred computer programmer David Parry was arriving on the San Francisco residential real estate scene. Though technology had led to some advances, the industry was still archaic. At Pacific Union’s Marina office, Parry’s first brokerage, all the agents in the office shared one computer-teletype machine. This was the portal to search for listings. To post a listing to the system, you mailed it into the San Francisco Association of Realtors. Each listing carried one exterior photo. “We used to swear that they never even slowed their car to take the picture,” says Parry. Forty-five day escrows were much more typical, compared to the more standard 30 days of today, as were Saturday open houses, he says. With no other means of exposure, they were also more important. An open house was one of the few ways that members of the public would encounter an agent. Intuitively, one might assume that the increased pace of business—or at least the technology-engendered sense of an increased pace—would mean greater agent sales velocity. Not so, both Bastoni and Parry told me. Both said that they were able to sell the same volume of real estate in the “old days” as they do now. Their experience may be influenced, however, by the fact that they both focus on the high-end segment of the market. There are agents and teams who handle hundreds of transactions a year. It’s hard to imagine this business model succeeding in the technological dark ages without taking on additional staffing. Modern advances may make parts of the job easier, but an agent or a broker still has to go out and nail down business. Blogs, industry TV shows and Web sites like YouTube have created theaters for lead generation, but good old-fashioned face-to-face relationship building still commands due respect. Noteworthy is the concept that it appears technology, our population, our county annual sales volume and agent annual transaction volume have somehow maintained parity with the old days. Clearly, the population of San Francisco and the amount of homes bought and sold here have increased significantly over the past 40 years. So, too, has the number of agents, however. This is especially significant when you count part time agents and out of area agents that may do a few deals a year in the city—deals that would have been nearly impossible to do without modern technology. Therefore, even with the advancements of past years, the average agent is still doing roughly the same number of annual transactions. Still, technology alone does not make all magically better. In 1907, the purchase contract in San Francisco was one page. It was still one page in 1968 and 1986 when Bastoni and Parry entered the biz. Our contract today is seven pages and considerably more complex. So once again we learn that change and progress are not the same thing. n

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Right: Andy LaVelle, Arborwell & Peter Sortwell, Arborwell

The Registry Silicon Valley Event

Right: Panelists: Rob Rubano, Eastdil Secured; Jeffrey Enright, Enright & Company; Chris Peatross, Equity Office & Mike Smith, CB Richard Ellis

Sixty commercial property professionals gathered June 15 at the Rosewood Sand Hill hotel and resort in Menlo Park for The Registry’s spring event, “Commercial Real Estate: Setting New Values.” The panel included Christopher Peatross, president and chief executive officer for Equity Office Properties; Michael Smith, executive managing director over the San Francisco Bay Area for global brokerage CB Richard Ellis; financier Robert Rubano, a senior vice president in San Francisco for Eastdil Secured; and commercial property appraiser Jeffrey Enright, president of the Northern California Chapter of the Appraisal Institute. Sponsors for the event were law firm Miller Starr Regalia and accountants and consultants Burr Pilger Mayer.

Below center: E. David Marks, Miller Starr Regalia (Title Sponsor)

Above: Rich Knauf, Colliers International; Jeff Fredericks, Colliers International & Kalil Jenab, Cassidy Turley BT Commercial

Above: Jackie Matsumura, Burr Pilger Mayer (Silver Sponsor)

Left: Chris Peatross, Equity Office & Jerry Hunt, Blake Hunt Ventures

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Above: Barry Swenson, Barry Swenson Builders; Joe Lewis, Orchard Commercial & Larry Stone, County of Santa Clara P H O T O S C ourtesy of S T E FA N A R M I J O

Right: Mike Field, The Sobrato Organization & Bruce Burkard, Four Corners Properties


SENT to us

continued from page 4

is being picked up by users around the globe. J.B. Cahoon, a partner with Los Gatos-based South Bay Construction, said less than a month after his company added the reference booklet to the Apple lineup, more than 500 applications have been downloaded, nearly a fifth by users outside the states. Next month, Blackberry and Android users can download it too. The guide is a valley staple for brokers, architects, landlords and others to create instant construction estimates for tenant improvements, building shells and the like. The company has gotten requests for apartment, mixed-use and “soft-cost” pricing, such as architectural services, which it is adding. “That’s the great thing. We can add to it and refine numbers,” Cahoon said.

