JMA Ventures LLC | Week in Review: 4/28 – 5/2
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Week in Review: 4/28 – 5/2

The American Hotel & Lobbying Association, which represents owners of 52,000 properties, has promised its members that it will launch a nationwide campaign to get federal and local governments to crack down on short-term rental operations facilitated by companies like Airbnb. The industry group says it has developed a game plan to “pre-empt” efforts by online short-term rental companies to influence tax, safety and health rules, and it will push for legislation ensuring hotel regulations are “applied equally to short-term online rental companies.” The industry group will also work with labor groups and advocates for the disabled and affordable housing, Sinders added, though she did not provide names. Sinders confirmed a report that her association told its members this week it will use public relations campaigns and lobbying efforts to “highlight the bad, unfair and in some cases unlawful business practices employed by short-term online rental companies and the lack of parity between safety, security, tax, and other requirements for hotels and short-term online rentals.” Members of the American Hotel & Lobbying Association employ 1.8 million people. While some travel data indicates the hotel industry as a whole is in a boom cycle, Sinders said smaller vendors in particular have complained that they are being hurt by short-term rental operations in residential neighborhoods. Such rentals are often technically illegal, but have nonetheless proliferated because of lax enforcement of laws. She specifically mentioned New York City, and said it is unfair that some businesses are required to adhere to health, safety and disability laws while others are not. (SF Biz Times)

Alameda is seeking new development proposals for Alameda Point that could include hundreds of homes, as well as retail and offices. The city on Thursday began accepting proposals for two bayfront parcels at the 1,500-acre expanse that was home to the former Navy base. The city previously worked with developers on plans for the site, after the Navy left in 1997. Developer SunCal pulled out as master developer in 2010, saying multi-unit housing would be needed to make a development profitable. A 1973 ordinance in the city bans new apartment and condos on the island. (SF Chronicle)

After much buzz, The Commissary, a new restaurant from celebrated San Francisco chef and restaurateur Traci Des Jardins, will open this month in the Presidio. The restaurant is slated for a soft opening on May 20, according to the Presidio Trust, and will be housed in the first floor of a former barracks building at 101 Montgomery Street at the Presidio’s Main Post. The Commissary will seat 112 people and feature “California cuisine with Spanish influences” and use locally sourced ingredients, as do Des Jardins’ other restaurants — Jardiniere, Mijita and Public House. During the day, the restaurant will be a casual spot for espresso and take-out meals and lunchtime dine-in service, and in the evening, the space will be full-service bistro built around an open kitchen. It will also have an accompanying shop selling handcrafted, artisan local foods, and prepared picnic meals can be ordered to bring out around the Presidio. The Commissary is located in what used to be a cafeteria for what was known as “infantry row” — formerly the Montgomery Street Barracks built in 1895. The restaurant is a component of a program called Presidio Foods that Des Jardins is helping to launch in conjunction with Bon Appetit for the Presidio Trust. A catering program, housed in an adjacent space at the Golden Gate Club, is also open and part of the Presidio Foods program, which aims to increase the currently limited offering of dining and food choices at the Presidio. The opening comes not along after the closing of Joseph Humphrey’s southern restaurant, Dixie, in the Presidio earlier this month. If the goal is to increase traffic to the national park, a restaurant from Des Jardins is a wise choice, said Ed Levine’s whose company, Vine Solutions, handles financial management for more than 180 restaurants. “They’re pretty darn light on food service,” Levine said of the Presidio, “But this is some of the best real estate in the city.” And an eatery from San Francisco fixture Des Jardins will broaden the market for visitors at the Presidio, he said. (SF Biz Times)

