Commercial Real Estate Blog

Robert Half International has signed a lease for building 3 at Bishop Ranch to take 236,000 SF of space. Robert Half International (NYSE:RHI) will move its regional operations from Pleasanton, where it occupies 220,000 SF currently across several buildings. The move to San Ramon will be completed in 2010.

In addition to the RHI deal, Bishop Ranch has also recently inked deals for an additional 100,000 square feet with Chubb Insurance, Del Monte Foods, Edgewood Insurance, and U.C. Davis.

Bay Area janitors, who first went on strike May 20th have approved a new contract. The contract increases their wages by $2.40 per hour over the next four years, which represents a 22% increase.

The janitors who walked off the job are responsible for cleaning approximately 80 percent of the commercial real estate in the South and East Bay. Some of the valley’s largest companies in the valley (Cisco, Oracle, Intel, and Yahoo) were amongst those affected by the strike.

The janitors will begin work as soon as this afternoon.

Over the weekend, the fate of the GM Building at 767 Fifth Avenue became known. Boston Properties and Goldman Sachs led an investment group that acquired the trophy asset along with other buildings from Macklowe Properties for $4B, $2.5B of which was assumption of debt. It’s rumored that middle eastern investors and sovereign investment funds are part of the investment group.

This deal highlights a tough 15 month period for the Macklowes which saw them make a spectacularly large acquisition of 7 buildings from Blackstone, only to default on the loans associated with the acquisition and finally the disposition of a dozen buildings totalling nearly 10 million square feet to escape financial ruin.

The elder Macklowe, 70, took on a $1.2B bridge loan from Fortress Investment Group which was recourse (meaning that the Lender, Fortress, could come after the personal assets of Macklowe). Part of the group’s personal assets (assets outside the investment vehicle created for the acquisition) was the GM Building which is likely now the most expensive office building ever sold.

It seems that the younger Macklowe is taking over the family empire from his father, who twice, has risked much at the wrong time and cost the family dearly, losing significantly both in the early 90’s and now. Of course, it must be said that the elder Macklowe has made many right moves as well, including the acquisition of the GM Building in 2003 for $1.4B, which has subsequently doubled in value.

The San Jose Flea Market land is up for sale. The 120-site, after going through nearly a decade of entitlements, has been put on the market for sale. The site is entitled for nearly 2900 homes and 350,000 square feet of commercial space (office and retail).

The site is a vast flat parcel in the middle of housing and commercial development in San Jose. Challenges facing the site include having to work with the seller’s to relocate the existing flea market inland and working on a timetable possibly centered around BART’s planned extension into downtown San Jose though a portion of the property is currently ready for development, allowing for 800 homes and about 100K SF of commercial development.

There is no price tag attached to the site officially, but in light of current housing conditions in North and East San Jose, as well as where capital markets are today, it is likely that the value of the property has dropped roughly 20% from where it would have been in 2005 or 2006.

Similar large transactions of residential housing in the valley have generally ranged from the $50-80 ($2.4-3.4M/Acre) psf range in the past few years and it is likely that this parcel will be near the lower end of that range given the inherit market risk, lower home values in that area of San Jose in contrast to Santa Clara/Sunnyvale markets, current state of capital markets, and of course the staggered/delayed timeline that any development proforma will need to account for.

Brocade, in an SEC filing dated today indicated that it has acquired land on North First Street for the construction of a 562,000 SF office project. We were previously the first to report on April 4th that Brocade was in negotiations to lease the project, however; as it turns out the transaction actually involved a sale of land and subsequent development agreement for the construction of the buildings and parking garage.

The agreement which was inked on April 24th between Brocade and MFP/Hunter@First Office Partners LLC (Hunter Storm Development of Cupertino and MacFarlane Partners out of San Francisco) consists of a sale of three unimproved parcels that are entitled for approximately 562,000 square feet of space in three buildings. The total purchase price for the property is $50.9 million.

In connection with the purchase, Brocade has engaged MFP/Hunter@First Development Partners, LLC as development manager to manage the development and construction of the office buildings on the property  for approximately $173 million which covers the construction of the three buildings and parking garage.

Brocade also obtained a four-year option to purchase a fourth unimproved approximate 4 acre parcel for a fixed price of approximately $26 million.

Buried in a housing bill which was passed by the Senate housing committee by a vote of 19-2 on Tuesday is language attacking the privacy of those in the mortgage profession. Eessentially anybody receiving compensation for a loan or accepting an application will be required to provide their fingerprint into a newly created National Fingerprint Registry. The provision would seemingly cover everybody from lenders, to brokers, to real estate agents who receive compensation from mortgage activities.

The Nationwide Mortgage Licensing System and Registry which would be created would serve as the national repository for the fingerprints. The provisions covering the fingerprinting were introduced by Senators Chris Dodd and Richard Shelby.

To be honest, I’m not sure how this will accomplish anything meaningful and from what I’ve read it seems most people agree and in fact think that this might even increase identity theft. It’s for this reason that I’m concerned about this legislation. Based on the definition it seems I’d escape the need to fingerprint, but I’ve already written letters to Senator’s Feinstein and Boxer urging them to look into this, and vote against it if it comes up for their vote.

It should be noted that many states, including California already require some mortgage and real estate professionals to be fingerprinted. The concern here stems from the creation of a national database of fingerprints as opposed to fingeprints being taken solely for the purpose of verifying identity.

To read about the amendment put forth which contained the fingerprinting provisions, you may read the document here.

2180 Sand Hill Road
Menlo Park, CA

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• 1,835 SF Office Space
• Excellent Windowline Views
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• Furniture Can Be Made Available
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