Landlord Arranges New Financing The Swig Co. has completed a $21 million refinancing of 633 Folsom St., a downtown San Francisco office building with 171,000 square feet fully leased to California Pacific Medical Center. CPMC is a wholly owned subsidiary of Sutter Health. The loan features a 10-year term and 30-year amortization. Mitchell Thurston and Andrew Ahlers of Berkadia Commercial Mortgage Inc.’s San Francisco office originated the transaction. Great American Life Insurance Co. is the lender. Swig is a private investment company with a 74-year history of ownership, development and management activity in commercial real estate. The company’s portfolio includes approximately nine million square feet of office buildings in markets such as New York, San Francisco and Southern California. Over the past three years, Swig has completed more than $1.4 billion in combined transactions, including sales and purchases. Berkadia Commercial Mortgage is a wholly owned subsidiary of Berkadia Commercial Mortgage LLC, a privately held company in which Berkshire Hathaway Inc. owns a 50 percent interest. Berkadia Commercial Mortgage manages a portfolio of more than $236 billion.

East Bay Crew Announces Scholarship Winners East Bay Crew has announced its 2010 college scholarship winners. The organization awards scholarships to qualifying participants in its annual “CREW Careers: Building Opportunities” event. CREW Careers helps to educate young women about professional opportunity in commercial real estate, including law, brokerage, finance, architecture and planning. The 2010 scholarships were granted to LaShawn Moore and Shawna Fields. Moore, a Pittsburg High School graduate, is to attend Howard University. Fields is an Antioch High School graduate and is to attend St. Mary’s College. n

PEOPLE on the move

continued from page 5

to joining hooksASD, Pesci was a designer for Baldauf Catton VonEckartsberg Architects specializing in retail, hospitality and institutional projects.

Tribeca Cos. Adds More in San Francisco Adam C. Aasen and Martin H. Walsh have joined San Francisco-based Tribeca Cos. LLC, a private real estate investment firm. Aasen is director of investments, responsible for structuring the firm’s investments as well as maintaining relationships in capital markets. He has extensive real-estate investment banking and structured-finance experience and has closed more than $1 billion of debt and equity transactions across all property types. Prior to Tribeca, Aasen worked with Highland Realty Capital and Buchanan Street Partners’ private equity funds. Walsh, director of private capital, oversees business development and capitalraising efforts for the firm. Prior to joining Tribeca, he worked with Goldman, Sachs & Co. and Allianz SE in corporate finance. In December, Tribeca announced that it had acquired a 10-building multifamily portfolio in San Francisco with approximately 200 units after buying senior secured debt and pursuing multiple foreclosures.

San Francisco Contractor Hires Five GCI General Contractors, which specializes in commercial interiors, corporate facilities and building renovation, has added Tony Miller, Thor Michelsen and Brian Lundberg as field superintendents; Ryan Ruhl as project manager; and Susan Alling as project engineer. Miller was previously with San Francisco’s Principal Builders Inc., Michelsen and Ruhl with San Mateo’s Webcor Builders; and Lundberg with Hathaway Dinwiddie Construction Co.

Law Firm Adds Trial Attorney Marshall C. Wallace has joined the litigation practice group of Allen Matkins Leck Gamble Mallory & Natsis LLP, a California business and real-estate law firm.

He will be a partner and work from the firm’s San Francisco office. Wallace is a trial lawyer whose practice focuses on high-stakes, complex business and consumer disputes, including sophisticated contract, fraud, title insurance, corporate, real estate, competitive tort, class action and unfair competition cases. His practice is divided equally between state and federal courts, and he handles both plaintiffs’ and defendants’ cases. Wallace counts First American Financial Corp. as one of his clients. He was previously a partner with Reed Smith LLP.

Brokerage Names Seven Board Directors Cassidy Turley BT Commercial has announced additions to its board of directors. Joining the board are: Todd Beatty, managing partner, Cassidy Turley CPS; David Hiebert, managing partner, Palo Alto; Matt Kircher, managing partner, Terranomics Retail Services; Greg Moss, managing partner, North Bay; Mike Moran, managing partner, Burlingame and Company Office Division; Ric Russell, managing partner San Francisco and Company Investment Division; and Jason Berry, chief operating officer. Cassidy Turley BT has more than 400 agents and staff in 16 regional offices. The national commercial real estate services firm has 420 million square feet of managed space, 58 offices, 19 national markets and more than $13 billion in completed transactions for 2009. Outside of North America, Cassidy Turley partners with GVA Grimley, the founder and majority shareholder of GVA Worldwide.

