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Downtown San Jose, Oakland opportunity zones attract investors, spur development plans amid Google effect

Developers eye projects in downtown San Jose and parts of Oakland, bolstered by tax incentives keyed to opportunity zone.

Developers and a new crop of investors are eyeing projects in downtown San Jose and parts of Oakland, bolstered by opportunity zones enabled by President Donald Trump’s tax-cut initiative.

Potentially the first project in a local opportunity zone would be development of a brand-new office and retail complex on South First Street in downtown San Jose at the site of the old Lido night club, said Erik Hayden, president of Urban Catalyst, a company that as formed an opportunity fund that would provide cash for selected developments in designated areas.

“These opportunity zones are ways to create greater economic activity in lower-income areas,” Hayden said. “They were originally presented to the Obama Administration but didn’t get a lot of traction. Then they became part of President Trump’s tax cuts and jobs act. San Jose Mayor Sam Liccardo very successfully lobbied Gov. Jerry Brown to get downtown San Jose included.”

Investors who plunk down cash for an opportunity fund can “defer or eliminate federal taxes on capital gains,” according to information on the state’s Department of Finance site.

The Lido night club site, currently a two-story building at 26 and 30 S. First St., is now owned by a partnership led by Gary Dillabough, who has emerged as one of downtown San Jose’s most active realty investors and developers. Among the properties Dillabough-headed groups have bought: the nearby Bank of Italy building, a historic office tower at the corner of South First and East Santa Clara streets.

 

 

 

Read more on The Mercury News

 

 

 

Owner who demolished Neutra house ordered to build exact replica

Ruling comes on the heels of the proposed Housing Preservation and Expansion Reform Act.

Designed in 1936 by Richard Neutra, the all-white, two-story Largent House in Twin Peaks was one of the few conceived by the noted architect in the Bay Area. For years it stood as a respected example of modernism, and as a dramatic and different construction when it went up during the Great Depression.

Today the house is no more. Over the years, the home suffered ill-advised renovations before falling victim to a demolition crew in early 2017 after it was purchased and illegally razed.

Now the city is fighting back.

According to a directive from the city’s Planning Commission, the owner must build an exact replica of the home.

“In a unanimous 5-0 vote late Thursday night, the commission also ordered that the property owner—Ross Johnston, through his 49 Hopkins LLC—include a sidewalk plaque telling the story of the original house designed by architect Richard Neutra, the demolition and the replica,” reports the San Francisco Chronicle.

Johnston explained to the San Francisco Planning Commission that, for $1.7 million, he had purchased the house “as a family home that would enable my family of six to move back to San Francisco.” He went on to say that he had been “stuck in limbo for over a year,” claiming that the property had already been renovated by former owners over the years, thus disqualify it from historic designation status.

No dice. The city wants to make an example out of Johnston.

 

 

Read more on Curbed SF

 

 

 

Trump is getting involved in Opportunity Zones, and experts think that’s a good thing

Opportunity zones have become the darling of real estate investors since their adoption last year, but the still-under-the-radar program is poised to receive a lot more attention, and possibly scrutiny after it was promoted in the Oval Office last week.

President Donald Trump’s signing of an executive order to push more federal resources into the Opportunity Zone program is a step in the right direction and could bolster the little-known tax incentive program and the distressed communities that benefit from investments, experts said.

“I think investors in the marketplace are going to be excited that there are going to be a number of new federal benefits aligned to these zones,” Develop founder Steve Glickman said.

Glickman is a former Obama administration official and one of the original architects of the Opportunity Zone program, which was enacted as part of the Tax Cuts and Jobs Act of 2017.

“Frankly, these zones need a lot more than private capital,” Glickman said. “They need infrastructure investment, they need to deal with crime, workforce training, and other strategies and dollars. Opportunity zones were always meant to stimulate that kind of holistic activity not just on a federal level, but on a state and local level.”

Erik Marks, a Seattle-based commercial real estate attorney and founder of Opportunity-Funds.com, a website that tracks opportunity zone funds and designated areas, said the executive order still does not address the current shortcomings and problems that are present from people trying to do opportunity zone deals now.

“I think the regulation may be useful, but this is not a problem-solving regulation,” Marks said. “I don’t know what his strategy is, but I think when there are opportunity zone successes, he has a clear opportunity to put himself and his Cabinet at the locations for the photo opportunity. I don’t mean to say that in a derogatory sense … This is to make sure [everyone knows] he’s still part of it.”