In a few years, the iconic San Francisco office tower at 555 California will cede the tallest office building title to another tower. Vornado Realty Trust, majority owner of 555, plans to rebrand the 52-story tower and two adjacent buildings to court the thriving tech tenant pool, while still maintaining the tower’s core base of finance and traditional office tenants. The question remains whether tech companies keen on South of Market will consider migrating north. Vornado’s three buildings total 1.8 million square feet and take up the entire block at California and Pine between Montgomery and Kearny. Next to the tower sits 315 Montgomery, a 16-story, 262,000-square-foot building dating back to 1922, and a 60,000-square-foot building known as “the Cube” at 345 Montgomery. Floorplates range up to about 30,000 square feet — unusually large for San Francisco office space. Already, two high-profile tech companies — software giant Microsoft and gaming company Supercell — inked leases in the buildings. The building’s anchor tenant, Bank of America, reworked its lease to retract from 600,000 to 260,000 square feet. Much of BofA’s previous space was subleased to tenants who now lease directly from Vornado. Including those transactions, Vornado completed 475,000 square feet of leasing in the last six months. (SF Biz Times)

New population figures show the Bay Area is leading the state in growth, with Santa Clara and Alameda counties ranked as the two fastest-growing in California. The figures from the state Department of Finance reported that San Jose’s population topped the 1 million mark, while San Francisco, the state’s fourth-largest city, saw a 1.3 percent increase last year, for a total of 836,620 residents. The East Bay city of Dublin was ranked the third-fastest-growing city in the state, with an increase of residents brought on by 1,100 new housing units, many of them on the city’s growing east side. (SF Chronicle)

Even as it plows forward on its new, massive Cupertino campus, Apple Inc. is gobbling large chunks of commercial real estate in Silicon Valley. The Mac maker is closing in on leases for roughly 250,000 square feet of additional office/R&D space in Sunnyvale, according to multiple industry sources. That’s on top of a couple of deals completed in recent weeks. The activity shows that Apple’s leasing appetite hasn’t been sated. The company expanded briskly as its business boomed in recent years. It also secured space ahead of the demolition of millions of square feet of offices to make way for Apple Campus 2. (SF Biz Times)

Westcore Properties continues buying and trading Bay Area real estate. The San Diego-based investor specializes in value-add deals in both office and industrial markets and has bought and managed more than $3.9 billion worth of assets since its founding in 2000. In the Bay Area, the company owns office buildings like the 24-story, former Clorox headquarters at 1221 Broadway in Oakland that it bought for $110 million in 2012 and a 163,221-square-foot former San Francisco Chronicle newspaper printing plant in Union City, which it plans to tear down to make room for 300,000 square feet of new industrial space. The firm bought numerous properties, many distressed, during the economic downturn in the Bay Area — it spent $169 million in the region in 2012 alone. In a recent deal, Westcore sold a 347,000-square-foot, two-building office complex at 1320-1390 Willow Pass Road in Concord for $55 million to Prudential Insurance Company of America and Montgomery Advisors. Westcore bought the property in late 2011 through a note sale, leased up empty space to get to more than 80 percent occupied and then sold it. (SF Biz Times)

San Francisco Mayor Ed Lee said the city is making progress on his pledge to make 30,000 new and rehabilitated housing units available by 2020. During the first quarter of 2014, 2,123 new housing units opened and 24 percent of those were affordable to low-income residents, Lee said. By comparison 2,499 new housing units were constructed in all of 2013, the mayor said. “We are making great progress toward our ambitious 2020 housing goals and our pledge to make San Francisco a city for the 100 percent,” Lee said in a prepared statement. “We are well ahead of our annual goal of completing 5,000 units a year.” Housing has become a top social and political issue in San Francisco. The roaring economy in the Bay Area has pushed home prices — especially those in San Francisco — to extreme highs. To reach its 30,000 goal, the city will use a number of different strategies, including converting city-owned property that is vacant or underused into housing. The city might also experiment with design, allow taller buildings and legalize new in-law units. Lee said his administration will track the progress it makes toward the 30,000 goal on a new website. (SF Biz Times)