Wong Jumps to Cornish & Carey Geri Wong, a long time broker for Ritchie Commercial in its downtown San Jose office, has been named a senior vice president for Cornish & Carey Commercial/ONCOR International. Wong specializes in office and retail leasing and investment brokerage. She has completed nearly 500 transactions in her 15-year career. Cornish has more than 250 agents in 13 offices in Santa Clara, Palo Alto, San Mateo, San Francisco, Larkspur, Santa Rosa, Oakland, Walnut Creek, Emeryville, Pleasanton, Hayward, Roseville and Sacramento. n

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S E E N Left: Carrie Robertson, Chicago Title Company; DeAnna Rivas, CB Richard Ellis; Mary Folzman, Iron Construction; Nancy Morse, SIOR, Grubb & Ellis and Shelia Laguna, Equity Office

Below: Hole Sponsor, Iron Construction

Below: Joe McSweeney, American Asphalt; Carlo Mormonini, Balboa Funds; Shelly Bescana, Eleven Western Builders and Mike Lloyd, SIOR, Colliers International

SIOR ANNUAL GOLF TOURNAMENT JUNE 14, 2010

The Northern California Chapter of SIOR (Society of Industrial and Office Realtors) held its Annual Golf Tournament on June 14, 2010 at Silverado Country Club in Napa. There were close to 100 players in attendance,

Below: Bill Hillis, Colliers International; Lou Scarpa, TMC Development; Shawn Johnson, SIOR, Keegan & Coppin and Dave Griffis, TMC Development

including their Annual Chapter Sponsors, AMB Property Corporation, TMC Development, Panattoni Development, Sam Clar Office Furniture and CHASE.

Above right: Ed Hofer, SIOR, Colliers International; Mark Triska,SIOR, Colliers International; Doug McGregor, AMB Property Corporation and Jim Morris, SIOR, Cushman & Wakefield

Right: Tony Beatty, Cassidy Turley/BT Commercial; Claudia Folzman, Iron Construction; Dave Edgar, Iron Construction and Tom DaMaschino, SIOR, Cassidy Turley/BT Commercial

Above: 1st Place Foursome: Peter Winterling, Cornish & Carey; Stewart Randall, SIOR, Colliers International; Don Helman, Quickie Wheelchair and Eric Gordon, Pacific Southwest Left: Vince Ciavarella, SARES Regis Group; Joe Fabian, Cornish & Carey; Bob Garner, Cornish & Carey and Casey Ricksen, (chapter candidate), Colliers International

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Left: Thomas Walcott, SIOR, Grubb & Ellis; Dennis Neeley, SIOR, Grubb & Ellis; Clyde Rawlings, Grubb & Ellis and Mike Kalmanson, SIOR, Grubb & Ellis


07 Calendar

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

7

AIA Santa Clara Valley will host a seminar called How to Prepare Successful Design Award Submittals from 4:30 p.m. – 6 p.m. at Blach Construction, 469 El Camino Real, Suite 100, Santa Clara. Members $10 and non-members $20. Register online at www.aiascv.org.

USGBC Northern California Chapter will host a LEED Green Associate Exam Prep from 8:30 a.m. –5 p.m. at Wendel, Rosen, Black & Dean LLP, 1111 Broadway, 19th Floor Conference Center, Oakland. Contact info@usgbc-ncc.org with questions. Register online at www.usgbc-ncc.org.

BOMA Oakland/East Bay will host a Night at Oakland A’s vs. New York Yankees Game and Pre-Game Tailgate Party starting at 5 p.m. at North Parking Lot K at the Oakland Coliseum. Tickets are $50. Visit www.bomaoeb.org to register for this event.

AIA East Bay will host an ARE Seminar: Construction Documents and Services I from 6 p.m. – 9 p.m. at AIA East Bay Chapter Office, 1405 Clay St., Oakland. AIA East Bay members $36.50, AIA members $52 and nonmembers $72.50. RSVP at www.aiaeb.org.

8

CREW San Francisco will host a CREW Networking event starting at 5 p.m. Visit www.crewsf.org for more information.

