From today’s San Francisco Business Times:
Everything must go? Transbay agency wonders if now’s the time to make final land sales
Blanca Torres, Reporter- San Francisco Business Times
July 31, 2014
The last two Transbay development parcels could be up for grabs sooner than expected — at a time when land prices in San Francisco are hitting record highs.
The Transbay Bay Joint Powers Authority planned to release the sites known as Parcel F and Block 4 via a request for proposals process in 2016 or later, but would entertain unsolicited bids from interested buyers or could move up the release of the RFP.
“If someone offered more than market value, we would consider it,” said Maria Ayerdi-Kaplan, executive director of the joint powers authority. “These are valuable pieces of property in any market, but especially now given their location and proximity to the transit station.”
The Transbay redevelopment area encompasses about 20 acres of land of which 12 are slated for private development and the other eight would be for a new regional Transit Center that is under construction and expected to open in 2017.
Check out our print and online package about the Transbay district tomorrow, with stories about developers, contractors and architects as well as a development pipeline and map.
Parcel F is a 32,700-square-foot site slated for up to 735,000 square feet of office and residential space in a tower up to 750 feet high. Block 4, a 43,000-square-foot site, could accommodate up to 590 units of housing.
Most of the private development sites have been picked up by developers such as the Salesforce Tower, a 1.4 million-square-foot office tower that is under construction. Boston Properties and Hines, developers of the Salesforce Tower, paid approximately $192 million or $4,000 per foot for a 50,000-square-foot parcel in a deal that closed in 2013.
Block 5, a 24,000-square-foot site, was just awarded to team led by Golub Real Estate and The John Buck Co. for $172.5 million or about $7,188 per square foot of land or $211 per buildable square foot. Block 5 is slated for a 675,000-square-foot office tower.
The competition for Block 5 was intense, drawing bids from four qualified development teams including Kilroy Realty Corp. and Boston Properties, one of the developers of the Salesforce Tower.
The winning team is based in Chicago and hasn’t built office in San Francisco before.
Development sites are in high demand these days as demand and rents for both housing and office space continue climbing, which has pushed up land values.
“If I were the JPA, I would take advantage of the current cycle to sell those parcels,” said Oz Erickson, head of the development firm the Emerald Fund. Real estate is cyclical, he said, and land values are the most volatile piece of the equation in development. “I would try to pick my cycle as best I could and maximize the value.”
One caveat with the two parcels is that they are not available for development until 2018. Construction crews are using Parcel F to house equipment for work on the transit center and Block 4 is the site of the temporary terminal.
The development market is hot right now, but it’s unclear how hot it will be in a few years and whether a developer would want to wait until 2018 to start construction on a new project that likely wouldn’t hit the market until 2020.
Right now, however, some developers are eager to grab a piece of San Francisco and willing to pay a premium as some industry experts said was the case with Block 5.
Numerous developers would be interested in the last two Transbay sites, Erickson said, and making a deal now would be the “right thing to do to protect the value of the assets.”
“Time is the enemy of all real estate deals,” Erickson said. “Now is a good time. You never can tell what’s going to happen. When the market is good, sell.”