San Rafael office complex takes shape

Article Launched: 03/07/2008 12:22:06 AM PST

A commercial area is blooming at the east end of San Rafael as a $40 million office complex on the southern end of Kerner Boulevard nears completion.

The buildings at 2350 and 2370 Kerner Blvd. are nearly fully leased although the first tenant - the Dutra Group - will not begin moving in until the end of this month.

Dutra, which operates the San Rafael Rock Quarry, signed on to the complex about a year ago; more recently, a subsidiary of Health Net agreed to occupy a 60,000-square-foot space at 2350 Kerner Blvd. The health insurer will merge Terra Linda and Point Richmond offices, bringing 350 employees together in a central location, said Brian Eisberg, who is marketing the project with Jerry Angel, both of Orion Partners Ltd. in San Rafael.

The 116,000-square-foot project, designed by Hannum Associates of San Francisco, includes underground parking and a waterfront location with views of the Marin Islands, the East Bay shoreline and the Richmond-San Rafael Bridge.

It is about 85 percent leased with about 25,000 square feet still available. Lease rates range from $3.50 per square foot per month to $4.25 per square foot for waterfront space, Eisberg said.

"It's an area that is upticking," Eisberg said. "It's getting more and more desirable, especially since the occupancy rates are escalating in Southern Marin."

David Walwyn, research director at Orion, said with the addition of an Extended Stay Hotel and a proposal for a Target store near Home Depot at the Shoreline Center, activity has picked up since the area's light-industrial days, before the city targeted it for redevelopment.

"What it comes down to is there is a lot of available land that is adjacent to major freeways that has the possibility of development," Walwyn said. "There is still a lot of potential for what can be done out there and that is what the Kerner project is doing."

But Bob Brown, San Rafael's community development director, said traffic is reaching capacity on Bellam Boulevard and anything else that would be proposed - including Target - would require an environmental impact report.

"The development in East San Rafael is in many ways reaching conclusion," Brown said.

The development that has taken place has benefited the environment with habitat restoration for wildlife.

The Kerner complex property is largely reclaimed marshland that had been a dumping ground for construction materials.

The developer of the Kerner Boulevard project, GateCapital Properties of San Francisco, cleaned up the debris and rehabilitated the land, dedicating a 100-foot-wide park strip between the buildings and the bayfront, according to company principal Bruce Jones, who said it was part of the development agreement.

"The bayfront will be part of an open space corridor around the bay," Jones said, referring to a plan by the San Francisco Bay Conservation and Development Commission plan to develop access along the bay.

COMMERCIAL REAL ESTATE: In $26 million deal, San Diego ﬁrm buys 11 Sausalito buildings

by Jeff Quackenbush
Staff Reporter

SAUSALITO – A San Diego-based commercial real estate private-equity firm has made its first foray into North Bay investments with the purchase of 135,000 square feet of buildings in the Industrial Marinship District of north Sausalito for $26.1 million.

Westcore Properties LLC, operating locally as Westcore Marin LLC, purchased half the seven-parcel portfolio from developer and owner Marin Freeholders LP. At press time, Westcore planned to complete the deal last Friday. California Bank and Trust financed the deal.

“It’s big time for Marin County and Sausalito,” said Bill McCubbin, president and CEO of commercial real estate brokerage Orion Partners. “You don’t get $26 million deals in Sausalito too often.”

The largest recent commercial deal in Sausalito was Harbor Drive Executive Park, a 112,000-square-foot class A office development, sold in 2005 to New York-based private-equity firm The Blackstone Group as part of a $270 million portfolio acquisition.

Several dozen industrial, office and art tenants are housed in 11 buildings located on 5.42 acres along Colma Street between Bridgeway and Gate Five Road. The largest is Sausalito Mini Storage, and notable businesses in the complex include the Avatars and Feng Nian restaurants. The buildings are at the north end of what once was the Marinship Corp. shipyards.

Westcore Properties, which owns more than $2.2 billion worth of office, industrial and retail space totaling in excess of 10 million square feet, came out on top of a half-dozen final contenders for the property.

“The property provides a rare opportunity to acquire a critical mass of multitenant product in the severely supply-constrained Sausalito market,” said Neil Johnson, a partner in Westcore’s San Francisco office in charge of Northern California acquisions. He noted that the property has suites less than 1,000 square feet, a size range popular to local tenants.

The Marin Freeholders portfolio originally attracted 11 interested buyers when it went on the market in July. That was despite the tight land-use leash Sausalito holds on that part of the city, according to John Greene, co-owner of the property and president of R.H. Greene, a commercial real estate firm co-marketing the property with Jerry Suyderhoud of Orion.

The city in the mid-1980s crafted the Marinships Specific Plan to retain the industrial character of the area in response to office building construction. For example, commercial office and retail space is limited to 40 percent or less of a building on a given parcel, according to the plan.

Westcore’s model in other acquisitions has been to upgrade the property to improve the rent base.

In the mid-1960s, Robert Greene and William Stewart III purchased the property and built four warehouses. The other buildings were constructed later.

“Sausalito didn’t and still doesn’t have much industrial space,” John Greene said.

Jeff Traynor of Orion Partners represented Westcore in the Sausalito purchase. Mr. Traynor and Marissa Miller of Orion are marketing the property for Westcore.