AIA San Francisco will host an event called Triskelion: The Story of the Presidio Habitats Exhibition Pavilion from 7 p.m. – 8 p.m. at Exhibition Pavilion, Fort Scott District at the corner of Storey Ave. and Ralston Ave. Visit www.aiasf.org for more information. AIA East Bay will host a Women in Architecture forum from 6 p.m. – 7:30 p.m. at AIA East Bay Chapter Office, 1405 Clay St., Oakland. This is a free event open to everyone. RSVP at www.aiaeb.org. BOMA Oakland/East Bay will host The Fundamentals of Mold Remediation and Sewage Clean-up course from 10 a.m. - 11 a.m. at Scott’s Seafood, 2 Broadway (Jack London Square) in Oakland. Advance tickets are $5 (members) and $25 (non-members). At-the-door tickets are $10 for members and $30 for non-members. Visit www.bomaoeb.org to register for this event.

AIA San Francisco will host a Sustainable Building Advisor Program: Information Session from 6 p.m. – 7:30 p.m. at Pacific Energy Center, 851 Howard St., San Francisco. This is a free event. For more information or to RSVP, visit www.bayareasba.org. SPUR will host an evening symposium called The Rational City: The troubled legacy of top-down planning starting at 6 p.m. at 654 Mission St., San Francisco. Members $0 and non-members $5. For more information, visit www.spur.org.

15

BOMA Oakland/East Bay will host a luncheon in Oakland. Visit www.bomaoeb.org for more information.

The Northern California Chapter of the Appraisal Institute will host a workshop and networking social titled Tax Appeal Issues for Appraisers at 3 p.m. at Four Points by Sheraton, Pleasanton. For more information, visit www.norcal-ai.org.

BOMA Silicon Valley will host a membership luncheon called Confessions of a Rogue Real Estate Broker starting at 11:30 a.m. at Crowne Plaza San Jose – Downtown, 282 Almaden Blvd. Visit www.boma-sv.org to register.

CoreNet Northern California Chapter will host a chapter meeting from 3:30 p.m. – 7:30 p.m. Visit http://nocal.corenetglobal.org/CORENETGLOBAL/ NorthernCalifornia for more information.

USGBC Northern California Chapter will host an event called Construction and Demolition Waste – Strategies for Improvement from 5:30 p.m. – 8 p.m. at Habitat for Humanity – Restore, 8351 Umbria Ave., Bldg 5, Sacramento. Contact Jessica_morrow@skwaia.com with questions. Members $15, non-members $30, and full time students and unemployed $20. Register online at www.usgbc-ncc.org.

CREW East Bay will host a luncheon called Can You Relate…? Working Across Generations from 11:30 a.m. – 1:30 p.m. at Fleming’s Prime Steakhouse & Wine Bar, 1685 Mt. Diablo Blvd., Walnut Creek. Members $45 and non-members $60. Contact eastbaycrew@crewnetwork. org with questions.

9

CREW East Bay will host a free members-only brown bag luncheon called Making the Most of the Job Market from 12 p.m. – 1p.m. at Argo Insurance Brokers, 2300 Contra Costa Blvd., Ste. 375, Pleasant Hill. RSVP to Elizabeth Creger at ecregor@assetresource.net.

16

SPUR will host a class called Urbanism: The Convenient Solution to the Problem of Climate Change (Part 2 of 5) starting at 4 p.m. at 654 Mission St., San Francisco. Cost is $100 for the series or $25 per session. Advance registration required. Register at classes@spur.org.

12

IFMA East Bay Chapter will host their 10th Annual Golf Tournament at Sequoyah Country Club, 4550 Heafey Rd., Oakland. Register online at www.ifmasv.org.

BOMA Silicon Valley will host an Asphalt Pavement Maintenance Seminar and Demonstration from 7:30 a.m. – 1:30 p.m. at 1130 Ringwood Court, San Jose. Members $35 and non-members $50. The ticket cost includes continental breakfast and buffet lunch. Visit www.boma-sv.org to register.

13

20

CREW Silicon Valley will host a luncheon called PowerSpeaking for Influence and Persuasion starting at 11:30 a.m. at The Silicon Valley Capital Club, Knight Ridder Bldg., 50 W. San Fernando, Ste. 1700, San Jose. Members $50 and non-members $80. Register online at www.crewsv.org. IIDA Northern California Chapter will host a course called San Francisco City Center: Design to Prevent the Damaging Effects of Mold starting at 5:30 p.m. at Teknion Showroom, 88 Kearny, 15th floor, San Francisco. Wine and light fare will be offered. RSVP by July 26th to sfcitycenterrsvp@iida-nc.org.

