Apple ‘spaceship’ neighbors: Some say life has been hell

SUNNYVALE — At the end of Nightingale Avenue, a tall yellow brick facade now blocks the view of the Santa Cruz Mountains to the south. Residents call it the “prison wall.”

For Apple, the facade is part of the 100,000-square-foot wellness center at its brand-new “spaceship” campus.

But for some of the Nightingale residents, the prison wall — nicknamed for its drab color — symbolizes four years of pent-up frustration living next door to Apple’s huge construction project.

As Apple puts the finishing touches on its $5 billion campus set on 175 acres, Sunnyvale’s Birdland neighborhood has become a microcosm of the tensions that can erupt as tech expands and residents deal with clogged streets, fewer parking spaces and higher housing costs.

More from The Mercury News

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NAI Northern California’s Jordan Geller Closes Back to Back Sonoma Apartment Complexes

SONOMA – January 2015 – NAI Northern California announced the sale of two Sonoma apartment buildings this month, another closing shortly, and a 4th coming to market. The closed transactions sales prices are $2,850,000 for 16 units and $1,498,000 for 10 units.

The well-located 16-unit at 885 Broadway, is a half mile from Sonoma’s downtown Plaza. While current rents are below market, after capital improvements the buyers expect significant rent growth. The complex will also benefit from the proposed Sonoma Gateway Commons project, planned for the northeast corner of Broadway and MacArthur.

The 10-unit at 120 Buena Vida Court is in the El Verano neighborhood of Sonoma with below market rents as well. This rental sub-market has vacancy under 4%. That demand fuels a plan to potentially add units to the large lot.

NAI Northern California has another multi-unit Mill Valley property currently under sales contract near asking for $3,320,000 and a 3.27% cap rate that is scheduled to close in the coming weeks. Joby Tapia is handling that sale and has another large multi-family asset that will be brought to market shortly.

President of the firm, James Kilpatrick added, “As we continue to see competition for high quality assets in core markets, real estate professionals like Jordan Geller and Joby Tapia may be suggesting to their clients that it’s a good time to sell assets–particularly if they have identified larger or add-value opportunities to exchange into”.

Jordan is a current member of the San Francisco Urban Land Institute and serves on a committee to explore increased housing density along San Francisco’s transit corridors for the San Francisco Housing Action Coalition. Joby has over 15 years experience managing commercial and multifamily assets and is a CAA certified instructor for CCRM designation coursework.

About NAI Northern California

Named a Top Commercial Real Estate Brokerage Firm by the East Bay and San Francisco Business Times, NAI Northern California prides itself on its accomplishments, culture and growth. With three offices in the Northern California Bay Area and 385 worldwide, NAI Global is the largest managed network in the world. For more information regarding these sales and other properties in the NAI portfolio, please contact (415) 226-0360.

Bay Area Retail Real Estate: 2014 Year-End Perspective

Compiled at the International Council of Shopping Centers (ICSC) Idea Exchange Meeting.

Napa, CA – November 21-22, 2014

By Mary Alam, MBA
Senior Associate
NAI Northern California



The San Francisco Bay Area continues to be one of the hottest real estate markets in the US and is the number one development market in the country. The phenomenal growth of the office sector in Silicon Valley and San Francisco, led by the high tech industry, has generated increased demand for multi-family housing. As long as millennials have not reached the age of settling down and starting families, they want to stay mobile and are not interested in buying houses; as a result, demand for new rental and condo multi-family developments will continue. In San Francisco alone, there is an overall shortage of hundreds of thousands of multi-family units. This shortage will contribute to the continuation of the development activities for some time to come and create consistently strong demand for retail space.

The area in general has experienced a marked increase in retail rents. For example, rents in the Silicon Valley have gone as high as $65-$70 for small spaces and $30 for big box space. In San Francisco, retail rents can range from $38 per square foot on average all the way up to over $125 plus per square foot for a prime location. More retail space is slated to come online with the new residential developments planned in SF but restrictions to formula retail have been further tightened to include companies with 11 stores or more worldwide.

For the shopping center sector, the construction of brand new centers has been largely hindered by prohibitive entitlement costs that include impact, permit, planning and site utility fees. These can range from $6.50 per square foot to $41 per square foot for a 15,000 SF building. As a result, investors and developers are focusing their attentions on acquiring distressed centers and repositioning them by way of adaptive re-use. This is a much less costly approach that can ensure them a successful exit strategy and the necessary upside and return their investors require.

Bay Area Sub-Markets:


San Francisco:

It is one of the hottest markets in the country. With more than 6.3 million square feet of entitled office space and over 11,382 residential units, entitled or planned, SOMA, Mid-Market and Mission Bay will witness an increase in employee count in the range of 20,000 to 40,000 people and around 17,000 new residents. With a low unemployment rate of 4.4% and very low retail vacancy rate of 2.1% in downtown San Francisco, street level retail is now competing with office space. As a result of the high demand, rental rates can be seen in the range of $38 on average, with high end pockets such as Fillmore Street leasing in the $70-$120 per Square foot and Union Square rents easily exceeding $125 per square foot. From new luxury retailers such as Christian Dior leasing approx. 10,000 SF to outlet stores sitting side by side with their flagship stores, such as Nordstrom Rack, Last Call by Nieman Marcus and Sack’s Off 5th, the demand for retail is great. There is also overwhelming demand for food locations in the city famous for its various restaurants and eateries. For example, a major Singapore restaurant firm with international ties has spent $14 million for the buildout of the Crystal Jade Jiang Nan restaurant at The Embarcadero 4 in the Financial District. Food emporiums are expected to gain traction with the concept of a store within a store like the Ferry Building or Oxbow Market in Napa. Due to its affordability over the Manhattan retail market, San Francisco will continue to attract first time international luxury goods providers looking for a foothold in the US. There are predictions that the San Francisco downtown will become more crowded, with activity in some streets resembling Hong Kong or Manhattan. This is great news for real estate in general and the retail sector in particular.

East Bay:

This region is experiencing an extremely active shopping center development activity with major developers such as Simon properties, Carmel Partners, Merlone Geier, Hall equities and many others currently overseeing large scale projects. Among them are:

  • The Shoppes at Livermore (120,000 SF) which will increase the phase II of the Livermore outlets and yield a total of approx. 900,000 SF of retail (Armani, Prada, etc..),
  • Pacific Pearl, the Vintage and Persimmon Place (157,000 SF) in Pleasanton and Dublin.
  • City Center in Bishop Ranch in San Ramon with office, retail and hotel development.
  • In Walnut Creek, an additional 300,000 SF are under construction in Broadway Plaza with a new Safeway prototype and 200,000 SF at the Orchards and Center Place South (developed by Hall Equities, Essex Property Trust and Laconia Development).
  • The Shops at the Ridge in Oakland with 275,000 SF which include a state of the art 70,000 SF Safeway.
  • Alameda Landing by Catellus Development is underway in Alameda.
  • In Fremont, Pacific Commons, the Block and Downtown Fremont are among the major projects underway.

South Bay:

As the heart of Silicon Valley, the area has seen an overwhelming boom in real estate. There are approx. 14 million square feet of class A office developments under way in the area. This has generated more retail activity and rents in the $65-$70 per square foot on a NNN basis in certain areas. Among the retail centers being developed are:

  • Valco Mall
  • Homestead Square
  • Santa Clara Town Center
  • Brokaw Plaza
  • The Village at San Antonio Center, a mixed use project by Merlone Geier in Mountain View with retail under office and residential and a flagship Safeway Store.
  • Redwood City is also undergoing major residential developments with Caltrain accessibility.

North Bay:

Coddington Mall in Santa Rosa is experiencing major success with a newly opened Target store that has already exceeded all sale projections and the signing of the Unleashed concept by Petco, along with Whole Foods, Texas Roadhouse and a very successful Chipotle.

In Napa, the exciting Napa Center around First and Randolph is underway; it is a walkable multi-purpose urban district and leisure destination with 275,000 SF of retail, hotel and office space. Other projects in the area include Oak Knoll crossing, Napa Crossing and Riverpark Center. Retail rents range from $48-$60 in Marin, $30-$36 in Sonoma and Napa, higher in class A centers. The new Smart Train connecting Cloverdale, Santa Rosa, Rohnert Park and Petaluma to the Larkspur Ferry is expected to bring major residential and retail activity to the area.

