Two Biotechs Take Meaty Amounts of Space in Big South S.F. Froject

A high-profile, one-million-square-foot development along Highway 101 in South San Francisco has landed two up-and-coming biotech companies, Five Prime Therapeutics, Inc., and Global Blood Therapeutics, Inc., that, together, will take roughly a fifth of the project. Located at the epicenter of the life science and technology industries, The Cove at Oyster Point is an 875,000-square-foot, life science/tech campus featuring 20,000 square feet of on-site retail, a planned upscale hotel, green space, bay-front walking trails, an outdoor amphitheater, and other amenities. The campus consists of seven buildings ranging in size from just over 115,000 to 182,000 sq. ft., and can accommodate users from 30,000 sq. ft. to 847,000 sq. ft.

In December 2016, Five Prime Therapeutics Inc. (NASDAQ: FPRX) signed a lease for 115,466 square feet of the HCP Inc.-developed campus. The lease is for an initial five years, with a one-time option to extend it for an additional five years. Prices start at about $60 per square foot, and ramp up over a decade to more than $80.

Five Prime Therapeutics is a leader in the discovery and development of innovative protein therapeutics. It library of more than 5,700 human extracellular proteins substantially represents all of the body’s medically important targets for protein therapeutics. The clinical-stage biopharmaceutical company was founded in 2001, by Lewis T. “Rusty” Williams, M.D., Ph.D., who serves as its President and Chief Executive Officer. The company will fully occupy a proposed four-story, 115,466-square-foot office and laboratory facility at 111 Oyster Point Drive, and is expected to take occupancy upon the building’s completion in the fourth quarter of 2017.

On March 17, 2017, Global Blood Therapeutics, Inc. (NASDAQ:GBT) entered into a lease with HCP Oyster Point III LLC, for approximately 67,185 square feet of space in a building located at 171 Oyster Point Boulevard. The term of the lease will commence on the later of December 15, 2017, or the date that the premises are ready for occupancy, and will expire on the day prior to the tenth anniversary of the commencement. The Company has an option right to extend the lease term for a period of ten years.

Global Blood Therapeutics, Inc. is a clinical-stage biopharmaceutical company engaged in discovering, developing, and commercializing therapeutics to treat blood-based disorders. It is developing its initial product candidate, GBT440, as an oral, once-daily therapy for sickle cell disease (SCD) and is evaluating GBT440 in SCD subjects in an ongoing Phase I/II clinical trial. SCD is a genetic disease marked by red blood cell destruction and occluded blood flow and hypoxia, leading to anemia, stroke, multi-organ failure, severe pain crises, and shortened patient life span.

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Investor Drops $185 Million on Prime San Francisco Office Building

The Walnut Hill Group is a San Francisco-based real estate investment company committed to investing, owning, and operating a real estate portfolio composed of various asset types in strong primary markets. The company focuses on target markets including San Francisco, New York, Washington DC, Boston, and Los Angeles.

Recently, in partnership with a Taiwanese family, Walnut Hill bought 150 Spear St., an 18-story, 264,492 square-foot office tower, located in San Francisco’s South Financial District. The price paid to Principal Real Estate Investors, which bought the tower in 2007 for $142.5 million, was $185 million, or about $700 per square foot. Principal sold the property through the San Francisco office of Cushman & Wakefield. The listing agents were Seth Siegel and George Eckard.

The Class-A, LEED certified building was originally constructed in 1981. When it was first acquired, the property was 72 percent occupied. At the time of the sale, the asset was 91 percent full. Some of its commercial tenants include: ICR, Vox Media, Castlight Health, Freeland Cooper & Foremand, Brigherion, Roper, Majeski, Kohn & Bentley, Lululemon, Athletica, OneLogin, Forrester Research, Specialty’s, Gartner, Krauter Group, Inside Track, Nasdaq Stock Market, Spring Studio, Confirmit, Phoenix Age, and TMP Worldwide Advertising.

Walnut Hill was founded in 2011 by its managing principals, Albert C. Hwang and Jimmy G. Park. Prior to joining Walnut Hill, Mr. Hwang was a partner at the law firm of Troutman Sanders LLP, where his primary practice areas included Commercial Development & Real Estate Investments and International Law. Prior to Walnut Hill, Mr. Park was a Vice President of Acquisitions at Beacon Capital Partners, LLC where he primarily focused on west coast acquisitions and dispositions.

Understanding Interest Rates

There’s a lot of talk these days about interest rates. When will the Fed (the Federal Reserve Bank) raise the interest rate, and how high will they raise it when it does? Of course, when the Fed raises or lowers an interest rate, it’s only dealing with one in particular – the rate that banks have to pay when they borrow from one another. But every time the Fed does adjust this “prime” rate up or down, it affects the rest of the interest rates in the whole economy.

What is an interest rate, anyway? In its simplest terms, an interest rate is the fee that is paid by a borrower (debtor) for the use of money it has received from a lender (creditor). Most often the interest rate is expressed as a percentage of the amount of the loan (principal), generally for a fixed time period, most often a year. Different interest rates exist because different types of loans impose different levels of risk for the creditor, and different debtors have disparate abilities to be able to pay back a loan in a timely manner.