A critical mass of residents is rising in Rincon Hill, a neighborhood on the south end of downtown San Francisco. The area is flush with hundreds of housing units under construction including the 299-unit, 52-story One Rincon II tower from Principal Real Estate Investors, which just started leasing units as Webcor Builders works to finish the project by the fall. The building, designed by Solomon Cordwell Buenz, is the second of two One Rincon highrises at the corner of Harrison and 1st streets. Rents start at $3,200 and go up to $4,800 for a one-bedroom apartment. The leasing office is open and some prospective residents already claimed units, but the developers plan to officially kick off marketing the units later this week. Principal Real Estate Investors, one of the largest institutional real estate managers in the United States, paid $29.75 million for the development site and kept on Michael Kriozore, the developer of the first tower, and his new firm, Urban Pacific Investors, to manage the development. The first One Rincon Hill tower, a 396-unit, 60-story building, hit the market in 2006 as condos and took about six years to sell out as the economy wavered from red hot to the worst recession in recent memory. Units ranged from one to three-bedrooms priced from the upper $700,000s to $2.6 million. Besides putting a damper on sales, the economic downturn also put the brakes on construction of the second tower, which was originally slated to move forward in 2008, but didn’t start construction until July of 2012. (SF Biz Times)

International fashion house Christian Dior will soon join San Francisco’s fashion scene with a flagship store in Union Square. The designer will open a 10,000-square-foot store at 185 Post St. in two years, after an interior renovation, according to a company statement from international property developer Grosvenor Americas. Grosvenor Americas, which leased the three floors of retail space to Dior, acquired the spot in 2005 and completed a building renovation in 2007 that layered the century-old brick building in translucent and frosted glass and upgraded the building systems to include seismic protection. Christian Dior will replace DeBeers Diamonds, which occupied the ground floor, as well as some office space on the upper floors. News of the lease comes amid a slew of designer store openings in the area, including Valentino’s recently opened store at Geary and Grant streets and Christian Louboutin on Maiden Lane. Grosvenor Americas also owns the properties at 251 and 180 Post St. in San Francisco’s Union Square shopping district, leased to retailers including Coach, The North Face, Ghurka, Facconable, and others. (SF Biz Times)

San Francisco is close to finalizing a deal to rehabilitate a collection of battered buildings on the waterfront, transforming them into new space for offices, manufacturers and artists. The San Francisco Port Commission, as soon as May 13, will be asked to approve a $100 million lease and development agreement with Orton Development Inc. to convert six buildings along 20th Street south of Mission Bay. The area is considered the most historically important cluster of buildings in the oldest working civilian shipyard in the United States. Approval from the Board of Supervisors, which is also required, could come as soon as June, which would allow ground-breaking in August. The Pier 70 buildings, formerly the headquarters of Union Iron Works and then Bethlehem Steel, were built between 1885 and 1941. Pier 70 still has an active ship repair business in its northeast corner. The rehabilitation project at Pier 70 will signal the start of the development for San Francisco’s next frontier: a 2.5 million-square-foot waterfront development that will create space for office, biotech, arts, retail, entertainment and “modern makers” or cottage industries. The Orton Development work represents a positive economic move for the Port of San Francisco, which controls 7-1/2 miles along the city’s waterfront. The port, which makes most of its money as a landlord, has had few successes with major redevelopment projects along its holdings south of the Bay Bridge. Indeed, discussions about how to renovate Pier 70 date back more than a decade. Working in parallel with Orton on Pier 70 will be Forest City, which is planning about 2 million square feet of ground-up development. Forest City might be more than two years away from breaking ground because of the approvals it needs before work can begin. Orton Development, upon securing approval, said it will begin an 18 month construction project to restore the buildings, making sure they are outfitted with all necessary seismic and infrastructure improvements to make them habitable. The transformation promises to bring new life to a corner of San Francisco that is uninviting now. The project will be paid for through a combination of Orton’s equity, a construction loan, a City of San Francisco seismic safety loan program, historic tax credits and a $1.5 million port equity investment that had been previously designated for seismic work at the site, Madsen said. (SF Biz Times)

The Golden Gate National Recreation Area wants to spend $150 million over the next 20 years on upgrades, as part of a new management blueprint for the 80,000 acres of parkland. The upgrades would include improvements to infrastructure and trails, as well as capital projects at Alcatraz, Muir Woods and elsewhere. At Muir Woods, the plan seeks to spend $15 million on projects such as upgrading the entrance to better accommodate the crowds that visit the park. The plan would also put nearly $20 million into stabilizing buildings on Alcatraz. (SF Chronicle)