Sacramento:

With an average home price of $340,000, the Sacramento area is extremely affordable and benefits from the major economic activity in the Bay Area. Its retail vacancy rate is still lagging at 10.4% but there are developments that indicate renewed retail activity. The Sacramento Kings entertainment complex in downtown Sacramento has broken ground and will consist of an arena, hotel and retail space. March Madness events are scheduled to take place at this venue in 2017. Rents in the Sacramento area are, as expected, lower than the Bay Area and they range from $1.00 to $2.00 NNN in B and C Centers and from $2.25 to $3.50 in Class A centers.

The San Francisco Bay Area continues to create opportunities in the real estate sector from higher leasing rates to increased property values. Major national and regional investors are undertaking investment and development projects that will continue to change the landscape of the real estate market. For real estate owners, there is an opportunity to sell assets at prices previously not possible. Owners of aging shopping centers should seriously consider selling at this time to take advantage of the high demand and investment funds available. For these investors, the repositioning of existing real estate acquisitions can create value and higher returns without the cost of new developments.

Mary Alam is a Senior Associate at NAI Northern California who specializes in leased investments with a focus on retail, office, and hotel properties, as well as redevelopment opportunities. Below are some of her most recent deals:

  • 3 High end retail condos, Mid-Market Street, San Francisco – $4,995,000
  • Mixed-use, Mid-Market Street, San Francisco – $4,850,000
  • Confidential Redevelopment Property, San Francisco – $8,500,000
  • Vacaville Town Center – Vacaville, CA – $5,135,000
  • Star Plaza – Sacramento, CA – $3,500,000

For more information, please contact:

Mary Alam, MBA

Senior Associate

CA Broker’s License

BRE# 01927340

malam@nainorcal.com

Cell: 415-297-5586

Direct: 415-358-2111

Market Still Pushing Higher

Multifamily property sales prove a growing market in the East Bay

By Grant Chappell

In wrapping up another strong year on multifamily property sales, the numbers show that the market is still pushing higher. Alameda, Berkeley and Oakland all posted strong numbers on activity, total volume and average sales price.

Since mid to late 2012, we have consistently reported that the market clearly had turned, and the worst was behind us. Fierce competition on market deals continues to push bids over the asking price – a practice traditionally less common in the 5+ unit segment.

Loans

Historically low interest rates and the perception of higher rents on unit turnover seem to justify the low cap rates paid all over the Bay Area.

Al Stephens, a veteran broker and property owner, views this practice as “rolling the dice” when obtaining a 5-year fixed loan in acquiring a property. Low rates are also a catch-22 for owners with adjustable loans, because payments are lower than a fixed rate on today’s rates. A fixed rate loan on a 5+ unit property will entail a penalty to pay it off early or before the fix rate period expires. With values still rising and rents strong, there are compelling reasons to sit back and “see what happens” with respects to interest rates and property values.

In speaking to Nils Ratnathicam of The Rincon Group, an independent commercial real estate banking firm, he sees more options for property owners in 2014.

“The trend so far in 2014 has definitely been the influx of new multifamily lenders into the Bay Area and Los Angeles markets,” Ratnathicam said. “These markets have been hyper-competitive for a few years now, so it’s been interesting to see the creative terms and features these new lenders are offering to earn business and market share.”

Whether that means lenders are more aggressive on debt coverage ratios, loan to value or interest rates, clearly many banks want a bigger piece of the market.

Compared to other parts of Northern California, the Bay Area continues to attract capital from around the world.

I recently spoke with Eli Cohen, a principal at Cohen Rojas Capital Partners, a private investment firm with holdings all over Northern California, about their take on the market in Northern California.

“As distressed opportunities are few and far between in Sacramento, we shifted our strategy to the East Bay in the last 18 months, primarily picking up value add assets in Berkeley and the walkable neighborhoods in and around downtown Oakland,” Cohen said. “While rent growth has been sluggish at best in Sacramento, we have seen our rents in the East Bay pick up, along with the quality of tenants we are able to attract.”