It would be nice if interest rates were actually that simple. But the truth is, there are several different types of interest rates: real, nominal, effective, annual, etc. The differences between these rates may seem overly technical to the uninformed, but lenders have been taking advantage of the public’s general ignorance of their distinctions for years in order to increase the actual payback on their loans. Here is a brief explanation of the different types of interest rates:

The “nominal interest rate” is fairly straightforward. If the nominal rate on a loan is five percent, a borrower can expect to pay $5 of interest for every $100 borrowed.

The “real interest rate” is slightly more complex, as it factors in inflation, which is the term that describes the devaluation of money over time. The real interest rate measures the lender’s loss over time due to inflation, when his money is no longer in his hands, but is “owned” by the borrower, and he can’t invest it anywhere else. For example, if money is lent at five percent for a year, but the inflation rate is three percent, then the real interest rate on that loan is two percent.

Another type of interest rate is the “effective rate.” This rate takes the power of compounding into account. For example, if a bond pays six percent a year but compounds semiannually, then the interest gained over the first six months is added to the principal. So, while the interest rate remains the same for the second six months, it is paid on the new, higher amount. Therefore a six percent rate on a $100 bond, compounded semiannually, has an effective rate of 6.09 percent.

Finally, there is the “annual percentage rate” (APR), which is expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan, plus any fees or additional costs associated with the transaction. It will always be higher than the nominal rate.

The chief advantage to knowing the difference between these different rates is that it allows consumers to make better decisions about their loans and investments.

Proposition G: A Bad Idea for San Francisco

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Every time real estate in San Francisco changes hands, the city charges a modest fee on the transaction called a “transfer tax”. When residents of the city take to the polls in November, they will be asked to vote on an amendment to the law called “Proposition G” that would increase this tax. Proponents of Proposition G claim it will be good for the city, raising needed revenues and solving the housing crisis. This is why they’re wrong:

Proposition G Turns the Transfer Tax From Modest to Monstrous

Currently, the transfer tax rate in San Francisco is fairly low and based on the amount for which the property is sold. It ranges from 0.5 percent for properties sold for under $250,000 to 2.5 percent for properties sold for over $10 million. Proposition G would add a new tax based on how long the seller owned the property. The new rates under Proposition G would range from 14 percent for properties owned between four and five years prior to the sale to a whopping 24 percent for properties owned less than a year. This tax would apply to the entire sale price of the property and would be paid in addition to the existing transfer tax.

Proposition G Is Poorly Written

Supporters of this amendment rushed to get it onto the ballot, and it shows in Proposition G’s poorly thought out language. As written, Proposition G would apply to all residential properties with between 2 and 30 units. This includes the estimated 50,000 single-family homes with in-law suites or garage apartments. This measure fails, however, to provide for the estimated 40,000 renters who live in buildings with more than 30 units. If Proposition G protects residents of smaller properties, why are larger buildings exempt? Clearly, this measure is poorly written and/or overtly political in nature.

Proposition G Offers No Common-Sense Exemptions

Proposition G makes no exceptions for situations in which people may need to sell a home quickly through no fault of their own, such as a job change, a medical emergency, a death in the family, or financial hardship. Having to sell a home because of a medical or financial catastrophe is hard enough, but by providing no provision for the sale of a home due to extenuating circumstances, Proposition G kicks folks while they’re down, imposing a tax of up to 24 percent on people already struggling to deal with a difficult situation. Proposition G also offers no exemption for senior citizens, despite the fact that many of them use their home as the majority or entirety of their retirement investment.

Proposition G Affects Too Many Properties

Proposition G levies a tax on property sales based on the amount of time the seller has owned the home, including owners who have owned their home as long as five years. The average home is sold every seven years. This means that Proposition G will affect tens of thousands of people.

Proposition G Provides No Accountability

Supporters of Proposition G claim it will generate revenue the city can use to provide affordable housing. However, the amendment has no language requiring that money be used for that purpose. In fact, under Proposition G the city is free to use those funds in any manner it wishes.

Proposition G Will Not Solve the Housing Crisis

Proposition G will exacerbate the housing crisis, not alleviate it. Besides making no guarantee that the money it generates will go to affordable housing, Proposition G will also cause the pool of available housing to shrink. Because Proposition G affects single-family homes with in-law suites, the owners of these secondary units are likely to pull them off the market or risk having to pay an exorbitant fee when they go to sell their home. Because there are over 50,000 secondary units in San Francisco, this could dramatically decrease the number of units on the market.
Additionally, Proposition G will raise housing prices. Sellers will pass the majority of their increased costs on to home buyers by asking more for properties. New landlords will simply pass this price increase on to tenants in the form of higher rents. Clearly, the people who will feel the greatest pinch from Proposition G will be middle-class home buyers or renters.