USGBC Northern California Chapter will host an event called New Cool Lighting Technology from 5:30 p.m. – 7:45 p.m. at Bluecoat, 410 N. Mary Ave., Café, Sunnyvale. Contact epaul@rosendin.com with questions. Members $10, non-members $25 and students $15. Register online at www.usgbc-ncc.org.

14

IFMA Silicon Valley will host a roundtable luncheon called Value of Certification from 11:30 a.m. – 1:30 p.m. at Citrix Systems, Inc., 4988 Great America Pkwy., Santa Clara. Register online at www.ifmasv.org.

22

The Silicon Valley Branch Chapter of the Northern California Chapter of the Appraisal Institute will host a joint workshop and networking lunch with IRWA Chapter 42 titled Everything You Were Never Taught about Litigation Appraisal: A Hands on Approach starting at 9 a.m. at Menlo College, Atherton. For more information, visit www.norcal-ai.org. 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 www.bomasf.org. BOMA Silicon Valley will host the First Annual Texas Hold’Em Tournament starting at 5:30 p.m. at 150 South Almaden Blvd., San Jose. Pre-registration tickets cost $65 and at-the-door tickets cost $85. Visit www.boma-sv.org to register.

23

The Northern California Chapter of the Appraisal Institute will host a seminar called Rates and Ratios– Making Sense of GIMs, OARs and DCF from 8:30 a.m to 4:30 p.m. University of Phoenix, 3590 North First Street, San Jose. Register before June 30th and the cost is $130 for members and $160 for non-members; after June 30th, cost is $180 for members and $210 for non-members. For more information, visit www.norcal-ai.org. SPUR will host a class called Urbanism: The Convenient Solution to the Problem of Climate Change (Part 3 of 5) starting at 4 p.m. at 654 Mission St., San Francisco. Cost is $100 for the series or $25 per session. Advance registration required. Register at classes@spur.org.

24

AIA Santa Clara Valley will host two sessions of ARE Workshops including Site Planning and Design and Construction Documents from 8 a.m. – 5 p.m. at Graniterock, 1505 South De Anza Blvd., Cupertino. Members $55 per session or $100 for both and nonmembers per session $85 or $170 for both. Preregistration is required. Register online at www.aiascv.org. IIDA Northern California Chapter will host a Honolulu City Center: H’iida Seek Fundraiser and Scavenger Hunt and Post Party. Visit www.iida-nc.org for more information.

26

USGBC Northern California Chapter will host an event called Retrofitting Existing Buildings for Energy Efficiency and Demand Response from 5:30 p.m. – 8:30 p.m. at Charles Salter Offices, 130 Sutter, St., Sixth Floor, San Francisco. Contact info@usgbc-ncc.org with questions. Members $0 and non-members $15. Register online at www.usgbc-ncc.org.

27

AIA East Bay will host a Young Architect forum from 6 p.m. – 7:30 p.m. at AIA East Bay Chapter Office, 1405 Clay St., Oakland. This is a free event and open to everyone. RSVP at www.aiaeb.org.

IIDA Northern California Chapter will host a course called San Francisco City Center: Indoor Environmental QualityDesigning Healthier Interiors starting at 5:30 p.m. at HOK Offices, 1 Bush St., #200, San Francisco. Wine and light fare will be offered. RSVP by July 26th to sfcitycenterrsvp@iida-nc.org.

21

28

AIA East Bay will host an ARE Seminar: Construction Documents and Services II from 6 p.m. – 9 p.m. at AIA East Bay Chapter Office, 1405 Clay St., Oakland. AIA East Bay members $36.50, AIA members $52 and non-members $72.50. RSVP at www.aiaeb.org.

USGBC Northern California Chapter will host an event called New Green Construction Export and Investment Opportunities in Central and Eastern Europe from 5:30 p.m. – 8 p.m. at USGBC-NCC/AIA SF Offices, 130 Sutter St., Ste. 600, San Francisco. Contact info@usgbc-ncc.org with questions. Members $0 and non-members $15. Register online at www.usgbc-ncc.org. IFMA Silicon Valley will host an Annual Membership Mixer from 5 p.m. – 9 p.m. Register online at www. ifmasv.org.