According to Property Radar, Notice of Defaults are down 33% from a year ago in Alameda County and down 44% over the same period in California. Notice of Trustee Sales are down 70% in Alameda County over the last year and approximately 60% over the same period in California. Finally, REO inventory is down about 32% in Alameda County over the last year and down about 53% in California.

2 – 4 Units

In Oakland, we saw the average price increase by 20% from $399,000 in Q4 of 2012 to $477,000 in Q4 of 2013. Even more remarkable, the number of transactions increased to 122, compared to 112 a year ago, and up 20% compared to last quarter.

When I first started writing this column back in 2006, it was normal to see stagnant or declining activity going from Q3 to Q4. Aside from 2011, every year since 2008 has bucked this trend and seen activity increasing to finish the year.

In Berkeley, the average sales price jumped about 12% to $827,000 from $739,000 a year ago, and a slight dip from $850,000 last quarter. Strikingly, Berkeley saw a big increase in number of transactions in Q4 of 2013, recording 34 property sales, compared to 21 a year ago and 19 last quarter.

We saw one of the highest sales in the last year on a 4-plex at 2712 Stuart Street, selling for $2,050,000. Comprised of four 4-bedroom, 2-bathroom units and not subject to rent control due to 1988 construction, this demonstrates a “flight to quality” for assets in core markets.

In Alameda, we saw a slight dip in transactions with 11 properties trading hands, compared to 14 in Q4 of 2012 and 13 last quarter. The average increased nearly 28% to $684,000 from $536,000 a year ago, and a minor decrease from $697,000 last quarter. Similar to Berkeley, a few high sales north of $1 million dollars will skew the average price. As you will read below, the market 5+ unit properties in Alameda has drawn substantial attention from investors.

5+ Units

In Oakland, total volume decreased approximately 15% to $39,600,000, compared to $46,350,000 a year ago. This is an even larger drop of 25%, compared to the $51,975,000 last quarter. We saw almost no change in price per unit at $107,000, and about a 10% increase in price per square foot compared to a year ago. Compared to last quarter, we were down 3% on price per unit and 12% down price per square foot.

I reacted positively to these figures initially, as the last two quarters very closely mirrored 2012’s Q3 and Q4 figures, when the expiration in federal capital gains rate was due to expire. I sense many owners are seeing prices at which they are happy to sell, in spite of capital gains, as prices are much higher than 2011 and 2012.

In Berkeley, total volume substantially increased by 50% to $22,465,000 from $12,600,000 a year ago. Price per unit also increased about 20% to $192,000 per unit. Berkeley also saw modest increases in price per square foot, to $267 per square foot, compared to $236 per square foot a year ago.

Three properties traded north of $300 per square foot, and one just over $500 per square foot. A 25-unit building at 2747 Haste, directly across from the Berkeley campus, sold for about $276,000 per unit and $325 per square foot, but also in the neighborhood of 15 – 16 GRM on actual income at time of sale. I give a range, as there were some vacancies at time of sale and upside in utilizing common area for additional income.

A building at 2537 Fulton Street sold just above $500 per square foot and $361,000 per unit, further attributing to the all-time highs we are seeing on both 2 – 4 unit and 5+ unit segments in Berkeley. The building on Fulton Street was completely gutted, fully remodeled and seismically retrofitted. It truly was an impressive project and reflects the high demand for assets near the Berkeley campus.

In Alameda, there was a dramatic jump in volume of nearly 237%, with $16.5 million in sales, compared to 6.9 Million a year ago.

Just over $10 million in sales was allocated to two transactions: 1704 Central Avenue (30 units) and 400 Marion Court (20 units). Both of these properties traded at just over $200,000 per unit and in the high $200 per square foot to low $300 per square foot range. There was also a 30% jump in average price per unit to $175,000 and a 20% increase in average price per square foot to $244.

The Future of the Market

Moving forward, I continue to maintain my excitement for where the sales market is heading. Tight inventory of properties for sale and low interest rates will continue to push values higher.

1031 buyers faced with paying higher capital gains will continue to accept lower returns on properties. Competition for existing buildings will remain fierce until more inventory in the form of new units hit the market, or demand for existing housing wanes.

Until then, we are likely in for another exciting year of record sales.


Grant Chappell
is the Vice President
of NAI Northern California. He can be
reached at grant@nainorcal.com
or 510-972-4941.