A deal for Universal Paragon Corp. to develop more than 1,700 housing units of housing in a mixed-use project at the site of the former Schlage Lock factory in San Francisco has finally come together, after the city and the developer hammered out a complex financial agreement to pay for utility work and other improvements in the area. Mayor Ed Lee announced the deal Monday, after years of work on the proposed development in the Visitacion Valley neighborhood. A previous $500 million plan to redevelop the site with fewer housing units hit the rocks in 2011 when Gov. Jerry Brown and the state legislature pulled the plug on redevelopment agencies across California. That eliminated the financing tool that would have paid for infrastructure, utilities and other improvements at the Schlage site. The site has been vacant and decaying since Schlage closed it and relocated its headquarters in 1999. (SF Biz Times)

Another clue about the ancillary development around the new downtown Sacramento arena was revealed Thursday, in the form of a hotel near the corner of 5th and J streets. Representatives from Icon Venue Group and Turner Construction, firms involved in the arena construction, mentioned the hotel as another project to bid on during a pre-bid meeting Thursday for contractors looking to get a piece of arena construction jobs. “The train is very long, and there’s a lot of time to jump on,” said Tom Noonan of Icon, adding the hotel is slated to be developed and built on a roughly parallel track to the arena itself, which is set to break ground by this fall. Noonan did not share additional details, such as how many rooms the hotel might have or what affiliation it would carry. But previous arena site plans submitted to the city mentioned a 250-room hotel as part of the development. More details on the site plan could be released as soon as today, with representatives from the city and the Sacramento Kings saying Thursday in a statement to the media they still intended to release finalized plan documents at least 10 days before the city council votes on the final arena plan May 13. Mark Friedman, a developer and member of the Kings’ ownership, previously revealed120,000 square feet of retail space should open in the same timeframe as the arena, by fall 2016. A hotel coming soon as part of the arena project, while not unexpected, could be part of a mini-boom in hotel rooms being added around the downtown core in the next few years. Owners of Marshall Hotel, which neighbors the arena site, have said they plan to redevelop their building from a residence to a boutique hotel. (Sac Biz Journal)

City officials and owners of the Sacramento Kings on Thursday said they are postponing the release of final details of their agreement for the proposed arena at Downtown Plaza. Kings president Chris Granger told The Bee, “There are so many issues we need to make sure are buttoned up on what is a 35-year deal.” Meanwhile, architect AECOM will release the final site designs and plans by Dec. 23. The announcements were made late Thursday at City Hall, where potential subcontractors were attending an outreach meeting with representatives from project manager ICON Venue Group and Turner Construction. The team plans to spend $5.5 million to a public art program at the arena as part of the city’s Art in Public Places Program. (Sac Bee)

As with many private companies looking at the landscape of commercial real estate, California State Lottery officials have determined it might make more sense to buy than rent — especially in Southern California. To take advantage of building prices still below the peak in many places, the state agency has signed a four-year deal with Colliers International Sacramento to advise its commercial real estate moves. Heath Charamuga, a senior vice president with Colliers, said when the lottery was created by voter initiative in 1986, it was intended to help state schools, but no one knew exactly how successful it would be. Nearly 30 years later, the lottery has a number of leases, most of them in Southern California, even though there might be better financial terms in buying, he said. “They’re looking at the market and noticing the dip,” Charamuga said, adding buying some locations near current leases would also give the lottery the benefit of appreciation value. Another upside of the lottery buying rather than leasing locations, Charamuga said, is any savings as a result would be passed onto the state schools the lottery is meant to benefit. Statewide, the lottery leases eight different regional offices along with a distribution center in Rancho Cucamonga. The lottery owns its headquarters on Richards Boulevard in Sacramento, and for now, the deal with Colliers wouldn’t have an effect on properties here, Charamuga said. Charamuga will head the sales team for the lottery, along with Dave Herrera of Colliers. (Sac Biz Journal)

A couple dozen properties in Sacramento stalled by redevelopment’s end are out of limbo, but dozens more will be delayed for some time to come. The California Department of Finance’s approval of 25 properties as good for “government use” allowed the city of Sacramento to formally take possession of them this week, from the successor agency established when the state killed redevelopment three years ago. But Leslie Fritzsche, the city’s economic development manager, said the fate of about 100 others depends on the same state agency approving the city’s long-term management plan for those properties, including a few downtown strongly eyed for development. “With some, like the 800 block of K, we’ll be actively looking for development proposals, and with the rest we’re working toward sale and disposition,” Fritzsche said. She added the state hasn’t given the city a sense of how soon it might respond to the long-term plan for those other properties. And there’s one other complication, she said: The property on the 700 block of K Street, also a redevelopment site, is the subject of litigation between the city and state. “We believe we have a contractual obligation for doing something, and they don’t agree,” she said, adding the lawsuit probably is delaying the state’s sign off on the more comprehensive city plan for redevelopment properties. “They’re really just being a stickler, to put it nicely.” The 700 block, which would be on the doorstep of the pending downtown arena, has a fleshed-out development proposal called The Kay, a combined effort of CFY Development and D&S Development. Housing, a live music venue and other retail spaces are in the proposal. Fritzsche said it’s possible the city will get more clarity within about a month, with a May 30 hearing on the 700 K litigation set for Sacramento County Superior Court. (Sac Biz Journal)

There’s another twist in the competition between two development proposals for a high-profile piece of property in midtown Sacramento, after the school district making the decision changed course on discussing the proposals Thursday. Rachel Smith, a spokeswoman for a mixed-use housing and retail proposal for the site said in an email that the Sacramento City Unified School District would pull a closed-session item on the property and refer it to a subcommittee for discussion at another time instead, though a district spokesman couldn’t confirm that. “I’m unaware of any formal decision to appoint a subcommittee, though I am aware that there may be a recommendation of that nature,” district spokesman Gabe Ross said in an email. “We won’t know more until tomorrow night’s meeting. As far as the process moving forward, I don’t believe any of that has been determined.” Originally, trustees were set to discuss, though Ross said not make a final decision, on two proposals for the former Jefferson Elementary School site at 1619 N St. The one from Smith’s group is called The Jefferson Midtown. Another called the California Tribal Life Center would include a tribal health center, nonprofit office space, a California native tribe cultural center including event space, and affordable housing. Since both proposals emerged publicly this week, proponents have engaged in a war of words about the merits and downsides of each. In a statement emailed by Ross, interim district Superintendent Sara Noguchi said the district was encouraged by the strong interest in the site, which has been unused for several years. (Sac Biz Journal)

Another midtown Sacramento housing project took a big step into reality Tuesday, as demolition crews began tearing down the vacant apartments on the northwest corner of 16th and N streets on the site of what will be The Warren mixed-use apartment project. Following demolition, the next month or so will be spent removing trees on the site and excavating five feet of soil. The soil is being done under a U.S. Environmental Protection Agency grant to clean up lead remaining on the site. By about the second week of June, foundation work for 118 apartments should get underway, around the same time the Capitol Area Development Authority will transfer the property to developer partnership UrbanCore Integral, said CADA deputy executive director Marc de la Vergne. In addition to the market-rate apartments for rent, the project will have 5,200 square feet of first-floor retail space, and two levels of parking, one at ground level and just below, de la Vergne said. Construction is estimated to take 13 to 15 months, which would make the building ready for occupancy by about mid-summer of next year. “This is bringing another 118 units to an area where we’ve just opened some at 16th and O, and there are some more coming at 16th and P,” de la Vergne said, referring to the Legado de Ravel and 16 Powerhouse projects, respectively. A few blocks west on R Street, the Warehouse Artist Lofts represent more housing and commercial development CADA is involved in, while Legado de Ravel has finished leasing half of its 84 units. But it’s not so clear what the timing will be for CADA’s next intended project, apartments at 14th and N streets facing Capitol Park, he said. “We look forward to getting started on 14th and N,” de la Vergne said. “But we haven’t even begun the process of pre-development there.” (Sac Biz Journal)