21-23

BOMA San Francisco will host a Budgeting & Accounting course from 8 a.m. – 5 p.m. at Lower Level Conference Room, 44 Montgomery St., San Francisco. Members $1,010 and non-members $1,110. Register online at www.bomasf.org.

SPUR will host an evening symposium called The Protected City: Localism, preservation and the city fabric starting at 6 p.m. at 654 Mission St., San Francisco. Members $0 and non-members $5. For more information, visit www.spur.org.

29

USGBC Northern California Chapter will host a LEED Green Associate Exam Prep from 8:30 a.m. –5 p.m. at Rancho Cordova City Hall, 2729 Prospect Park Dr., American River South Room, Rancho Cordova. Contact info@usgbc-ncc.org with questions. Register online at www.usgbc-ncc.org.

30

SPUR will host a class called Urbanism: The Convenient Solution to the Problem of Climate Change (Part 4 of 5) starting at 4 p.m. at 654 Mission St., San Francisco. Cost is $100 for the series or $25 per session. Advance registration required. Register at classes@spur.org.

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activity

Reports

commercial leaseS

City

Lease Sq. Ft.

Name of Tenant/Rep (Brokerage)

Name of Landlord/Rep (Brokerage)

Notes (ie. Lease type and/or lease longevity)

25858 Clawiter Rd

Hayward

105,000

Companion Group

Clawiter Associates/Mark Kol (CB Richard Ellis)

Warehouse/Distribution, New Lease

6200 Paseo Padre Prkwy

Fremont

44,000

Bob Tasker & Matt Currie/ CM Commercial Real Estate, Inc.

Sam Wright & Brian McCarthy/ Cassidy Turley BT Commercial-Palo Alto

Lease, 60M

5870 Stoneridge Dr

Pleasanton

40,589

Coopervision, Inc.

Triple Net Properties/Marcy Place, Andrew Zink/Cornish & Carey Commercial

Industrial

5858 Horton St

Emeryville

29,378

Tethys Biosciences/Jonathan Tomasco (Cornish & Carey Commercial)

EmeryStation, LLC

Office

1390 Willow Pass

Concord

26,368

Eichleay Engineers

Transwestern Concord Corporate Centre, LP/ Breck Lutz, Patrick Reilly & Tom Fehr (Cornish & Carey Commercial)

Office

1340 Treat Blvd

Walnut Creek

12,806

John Muir Health

California State Teachers’ Retirement/ Andy Schmitt (CB Richard Ellis)

Class A Office, New Lease

100 Wood Hollow Dr

Novato

124,600

Quadrant Data Systems

Lexington Lion Wood Hollow, LP/Haden Ongaro, Brian Eisberg & Mark Carrington (Cornish & Carey Commercial)

Office

700-771 Center Blvd

Fairfax

66,168

Fairfax Center Properties

Fair Anselm Center, Inc./Roger Smith (Cornish & Carey Commercial)

Retail

361 Third St

San Rafael

5,943

Huckleberry Youth Programs / Matt Storms (Keegan & Coppin Co., Inc.)

Montecito Marketplace Associates

N/A

88 Kearny St

San Francisco

10,278

Callwave/Liz Hart & Jon Mackey (Cornish & Carey Commercial)

Reuters America, LLC

Office

185 Berry St

San Francisco

1,162

Angeline Ong (UCSF Real Estate Services)

Richard Hayes (McCarthy Cook)

New Lease

2700 Middlefield Rd

Redwood City

41,200

Sierra Pacific Recycling/ Mark Lockenmeyer (Cornish & Carey Commercial)

Ferrando & Franceschini

Industrial

1400 Industrial Way

Redwood City

23,192

Satellite Laboratory Services/ Bob McSweeney (CB Richard Ellis)

Giampaoli Family Partnership/ Bob McSweeney (CB Richard Ellis)

Flex/R+D , Renewal

1470 - 1480 Industrial Way

Redwood City

22,365

Satellite Laboratory Services/ Bob McSweeney (CB Richard Ellis)

Giampaoli Family Partnership/ Bob McSweeney (CB Richard Ellis)

Flex/R+D , Renewal

1332 San Mateo Ave

South San Francisco

10,500

My Home and Bath, LLC/ Ryan Walsh (CB Richard Ellis)

Wai Keung Lau/Lewerenz Co

Warehouse/Distribution, sublease

762 Sunnyvale Saratoga Rd

Sunnyvale

44,795

24 Hour Fitness

Property Development Centers/Sandy Berry (Cornish & Carey Commercial)