For more information, call 415-391-8400 or visit www.westcore.net.

HEALTH CARE: Health Net subsidiary headed for Kerner project

MHN will consolidate two offices into new waterfront buildings

by D. Ashley Verrill
Staff Reporter

SAN RAFAEL – The mental and behavioral health subsidiary of leading medical insurer Health Net will merge two offices into San Rafael’s newest major office building on Kerner Boulevard at the foot of the Richmond-San Rafael Bridge.

Officials signed the major 60,000-square-foot lease for the office buildings at 2350 Kerner Blvd. late last month and will move in phases beginning in June as tenant improvements are completed.

About 350 employees from two of Health Net’s MHN offices in San Rafael and Point Richmond will move to the space, and the remaining staff will be transferred to service centers in Texas, New York or Huntington Beach, though, the employees in those positions also have the option to leave the company.

Between the two North Bay offices currently under lease, MHN has about 110,000 square feet, which includes the headquarters office at 503 Canal Blvd. in the East Bay’s Point Richmond.

MHN will occupy an entire building and about three fourths of another building in the new office project for a total of about 60,000 square feet.

“We are expanding on our commitments to our customers and to maintaining a significant Bay Area presence,” said MHN spokeswoman Gina Clemente. “By consolidating two Bay Area offices into one Marin-based complex, we’ll gain efficiencies for our business while continuing to deliver superior customer service.”

MHN does not have plans to eliminate any positions, but Ms. Clemente said, “we are moving like positions together where it makes sense for us.” She said the company does have a separate growth plan for the new corporate office.

Orion Partners’ brokers Jerry Angel and Brian Eisberg represented building owner San Rafael Land Co. in the deal, and Patrick Nally of Madison Partners in Southern California represented Health Net.

Currently about 85 percent of the complex is preleased, but spaces of 2,500 to 13,000 square feet are still available.

In total, the complex has about 116,000 square feet in all four buildings and cost about $40 million, according to San Rafael Land Co. The Dutra Group, which operates the San Rafael Quarry, is also a tenant.

The project includes wetlands restoration and a 3.5-mile waterfront walking trail that will be dedicated to the city.

The developer for the project is GateCapital Properties, and architects from Hannum Associates of San Francisco did the design.

The buildings are in an area of San Rafael that has been undergoing a renewal since the exit of filmmaker George Lucas.

Marin commercial real estate market on the rebound

Nancy Isles Nation

Article Launched: 01/29/2008 12:34:01 AM PST

The Marin commercial real estate market is making a comeback as office vacancy rates are gradually declining and leasing rates are increasing.

Orion Partners Ltd. in San Rafael reported that the office vacancy rate dropped to 13 percent in 2007 - 1 percentage point less than in 2006. The rate has not been so low since the dot-com explosion in the 1990s, said Bill McCubbin, Orion's chief executive officer.

The technology-fueled dot-com era brought vacancy rates to a low of 2.5 percent in 1999 but they spiked in 2000 and 2001, when the industry exploded.

But technology companies once again are a growth industry in Marin. A division of Disney that produces special effects and animation has leased 120,000 square feet at a Hamilton Landing hangar that is under renovation.

While McCubbin, whose firm represents Hamilton Landing, could not comment on the lease, he said the company is an important addition to Marin.

"I think that can be a real catalyst in the sense of bringing new technology-oriented companies to Marin," McCubbin said. "That historically has been the driver of the Marin economy - add that to the other two drivers, which are government and health care."

McCubbin said a leading high-tech firm would likely draw other smaller technology companies.

"At Hamilton you've got three or four major technology companies," McCubbin said. "The area has matured."

David Walwyn, research director at Orion, said that while the commercial office space market is extremely tight, there are large buildings with blocks of available space.

Marin Commons at 1600 Los Gamos Drive and the Fireman's Fund building at 777 San Marin Drive in Novato both have been leasing space but are looking for tenants.

"Until we get someone big to take down a lot of space, I think the vacancy rate will be hovering around this point," Walwyn said. "We have seen a steadily stronger market since the recovery from the dot-com crash - space has definitely gotten more expensive since then."

The upward trend in leasing rates was boosted in 2007, when the Blackstone Group, a private equity firm, merged with Equity Office Partners Trust, the nation's largest publicly traded office building owner.

The $39 billion deal gave Blackstone 580 buildings, including office parks in Sausalito, Mill Valley, Greenbrae, Larkspur and Novato. Properties include the Shoreline Office Center, a two-building, 97,910-square-foot complex at Shoreline Highway and Highway 101 in Mill Valley; offices at Larkspur Landing Circle; Wood Island in Larkspur Landing, and Drake's Landing in Greenbrae.

At the time, prime parties offered asking rents ranging from $2.50 per square foot in Novato to $4 per square foot in Southern Marin.

Walwyn said Blackstone is signing deals for as much as $5 a square foot in its Larkspur properties.

Greg Moss, managing partner at NAI BT Commercial in San Rafael, said the credit crunch could keep asking rates stable because mortgage companies have closed their doors and jobs have been cut.

"Consequently, we anticipate sublease space to begin hitting the market in the first quarter," Moss said.