Of the two proposals the Sacramento City Unified School District is considering for an inactive site at 16th and N streets, City Councilman Steve Hansen said the city’s perspective is biased toward the one that can get moving soon. Beyond that, said Hansen, he wouldn’t offer an opinion on the proposals the district’s board of trustees is scheduled to discuss in closed session Thursday. Hansen’s district includes midtown Sacramento and the site being scrutinized for redevelopment. “At this point, it’s a school board decision, and both of the proposals are compelling,” Hansen said. “The board has a difficult decision to make.” One proposal, called The Jefferson Midtown, would redevelop the former elementary school site with housing, retail and some rehabbed office space in the former school building itself. The other, a partnership between Domus Development and the Sacramento Native American Health Center, would include a health and cultural center, affordable housing and nonprofit office space, as well as a site to host events. Developers for The Jefferson have said their project is a better economic development boost, while proponents for the health and cultural center said it’s a better deal for the district and could be a potential draw for tourism. Hansen noted the land was at one time planned for a multicultural celebration project called the California Unity Center that didn’t move forward. But otherwise, it’s been largely unused for decades, he said. “It’s a critical corner,” he said. “If either team can deliver, that meets the needs of the city.” (Sac Biz Journal)

An industrial warehouse-type building near downtown Sacramento has a new owner, but it’s not clear yet what the plans are for its future. The 12,480-square-foot building at 712 R St. was bought earlier this month by an unidentified local owner who owns other buildings and businesses nearby, said David Brandenburger of Cornish & Carey Commercial Newmark Knight Frank. The building once housed the state printing office, said Brandenburger, who brokered the $698,000 sale on behalf of the buyer. “They’ve just purchased it and are figuring out what to do with it,” Brandenburger said. “It’s totally open ended.” The building was previously owned by a family trust that inherited it but wasn’t in a position to become a landlord, Brandenburger said. The building had an original asking price of $940,000. Though the space is big enough for either warehouse or industrial space, it could also be attractive as a gym or fitness spot. The building also could eventually be redeveloped for retail use, similar to others farther east on R Street that have both tapped into and expanded a burgeoning arts and nightlife district in the neighborhood. (Sac Biz Journal)

Tahoe Expedition Academy’s road toward realizing a lakefront school has hit another speed bump. In order to construct a 15-classroom campus that includes a performing arts center and waterfront interpretation center, the private K-12 school planned to buy 1.4 acres of property off Highway 28 that includes the Crown Motel, Falcon Lodge and the roadside portion of the Goldcrest Resort. An issue with the Falcon Lodge, however, will postpone those plans, said D.C. Larrabee, co-director of the adventure-based, experiential learning school. John Rogers, an attorney with Incline Law Group, which is representing Falcon Lodge owner East Bay Investors, LLC, said the issue stems from the property’s title. East Bay Investors acquired the Falcon Lodge through a foreclosure action, he said. According to legal documents filed with Placer County Superior Court, foreclosure happened in November 2012. However, Fredrick and Linda Hodgson, who bought the property in July 2000, are claiming wrongful foreclosure and that they are the current owners of the lodge. The matter is in litigation. The Falcon property is intended for parking, while the Crown Motel would be remodeled to create the school. “(The lodge is) a very fundamental piece of property,” Larrabee said, given the public’s traffic/parking concerns with having a school in the heart of Kings Beach. That concern is shared by representatives on Placer County’s North Tahoe Design Review Committee, who’ve requested a traffic analysis for the project, Larrabee said. A change in land use also needs to be approved by the Tahoe Regional Planning Agency governing board.That includes purchase of the Crown Motel which, in the meantime, will continue normal operations. Originally, TEA hoped to break ground this spring to have the campus ready for Sept. 1. The academy has been looking for property for more than a year after outgrowing the facility it rents at 8651 Speckled Ave. Since opening in 2011, the school has gone from 74 students to 134, according to previous reports. The proposed campus is anticipated to serve up to 250 primary and secondary school students. TEA announced the proposed campus in January, drawing a mixture of support and concern from community members. The school has raised roughly $12 million for the project, which is expected to cover the cost of purchasing the land and remodeling. (Sierra Sun)

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