Retail

1010 - 1020 Rincon Cir

San Jose

23,261

Applied Microstructures

Equity Office Properties/Rob Shannon, Joe Kelly (CB Richard Ellis), Craig Fordyce, (Colliers Internationa-San Josel)

Class B R&D/Flex, Renewal

1145 Sonora Ct

Sunnyvale

20,000

Applied Quantum Technology/ Sherry Gubera & Jay Phillips (Cornish & Carey Commercial)

Paul Locklin

R&D

140 Kifer Ct

Sunnyvale

19,950

Applied Weather Technology

Silicon Valley CA-I, LLC/Phil Mahoney, Rod Scherba & Jack Troedson (Cornish & Carey Commercial)

R&D

1137 Cadillac Ct

Milpitas

13,920

Bluepoint Controls, Inc./Ben Knight (CB Richard Ellis)

RREEF/Joe Kelly, Rob Shannon (CB Richard Ellis), Dave Schmidt (Colliers International-San Jose)

Manufacturing, New Lease

2525 Charleston Rd

Mountain View

13,040

PSS Systems/Sherman Chan (CB Richard Ellis)

Charleston Investment Group/Roger Fields (Cornish & Carey Commercial)

Class C R&D/Flex, New Lease

4227 Middlefield Rd

Palo Alto

11,480

Kelly Paper Company/Ken Gould (Lee & Associates)

Ted Nell/Bob McSweeney (CB Richard Ellis)

Class C R&D/Flex, Renewal

Santa Rosa

15,400

ProSight Specialty Insurance / Shawn Johnson & Kevin Doran (Keegan & Coppin Co., Inc.)

Basin Street Properties / Shawn Johnson & Danny Jones (Keegan & Coppin Co., Inc.)

Full Service Lease

Address Alameda County

Contra Costa County

Marin County

San Francisco County

San Mateo County

Santa Clara County

Sonoma County 3562 Round Barn Cir, Suite 200

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For-Sale Transaction Data Provided By:

commercial SALES

City

Property Size (Sq. Ft.)

Pleasanton

578-580 Natoma St 114 7th St

Address

Buyer

Seller

Price

Product Type

4,305

Iron Horse Equestrian Center LLC/ Tracey Hirt

Todd Thomas

$3,000,000.00

Apartment

San Francisco

9,800,000

Apic Hotel Americania LLC

AZ-SF Hotels LLC

N/A

Motel

San Francisco

6,800,000

Apic Hotel Good LLC

AZ-SF Hotels LLC

N/A

Hotel

140 7th St

San Francisco

3,200,000

Apic Hotel Carriage LLC

AZ-SF Hotels LLC

N/A

Motel

2845 Pierce St

San Francisco

2,665,000

2845 Pierce Street LLC

REF SF Properties LLC

N/A

Apartment

620 Post St

San Francisco

2,320,000

Fitzgerald Hotel LLC

620 Post LP

$4,600,000.00

Hotel

1357 Clay St 11

San Francisco

511,000

MWC Clay Street LLC/Jill Dodd

F H Lopez Corp

$2,750,000.00

Apartment

2690 Great Hwy

San Francisco

21,423/ 21 Units

A & F Properties LLC/Azadah Hariri

Fred Colland

$3,410,000.00

Store Building

Palo Alto

3,200,000

F & G Partnership LLC/ Golgoun Habibi

Golgoun Habibi

N/A

Multi Family Dwelling

401 Burgess Dr A

Menlo Park

2,600,000

Magnussen Of Phelan LP

Carolands LI LLC

N/A

Office Building

610 Grand Fir Ave

Sunnyvale

1,705,000

610 Grand Fir LLC/Paul Kalcic

Kahn Family 1995 Trust

$2,615,000.00

Multi Family Dwelling

473 Los Coches St

Milpitas

13,280/ 3 units

Vedic Educational & Devotional

Islamic Research Association INC

$2,200,000.00

Farms

24600 Dutcher Creek Rd

Cloverdale

1,600,000

David Bohrman

Linkletter Jack & C Trust

$2,000,000.00

Pasture

271 Cresco Ct

Santa Rosa

1,100,000

Ghilotti M M & L 2006 Trust

Rosemarie Paulin

$2,100,000.00

Commercial Acreage

Contra Costa County 5959 Camino Tassajara

San Francisco County

San Mateo County 643 Homer Ave

Santa Clara County

Sonoma County

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theregistrysf.com 31


FINAL OFFER Looking Homeward

❯ PATRICK BARBER By Sharon Simonson

In March, 43-year-old Patrick Barber became president of the San Francisco region for residential real estate brokerage Pacific Union International, the exclusive affiliate of Christie’s Great Estates in the San Francisco Bay Area. A San Francisco native, Barber manages two of the private company’s 17 offices. Aside from an enviable record as a top-selling agent and later as manager of a team of some 150 top-selling agents who at their peak sold properties valued at $1 billion a year, Barber has bought, renovated and sold a dozen San Francisco condominiums and homes himself, living in some along the way. His first such effort was four years into the business and before age 30. “It’s a long-term process where you buy the best you can buy, add value and then move up in a few years,” he says. The practice fulfills his desire to improve his hometown, one residence at a time, while also building wealth. “I am very passionate about architecture, interior design, construction—all of the aspects of real estate,” he says. Today, at his offices in the Letterman Digital Arts Center at the Presidio, Barber can overlook the soon-to-berenovated Palace of Fine Arts, and, of course, the Pacific Ocean.

How did you wind up in real estate? PB❯ Growing up there was no Internet, so when I went to college, I had no huge ambition to start a new company, unlike so many of the young people today. When I looked at the landscape of who was successful at creating wealth, I saw it was people in real estate. My premise was that no matter my day job, I needed to understand real estate. I did an internship with a commercial development company in college and when I came back to San Francisco after doing a few other small things, I started working in residential real estate. I said, ‘I will give residential real estate four years like high school and college,’ but very quickly I found myself.

What are your observations about the Bay Area housing market after your 20 years in the business? PB❯ We have been very fortunate in San Francisco and the Bay Area. In the Bay Area, over the last 10-plus years, many of those years have seen double-digit appreciation. August 2005 was the high point of the market. Most people think it was later, but 2006 and 2007 were the second- and third-best years. The first six months of 2008 were on target to be even better than 2005, if you can believe that. It will be quite awhile before we are back to the days of 2005. In the first five months of 2009 versus the first five months of 2005, we are still down 27 percent in terms of units sold for more than $2 million in San Francisco. So there were 87 units sold in 2009, but 119 in 2005 in those first five months.

Do you miss the good old days of three and four years ago? PB❯ Frenzied markets are a bad time to buy and sell real estate. Real estate markets in general work better when there is a more even supply and demand. When demand is too high or supply too great, you end up with one side or the other being very frustrated and that leads to anger and lawsuits. Most educated real estate agents also don’t like the frenzied markets where you have people writing offers but not doing due diligence and not understanding what they are buying. We want all parties to a transaction to have their eyes wide open.

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What are your observations about the events of the last two years and what they mean? PB❯ Americans in general are onward and upward people, and we will get through anything that is thrown at us. But we are going to have to make some very difficult decisions in the years ahead. The same with Californians. In the San Francisco Bay Area, we are extremely fortunate that the region is in such demand. The best and brightest are drawn here. Our limited geography will help us, and I imagine for at least the shortterm interest rates will stay low. One of my fears is high longterm interest rates and how much money we as a nation have borrowed. Rampant inflation is good for real estate, but I don’t hope for that. Job growth is what will ultimately lead us out. Has the mindset of clients changed? PB❯ Absolutely and in a very positive way. The end of 2008 and 2009 showed all of us that having the newest this and the best that is not really important. I see a lot of our clients getting back to family values and schools and friends and taking the time to invest in their current homes instead of their next homes. The trends going forward are going to be that it’s not about having a bigger house. It’s about making a home. What would you say to young people starting in the profession or any profession? PB❯ I think to be truly successful it can’t be about you. It has to be about loving what you do. Those people who are successful in this business realize that it’s not about the commission. It is about what is best for a client. When you are starting [as a real estate agent], it’s hard to do because you are trying to pay the rent. Especially in a city like San Francisco where the barriers to entry are so great, winning a property and getting through the disclosures and inspections really is an accomplishment. There are sales involved in real estate. But you don’t sell someone a home, people know when they are home. Residential real estate is also about balance. It is a business decision, the dollar and cents side, and it is also the notion of what is home. It takes a unique person who can empathize and appreciate all of those client emotions in making such a large transaction but also understand the business side. n


The Registry July 2010 Issue  

The Registry July 2010 Issue

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