For the past year, the at-first unheralded Opportunity Zone program, passed last year as part of Trump’s $1.5 trillion Tax Cuts and Jobs Act, has flown under the mainstream radar.

The program’s goal is to generate economic development in the form of the redevelopment or the development of market-rate housing, affordable housing, new offices, retail buildings and businesses in these communities.

 

 

Read more on Bisnow

 

 

Oakland may require landlords to retrofit seismically unsafe apartments

Oakland may soon require hundreds of old apartments to be seismically retrofitted in an effort to prevent a mass collapse of buildings in the next big earthquake.

The retrofit rules would apply to soft-story residential buildings: multiunit, wood-frame structures with weak first stories built before 1991. An apartment with garage parking in the ground floor or street-level retail could fall into the targeted category.

Such buildings are prone to collapse during earthquakes, when the combined weight of shaken upper levels becomes too much for the vulnerable first story, as Loma Prieta proved in 1989 and Northridge in 1994.

“You look at photos of (San Francisco’s) Marina District after ’89 — quite a few buildings looked like three stories when they used to be four,” said Thor Matteson, a structural engineer of the Bay Area firm Quake Bracing.

Oakland is believed to have more than 24,000 housing units in 1,400 to 2,800 soft-story buildings, defined as those with at least five units and two to seven stories, according to city estimates. The first step of the ordinance proposed by City Councilman Dan Kalb and Mayor Libby Schaaf involves finding out which buildings must be retrofitted and which are exempt, such as those that have already completed the work.

Building types would be divided into three tiers, and each category would be on a different timetable. Owners would have four to six years to complete the retrofit work.

Read more on the San Francisco Chronicle

Oakland’s building boom is giving rise to robos, virtual reality and other construction tech

With the building boom in full swing in Oakland, many contractors are using different technologies from productivity software to robots to improve productivity, efficiencies, and job-site safety.

Contractors that are ahead of the game are using drone technology, 3D modeling and building information modeling, virtual reality, print camera technology and mobile-friendly software, such as PlanGrid, which digitizes building plans and makes them accessible on any device. The startup was just bought by AutoDesk for $875M.

Nationwide, contractors are turning to these technologies to create better efficiency, supplement the workforce during a skilled-worker shortage and reduce mistakes and project costs.

Construction technology is still new to many contractors in Oakland, and it hasn’t yet been fully implemented. Because of this, some contractors are still running up against a lot of rework due to poor communication, PlanGrid Western Region Customer Advocate Ross Wagner said.

“Business out here hasn’t had the growth that San Francisco has had … but overall there certainly are people who are ahead of the curve in Oakland,” Wagner said. “The growth curve is just a little bit later.”

He said technology is allowing contractors to work together and increase productivity without having to go back and forth to the trailer to get information needed at the job site.

 

 

Read more on Bisnow Oakland

 

 

A sample of SF waterfront redevelopment concepts

The Port of San Francisco’s “request for interest” for 14 waterfront structures within the Embarcadero Historic District is an outgrowth of a larger effort to update the port’s Waterfront Land Use Plan.

That effort began in 2015 and should move to environmental studies next year. The goal for the requests is to try and begin making plans to revive specific piers, so work could begin soon after an update is approved.

Respondents include restaurateurs seeking space, cultural entrepreneurs, and developers or design firms eager to take part in future projects. The full set of 52 responses can be found at www.sfport.com, but here are six examples that show the range of ideas.

 

Read more on the San Francisco Chronicle

 

 

Downtown San Jose developer drops hotel, apartments from massive Museum Place project

The developer behind Museum Place, a 1.4 million-square-foot downtown San Jose mixed-use development and Tech Museum expansion, is simplifying the project, shedding the previously planned hotel and residential units in the project.

Plans submitted this week to the city of San Jose show that investor and developer Gary Dillabough, who took over the project from Insight Realty earlier this year, is looking to reconfigure the previously approved tower by increasing the office space from 250,000 square feet to 850,000 square feet on the 2.3-acre site at 180 Park Ave., where Parkside Hall currently sits.

“The reality of the situation is that when you are trying to build a hotel, residential space and office, you can’t do all three in a world-class fashion, and our belief is that we want to build a world-class office tower,” Dillabough told the Business Journal in an interview Thursday morning.

That means the previously planned 184-room Kimpton Hotel and the 306 residential units that San Jose-based Insight Realty had gotten approved by the city last year would be no more. The project is now estimated to rise to about 19 stories — down from the currently approved 24 stories — and would still include parking and between 15,000 square feet and 20,000 square feet of retail space on the ground level.