Proposition G Is Not the Same Tax Proposed By Harvey Milk

Proponents of Proposition G are trying to drum up support for this deeply flawed law by claiming that it was first proposed by Harvey Milk. While Supervisor Milk did at one point propose an increased transfer fee, the measure he proposed differs drastically from Proposition G in several key ways. Mr. Milk’s proposal would have only taxed profits made by a home sale, not the entire price of the home. Additionally, under Mr. Milk’s proposal, single-family homes with secondary units were also exempted. Finally, Mr. Milk’s proposal would have exempted those over 63. Clearly, this isn’t the measure Harvey Milk proposed, and just as clearly, it isn’t a law he would support.

Everyone agrees San Francisco is facing a housing crisis, and everyone agrees something needs to be done to fix it. Unfortunately, Proposition G isn’t the solution. In fact, Proposition G is an ill-conceived, overtly political, poorly thought out knee-jerk reaction to the situation that will do far more to harm than good to the housing market. Proposition G imposes an excessively high tax that will increase housing costs, and because it doesn’t exempt in-law suites, it will cause secondary units to be pulled from the market, tightening the market further rather than expanding it. Because it doesn’t offer protections for senior citizens or provisions for emergency situations, it threatens to disproportionately harm those who are most vulnerable. It provides no accountability for spending the revenue it would raise. In short, Proposition G is bad for San Francisco.

This law will affect everyone who lives in San Francisco, regardless of whether they rent or own. Therefore, this November, when time comes to cast your vote, I ask you to make the right choice for San Francisco. Vote “NO” on Proposition G.

If you’d like to learn more about Proposition G, enjoy this informative debate sponsored by The San Francisco League of Women Voters in partnership with San Francisco Government TV:

San Francisco Fights Back Against Tech Housing Crunch

San FranciscoSan Francisco is a city with a major problem on its hands. The city has worked hard in recent years to lure high-tech firms to the area. That effort has largely succeeded, but as the only saying goes, be careful what you wish for.
Lured in by the city’s self-marketing program, technology firms have flocked into the bay area. As they have, they have attracted young, educated professionals in droves. Driven by the demand for housing these professional create, as well as their generally high salaries, real estate prices in San Francisco have skyrocketed.

Due in part to its geography, housing in San Francisco has always been somewhat at a premium. Because of this, the city has long had rent controls to protect tenants from sharp rent increases. These controls are preventing real estate speculators from making good money, however, and so it was probably just a matter of time until a way around them was found.

California has a law on the books called the Ellis Act. Under the Ellis Act, landlords are allowed to sell their properties and exit the real estate market. A part of this law allows for the rental buildings to be sold and tenants evicted. The law was originally envisioned and enacted to ensure landlords with rent-controlled apartments weren’t forced to continue managing their properties should they desire to retire completely from the industry.

The law has a loophole, however, and speculators have found it. Essentially, landlords sell their buildings to companies that are specifically formed for the purpose of speculation. These new companies use the Ellis Act to evict tenants, then quickly remodel the units and and sell them off either as tenancies-in-common (similar to condominiums) or to firms that desire to own and rent the units for the long-term. Either way, the short-term company is then dissolved, the original tenants enjoying rent control have been removed, and the units can then be sold or rented at market value, which is often now much higher due to the boom in housing demand in rental prices. The scheme is working; evictions under the Ellis Act more than doubled last year from 2012, and half of these evictions were performed by companies that owned the buildings for less than a year. A majority of these evictions occur in traditionally low-income, immigrant areas of the city that have experienced gentrification since the tech housing boom started.

The South of Market district of San Francisco has long been an area where low-income immigrants lived. Because of gentrification and booming housing prices, however, low income tenants are being forced out of the area in record numbers.

The South of Market district of San Francisco has long been an area where low-income immigrants lived. Because of gentrification and booming housing prices, however, low income tenants are being forced out of the area in record numbers.

Now the city of San Francisco has formulated a plan to fight back. The city has put aside a pool of money, estimated to be over $3 million, to offer loans in order to help low-income tenants in apartment buildings with low, controlled rent band together to buy the buildings in which they live under co-op arrangements. The assistance comes with a stipulation that rent continues to stay low and controlled, that tenants remain in control of the buildings, and that no one be evicted as a result of the process. As the original loans are repaid at a modest interest, more and more money will become available to help tenants.

As this program just started, it is too soon to tell whether it will be successful. However, given the state of the housing market in San Francisco, it’s clear without some sort of immediate action, low income tenants (who are already being forced to exit the city in droves) will continue to be forced out of the city in increasing numbers, which among other issues may lead to labor shortages. Someone has to collect garbage and flip burgers, after all, and if that someone is paying extremely high rent or commuting long distances from outside the city, they will require higher and higher wages, meaning prices for everything in the city will rise.

Glenda DeVera is a 45-year-old Filipina immigrant who works part time as a home healthcare aide. She has shared the same one bedroom apartment with her 3 teenage and adult children for over 11 years. All three children attend school and work part time. She pays less than $800 in rent. As she told SFGate.com recently in an interview, “We cannot afford to move. Nowadays, it’s over $1,000. We’re all low-income people.”

CBS Evening News discussing the housing market in San Francisco: