One of my favorite condo developments in the Bay Area is the Ellington located in Jack London Square of Oakland. Units range from low 300k to over 1M as you will read about. The first $1MM+ condo since 2008 has been sold recently there, a penthouse on the 15th floor covering 1700+ sq ft, a 2 and 1 and private deck viewing the city and the bay. Reportedly the second penthouse is in escrow at $1.5MM, this just shows that the demand for high end luxury condos are seeing light again. The combination of area developments, quality and location is reason why I’ve been making suggestions to all clients to look into the Ellington. What’s worth noting is the fact that today’s prices are still below the original construction cost, and the quality speaks for itself. The complex is comprised of 134 units, was originally developed and owned by the now dissipated Lehman Brothers (Emerald Fund is in charge of the sales now).
http://www.thebayishome.com/home14_detail.php

EXCERPT SFBT below:

Emerald Fund Chairman Oz Erickson, who is managing the sales of the Ellington on behalf of the Union Labor Life Insurance Company, said the “renewed interest in high-end condominiums is a very strong indicator of the value at The Ellington and in Oakland in general.” He added, however, that the $600 per square foot price point is still well below construction costs.

“These condos are selling at a fraction of what they cost to build so the consumer is getting a great opportunity that is unlikely to occur again for a very long time,” said Erickson.

The building has commanded a price per square foot of $471 for lower floors to $632 a square foot at the top of the tower, according to the Polaris Group, which markets and sells new homes in the Bay Area.

“People are recognizing that interest rates are going to start going up and they prices are not going to come down more than they have,” said Polaris Group Principal Chris Foley. “So you better buy now.”

The video is months old but still worth a peak into one of the most vibrant cities in the world and it’s biggest development plan in quite some time.

EXCERPT:
The most recent update was :

The Transbay Joint Powers Authority (TJPA) Board of Directors unanimously approved the $171 million Transportation Infrastructure Finance and Innovation Act (TIFIA) loan for the Transbay Transit Center Project on December 10, 2009.

Excerpt: An integral part of the Transbay Project includes the creation of a new neighborhood surrounding the Transit Center.

Adopted by the City of San Francisco in June 2005, the Redevelopment Plan will facilitate the development of nearly 2,600 new homes (35 percent of which will be affordable), 3 million square feet of new office and commercial space and 100,000 square feet of retail. The buildings will include townhouses, low- and mid-rise buildings and slender high-rise towers spaced apart to provide sunlight to proposed new plazas, parks and widened sidewalks.

The Project Area is about 40 acres and is bounded by Mission Street in the north, Main Street in the east, Folsom Street in the south and Second Street in the west. Folsom Street will be the centerpiece of this new neighborhood and will feature widened sidewalks with cafes, markets and views of the San Francisco Bay.

Transbay Transit Center Demo from steelblue on Vimeo.

good morning. 1/9/2010 By Jesse Sung 357 Investments.

Business owners looking to strategically place or expand their presence in San Francisco: if you missed the boat in ‘09, 2010 might serve as a better charter… perhaps we can be of assistance.

Let’s pin point what your core business necessitates and play match maker with the current opportunities given in today’s market. Obviously with an indicative rebound of economic state, both landlords and tenants can discounts the pre-notion of an all out commercial wasteland coming full circle. But we are far from being fully revived and off the IV. For example, SF’s Marina / Cow Hollow area is still suffering from a mid-harrowing state of retail vacancies, but it only spells opportunities. The question is how can you get in on it now?

Several of the 10 SF districts and the fragmented areas within those districts are still hosting rounds of tenant musical chairs. As a business, you need to stringently obviate all the red zones and spotlight the greens, perhaps with the assistance of experienced commercial real estate professionals.

It can be quite a process but having the right representation can be extremely valuable. Making sure both tenant and landlord fully understand and agree upon a set lease agreement. This encompasses a well drawn out request for proposal / letter of intent to serve structure to lease agreements, implementing provisions and safeguards to protect the represented. Knowledge of ordinances, compliance, permits and licensing, tenant allowances, concessions, landlord participation in improvements and the list goes on.

Having a professional c.r.e broker well versed in the process of finding a prominent space and then negotiating a beneficial lease is imperative to the success of your business. Make sure whoever represents you (ahem) in the process has access to the type of acumen and experience to see to a successful lease agreement. SF is still one of the premier metropolitans of our known universe, and as far as I know it’s going to stay that way.

http://www.357investments.com

Happy motherfncking new years to the bulls and bears, not to the weasels. As per the investment eye, let us render the perception of the CRE arena going into 2010 a bit.

For months now, experts have shared such a dismal forecast stirring up the pot to which every would-be participant anticipates for the particular shoe to drop, and drop hard. But for some, this shoe will simply take form of a glass slipper nothing more nothing less. The encouragement is for all qualified investors to bring their .416 Magnum elephant rifles to the table in lieu of polished silverware, you got to be ready to pull the trigger. Great deals will be in-the-making period.

The capital markets seem to be scouring for a smooth channel of match makers and seasoned experts to provide a platform to serve as a confidence booster. Value needs to be derived out of the wastelands. But the availability of capital now leach from private equity, REITs, foreign pockets and government sponsored entities, oh yes and a new fruition of investor syndicates abroad! The recent bad tastes still linger from securitized lending, commercial lendings and those fund managers and pension heads who are spending more time making deals with the devil in hopes for a second chance. Furthermore regional banks will be walking the plank and the guys who are well situated in work-outs, dispositions and asset managing will be making a fortune in fees. Let’s review the prospective menu.

CASH STAYS KING: banks will not loosen their belts anytime soon, de-leveraging continues as it is no longer “the Fonz” to be spending money like its 2006. Comb through the deals. Be comfortable with cash flow driven modeling as opposed to leverage-based modeling investments. This time around, there may not be such thing as FAST money.

THE CLOCK IS TICKING, BUT IT’S 7AM: In other words, there is no reason to shove hands into golpher holes but hands shouldn’t be sat on either… we will find a bottom. Job revival + inflation should provide an upward push to property values going into the next 5 years. Seek, Buy and Hold.

CLASS A and maybe B: Want to avoid tossing and turning, purchase premium assets, ideally buying properties that have dropped below replacement costs. For the big boys they will continue looking for debt maturity problems to vulture in on, especially in the big Metros. Sit pretty, the capital markets are going through a shift as we all know, private money are the all stars right now.

LOOK INTO REITS: Although I personally think some of the top dogs like Simon, Vernado are over priced (stock wise), some of the aforementioned have incredible management on display so being their stockholders puts your money in good hands. These guys are survivors no doubt, and REITs provide for generous dividends and a quick exit strat … liquidity lol !

SEGMENT BREAKDOWNS:

Multifam props are at the top of everyone’s list…can’t fight that so I would suggest if you and your money can be a little patient for payoff, start looking at hospitality as well. Hotel rates have been slaughtered, but this makes for an incredible time to find opportunities in higher end locations. Same goes with distressed over built condo regions that are held as premier resort type regions of both both coasts. Remember, the economy will recover and nobody forgets how to enjoy the life of luxury. Land, industrial and even select office/retail are actually lower on my totem pole. Their utility is limited and very reliant on the bolstering of economic rebound. As development is playing footsies at the mortuary and companies are continuing to consolidate space and inventory…I just don’t see the value just yet.

I haven’t eaten lunch yet…enjoy your first weekend of 2010 I know I will.

According Brian Miller of GSt. San Fran Bay Area Condo supply/inventory will start to see contraction going forward … My company will be reviewing select new developments and condo complexes in the Bay. http://www.thebayishome.com/home14_detail.php

SAN FRANCISCO- There is apparently an increased demand and a bit of limited supply in condos around the bay under the $700,000 range. This type of movement could set a paradigm and subsequently push for price movement upwards in certain areas, (according to Pacific Marketing Associates who provide sales and marketing services for urban r.e developers in SF Bay. PMA’s founder Paul Zeger already says several factors are pushing average sales prices up in that mid-range market…again that is interesting. I have been combing through the MLS and have discovered a slight drought in new inventory as far as listings in REO and market rate units (not including short sales).

New construction in addition to factors such as interest rates and availability of home loans have helped spark an increase in year-over-year sales (contra costa, walnut creek were noted).

GSt. noted that an example like 555YVR, an 87-unit b condominium development next to downtown Walnut Creek and the BART station reflect the theory. One-third of the units were under contract when closings began there in October and sales are expected to accelerate in January when the property will be able to offer FHA loans. The average price–per-square-foot is $467 at 555YVR versus $310 on average for all condos in Walnut Creek.

EXCERPT:
In Oakland, The Ellington, a 146-unit, 14-story condominium in Jack London Square, is more than 30% sold or in contract and Vue46 in Emeryville reports 8-10 deals a month and seeing completion for some homes for the first time in more than 18-months.

PMA’s also is assigned SF’s One Rincon Hill, Soma Grand, 555 Bartlett and Union in San Francisco; Axis, City Heights and the 88 in San Jose; and Altaire in Palo Alto.

The latest quarterly report on the market by Polaris Group suggests the East Bay residential markets have stabilized after experiencing some of the steepest price declines and highest foreclosure rates in the region. Condominium resale transactions jumped by 40.7 percent during the August-to-October 2009 time period versus the same three months in 2008, according to the report. The median resale price over the past three months was $285,000, which is 12% ($37,500) lower than the same period one year earlier.

“The surge in pending resales should convert to closed transactions, further reducing inventory levels and stabilizing prices,” states the report.

As of the start of November, 12 communities containing 1,669 units were offering homes for sale. Approximately 66% of the units have been sold or are under contract to be sold, leaving a standing inventory of 571 units. The average number of days a home remains on the market remains elevated at 57 days year-to-date. Octobers’ reading of 37 days was the lowest reading since September 2007.

“For new condominium sales, recent inventory reductions, substantial price cuts and low interest rates have combined to create an environment where buyers are once again willing to make purchase commitments,” states the report. “Nevertheless, conditions are far from favorable for new home developers, as homebuyers remain opportunistic and price sensitive.” (more…)

Some good articles regarding some insight and sentiments going into 2010 for residential R.E markets.

More Home Owners Walk Away
A growing number of home owners in Arizona, California, Florida, and Nevada—where prices have fallen the most—are walking away from their properties.

They are leaving the deal behind not because they can’t pay but because they don’t want to. A study by researchers at Northwestern University and the University of Chicago concludes that as many as 25 percent of defaults are driven by strategy, not necessity.

If many other people follow suit, “It’s going to be really difficult to prevent a cascade effect,” says Paola Sapienza, a professor of finance at Northwestern.

Brent White, an associate law professor at the University of Arizona, points to actions by banks themselves to avoid staying in bad business deals as an example of why homeowners should make a decision “unclouded by unnecessary guilt or shame.”

For instance, on Thursday, financial services firm Morgan Stanley announced that it is turning five San Francisco office buildings back over to its lender two years after it purchased them when the market was at its priciest. The buildings are estimated to be worth about half of what Morgan Stanley paid.

“This isn’t a default or foreclosure situation,” spokeswoman Alyson Barnes told Bloomberg News. “We are going to give them the properties to get out of the loan obligation.”

Morgan Stanley is apparently current on the loan, so this is what is known as a “strategic default.”

Some might ask: If strategic defaults are OK for banks, why aren’t they OK for ordinary homeowners?

Coming Soon: More Foreclosures
More than 1.7 million homeowners were verging on foreclosure this fall, making it likely that these houses will soon end up on the market one way or the other, driving down overall housing values.

“We’re going to be dealing with high levels of distressed (sales) in the marketplace for at least a couple of years,” says Mark Fleming, chief economist of researcher First American CoreLogic, which has been studying the problem.

Some real estate practitioners say they fear that this onslaught is coming.

“We’ve been in recovery mode for most of the year. How many foreclosures do they have to dump on the market to affect that? I don’t know,” says Deborah Farmer, owner of StarLight Realty in Tampa, Fla. “Any house priced under $225,000 will be affected by a large increase in foreclosures in this market.”

Interest Rates Predicted to Reach 6%
Interest rates are likely to rise to 6 percent by the end of 2010, predicted Amy Crews Cutts, deputy chief economist at Freddie Mac.

The end of the Federal Reserve program that buys mortgage-backed securities will drive rates higher because private buyers will demand more return than the Fed.

“Extraordinary resources have been put into keeping the rates down and supporting the mortgage markets and it’s hard to imagine that the rates can go much lower than they are,” Crews Cutts said. “Anything we get at or below 5 percent is a gift at this point.”

Excerpt from SFGATE.COM

San Francisco — Mayor Gavin Newsom struck a deal today with the U.S. Navy to transfer Treasure Island to San Francisco for a $55 million guaranteed payment over several years, plus additional considerations that could make the total deal worth more than $105 million to the federal government.
More Bay Area News

The agreement paves the way for the city to undertake one of its most ambitious development projects - remaking the closed naval base on a man-made island in the middle of San Francisco Bay into a model of sustainable development.

“We can finally begin the hard work of making sure the city’s grand vision for Treasure Island can be realized,” Newsom said in a prepared statement announcing the deal with Secretary of the Navy Ray Mabus.

The agreement calls for the Navy to transfer almost all of Treasure Island and the northern portion of neighboring Yerba Buena Island - about 450 acres of land in all - to the city. Details of the handover will be negotiated over the next several months, Michael Cohen, head of the city’s economic development office, said from Washington D.C.

The city agrees to pay $55 million guaranteed over several years, plus another $50 million payment that both sides described as an “interim payment.” Cohen declined to discuss the details of that second payment, other than to say it “will be structured to allow necessary private capital to be invested in the project.”

The Navy was also given what’s typically know as an excess profits clause, where if the proposed development for the island performs extremely well, the navy will share in that profit.

The Navy agrees to cover the cost of environmental cleanup at the base, which closed in 1997. More than half of that cleanup has already been completed, and the remainder of the work, relatively speaking, is not very significant, Cohen said.

The city, facing a projected budget deficit of $522 million for next fiscal year, will use revenue generated from the development of the island to pay the Navy, Cohen said.

“With this agreement in hand, we would hope to have the development plans wrapped up by the end of 2010,” Cohen said.

The redevelopment of Treasure Island calls for a new commercial town center and neighborhood, three hotels, a new ferry terminal and hundreds of acres of parks and open space.

The plan is for 6,000 homes to be created through private and public financing. Development partners Wilson Meany Sullivan, Lennar Corp. and Kenwood Investments will stake $500 million with the city providing an additional $700 million in bond money financed by property taxes collected once the development is completed. The initial $1.2 billion will pay for the project’s infrastructure and some of the proposed housing.

Newsom’s office says the project will create thousands of construction jobs annually over the next two decades and 3,000 permanent jobs.

“This agreement is good for the American tax payer, will create jobs in the San Francisco region and will effectively transition Treasure Island to productive civilian reuse,” Mabus said.

From Pier 1.5 to peir 39~! This might be fun when completely implemented ya dig?
SF water taxi on it’s way! southbeach to the wharf… HERE to read more!

glbest excerpt article:

SANTA CLARA, CA-The Santa Clara City Council on Tuesday is scheduled to certify the final environmental impact statement for a new football stadium for the San Francisco 49ers next to the San Jose Convention Center and Great America theme park and the football team’s existing headquarters and training facility. The Council also is expected to set an April or June date for citizens to vote on the project.

The City and the 49ers began working on a disposition and development agreement in July. The financing agreement calls for the city to pay for up to $79 million and for eight nearby hotels to put up an additional $35 million by way of a voluntary room tax. The team agreed to pay for any construction cost overruns as well as any operational shortfall.

If not approved by voters, the 49ers attention likely will shift back to San Francisco where the city, in partnership with Lennar, wants a new 49ers stadium at Hunter’s Point to replace Candlestick Park. An EIS for the larger Hunter’s Point/Candlestick Point redevelopment was recently released by the City of San Francisco for comment.

Either way, the goal is to have the stadium ready for the 2014 NFL season. The team’s initial lease term at Candlestick ends after this season but the team holds three five-year extension options such that it could continue to play in its existing stadium through 2023.

gst. excerpt: CRE index details, oooh snap!

Retail

* The retail sector of the index fell to 60.89 in the third quarter from 65.99 in the prior quarter, down 7.73%. The drop was about half as much as compared to the second quarter.
* For neighborhood and community shopping malls, rents fell an average 0.7% during the quarter. Vacancy rates at neighborhood and community shopping malls exceeded 10%, while rates rose nearly 2.5% at regional malls. In both subsectors, the rate of deterioration is only about half that of the second quarter.
* Overall, more than six in 10 markets experienced a rise in vacancy rates, and more than 95% recorded negative rent growth.
* Lending conditions benefitted from a modest improvement in retail sales (less gas and autos). Sales rose 0.6% in August and 0.4% in September.

Industrial

* The industrial sector of the index fell to 43.97 in the third quarter from 55.84 in the prior quarter, down 21.27%. The decrease was tempered compared to the decline between the first and second quarter.
* Vacancies rose again, up an average 3.4% in the quarter.
* With inventory levels sinking, industrial production has turned positive for every month in the third quarter.

Multifamily

* The multifamily sector of the index fell at an accelerated pace of 9.06% to 76.74 in the third quarter from 84.39 in the prior quarter.
* Unemployment rose 30bps from June through September. The average vacancy rate increased 1.3% over the quarter to a 23-year high. The vacancy rate is expected to climb further, although at a slower pace. In tandem, rent growth dropped 30bps.
* Across the U.S., about 65% of metropolitan locations reported a rise in vacancies, while more than five in 10 saw rent declines.

Office

* The office sector of the index fell to 73.07 in the third quarter, down 7.19 % from 78.73 in the prior quarter.
* The sector posted negative net absorption levels with vacancies rising on average near 4% over the third quarter, despite only half the amount of space coming online as the second quarter. Nearly 85% of metropolitan areas experienced a rise in vacancies.
* * Year-to-date, average rents dropped 7%, with nine in 10 areas suffering rent declines.