Dillabough, who has become a major property owner in Downtown San Jose over the last year-and-a-half after setting off on a buying spree in the area, says he is still interested in hotel and residential projects in the city, just not at Museum Place.

“We still think the city needs housing and hotel uses, but we think they would be better in standalone buildings,” he said.

Read more on Silicon Business Journal

Are food halls a magic elixir for retail owners?

The concept of the food hall has taken deep root in U.S. retail properties, with scores up and running and hundreds in the pipeline.

Though a popular addition for struggling retail properties, celebrity chef Todd English said that without the right approach, food halls are not always the solution for owners. English spoke at the recent Second Annual International Council of Shopping Centers-Baruch College Real Estate Conference, as reported by Real Estate Weekly.

He warned that some food halls are merely “glorified food courts with better options.” He further called food halls a WeWork model, a kind of coworking space that “has to be about more than just food.”

Food halls are a draw because of their perceived authenticity, as local eateries, healthier options and craft breweries edge out standard food court fare (fast food, that is).

While not every food hall is going to feature chef-curated or otherwise expensive options, they have to be creative in some way, English said during the ICSC conference. “It’s not just another great turkey sandwich or croissant, or whatever the latest trend is, it’s something that brings people in.”

For retailers, a successful food hall is thus not a matter of simply setting up a food hall. With the increasing number of food halls, they too need to stand out to be competitive.

 

 

Read more on Bisnow

 

‘Monster in the Mission’ housing proposal back in new form, but with same old opposition

The developer behind a long-stalled mixed-use apartment complex above the 16th Street BART Station in the Mission District has a new plan, but so far it is being met with the same staunch opposition as previous iterations.

Maximus Real Estate Partners, which owns the 57,000-square-foot site at the southeast corner of 16th and Mission streets, has filed a revised design that calls for two 10-story market-rate buildings — one on Mission Street and one on 16th Street — totaling 285 units, as well as 46 affordable units arranged in a row of five-story townhomes along Capp Street.

The affordable units would be given to the city, and the rents spun off from that building, roughly $1.15 million a year, could be used to help subsidize rents in other nearby buildings in the rapidly gentrifying area.

The revised project, designed by Skidmore, Owings & Merrill, also scales back some aspects of the project, which critics have long dubbed the “Monster in the Mission.”

The 163-unit mid-rise on Mission Street would be moved back 15 feet to expand the usable space on the BART plaza by 40 percent. The three buildings would each have a district architectural style — one green tile, one red brick and one wood — to break up the massing and better fit into the character of surrounding buildings, project architect Leo Chow said.

 

 

Read more on SFGate

 

 

Bay Area tops U.S. in new office space, but lags in housing starts

 The Bay Area is a hot place to build cubicles, conference rooms, and office suites. But don’t look for as many hammers pounding out new homes, condos, and apartments.

The region is expected to open 18.2 million square feet of office space in 2018 — tops in the nation and more than New York City and Dallas combined — while home, condo and apartment building has grown only modestly.

More work space, more jobs and more people chasing a limited supply of homes is expected to add more steam to the pressure cooker of the Bay Area housing market.

“It’s encouraging that so many respected employers are investing in Bay Area jobs and immigration growth” said Carl Guardino, CEO of the business-backed Silicon Valley Leadership Group. “But we all recognize that jobs need a place to go home and sleep at night.”

The region created six times as many jobs as housing units between 2010 and 2015, according to a study by the leadership group and the Silicon Valley Community Foundation. The increased housing pressure has forced lower-income workers out of the region at much faster rates than higher paid workers, even as jobs go unfilled.

The run up in commercial development is led by major office openings in the South Bay, according to a survey from real estate data company Yardi Matrix. The big projects in 2018 include the official, complete opening of the 2.9 million square foot Apple Park in Cupertino, Park Tower at Transbay and The Exchange on 16th in San Francisco totaling 1.5 million square feet, and Facebook’s MPK 21, a half-million-square-foot campus designed by Frank Gehry in Menlo Park.

Other major developments underway include the Voyager property developed by Nvidia in Santa Clara, Microsoft and Google projects in Mountain View, the Stoneridge Mall Road project in Pleasanton, and Moffett Towers in Sunnyvale, according to Yardi Matrix.

The real estate data firm estimates that commercial openings in Santa Clara County are up 6.5 percent over the same period last year. The San Francisco and Oakland metro has seen three times as much commercial space open up this year compared to last year.

 

 

Read more on The Mercury News