Wilson Meany Begins Bay Meadows Sales




Submitted September 29, 2011, 3:19 PM


Sharon Simonson


San Francisco developer Wilson Meany Sullivan has put its first parcel up for sale at the 83-acre Bay Meadows redevelopment in San Mateo.


The company has distributed a limited number of requests for proposals to home builders, seeking market appetite for the Peninsula site, which is entitled for 156 town homes, said Janice Thacher, a WMS partner. Meanwhile, Wilson Meany itself intends to start construction in 2012 on 108 apartments in Bay Meadows. It hopes to deliver the units to market within 18 months of their construction start.


Wilson Meany, with backing from its long-time financial partner Stockbridge Capital Group, is currently developing all infrastructure at Bay Meadows, including roads, sidewalks, gutters, storm-water upgrades and traffic lights, Thacher said. The company has used equity to finance the improvements because it could not line up the debt.


A bank that had offered a commitment before the financial crisis pulled out, and WMS was unable to find another.


“It has been a tough time,” Thacher said, “but the positives are that construction costs are down and labor is available, so we can get things done in a reasonable amount of time.”


Of the 83 acres, 16 acres are public streets while another 18 acres are public open space including parks and pedestrian easements.


Wilson Meany and Stockbridge specialize in large-scale real estate projects. Besides Bay Meadows, they are partners in the development of San Francisco’s Treasure Island, which is slated to have 8,000 homes, 235,000 square feet of retail and 500 hotel rooms. They also are partners at the Hollywood Park development in Inglewood, Calif., where 3,000 homes and a 120,000 square feet casino are planned.


In total, Wilson Meany intends to develop five Class A office buildings with more than 700,000 square feet, more than 1,100 homes and apartments, and not quite 100,000 square feet of retail at Bay Meadows. Under an arrangement with the city, it could develop as much as 1.5 million square feet of offices instead of some housing, but in any case it can go no lower than 1,000 housing units. All of it is adjacent to Caltrain’s Hillsdale station, with the offices being the closest. At completion, the development is expected to have roughly 2,500 permanent residents and another 3,000 or so office workers on site daily.


Wilson Meany has begun construction drawings on three office buildings, which have been designed by global architecture firm HOK, and could deliver the space in 21 months, Thacher said.


Jack Troedson, an executive vice president for Cornish & Carey Commercial Newmark Knight Frank in Palo Alto, is representing the landlord in the office leasing. He, Thacher and Kim Havens, a WMS project manager for Bay Meadows, spoke to the Peninsula Investment Forum on Sept. 27.


The 31 million square-foot Peninsula office market has recovered well this year, alongside San Francisco and the South Bay. At mid-year, vacancy had fallen to 14 percent from nearly 18 percent in 2009, according to Cassidy Turley/BT Commercial, a brokerage.


The latest sign of the Peninsula’s vigor was a 100,000 square-foot lease signed by Perfect World Entertainment, a publicly traded online gaming company that will move its North American headquarters to 101 Redwood Shores Parkway in Redwood City next year. The company is moving from less than 35,000 square feet in Foster City, which is further north on the Peninsula.


Andrew Diamond of Diamond Investment Properties, which owns the building where Perfect World is relocating, said the 100,000 square-foot space had attracted lots of tenant interest. With the lease, 101 Redwood Shores is 100 percent occupied. The company also owns Sierra Point Towers in Brisbane.


“We are seeing great demand from across the tech industry, from gaming companies and social networks. Everyone I talk to has boundless enthusiasm,” Diamond said. “It has been years since we have seen this kind of organic growth at these companies.”


Despite its current strength, the Peninsula office market has proven more volatile in the last five years than the region at large. According to Grubb & Ellis Co., in 2007, office vacancy rates on the Peninsula were the highest in the region at more than 15 percent. When the economy cratered, initially the Peninsula outperformed, but by early 2009, its vacancy rate was the highest in the region, bumping up against 20 percent. Twenty months later, the San Francisco and Peninsula office markets are tied for the lowest vacancy rates in the Bay Area, at just more than 15 percent.

 
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