Orion News Archive
The stories below are pre-2002

Sept. 3, 2001

San Rafael buildings sold in $17 million transaction

BY JEFF QUACKENBUSH
STAFF REPORTER

http://www.northbaybusinessjournal.com
© 2001 North Bay Business Journal


Four buildings located on prime corners in San Rafael have been sold for $17 million.

The buildings include a 6,500sf retail and apartment building at 918-24 B Street, the 13,300sf Bank of Marin building at 1101 Fourth Street, a 17,620sf retail and office building at 1005 A Street, and a 26,400sf retail and apartment building at 1200 Fourth Street. The B Street building contains three-decade notable Izak's Café.

Herzog/Rake Family Trust sold the buildings to Verrago Properties, which simultaneously sold all but the 1005 A Street building.

Vic Brown and Jerry Suyderhoud of Orion Partners Ltd. in San Rafael represented Verrago Properties in the transaction, which closed August 10. Dirck Brinckerhoff of H&L Commercial represented the family trust.

Cabinet maker takes 54,000sf in Santa Rosa

BY JEFF QUACKENBUSH
STAFF REPORTER

http://www.northbaybusinessjournal.com
© 2001 North Bay Business Journal


ROHNERT PARK -- The fiscal cupboards of Sweetheart Cabinetmakers are bursting with growth, so the custom cabinet maker and installer will expand in a move to Santa Rosa in February.

Owner Rand Moeller has come a long way since borrowing $1,500 from his grandfather and starting a furniture-building business in his parents' Napa Valley garage in 1976. He fled the remodeling bidding fray in the valley in 1989 for a 3,000sf shop in Santa Rosa, then expanded to Sweetheart's current quarters in Rohnert Park in 1997.

Sweetheart's new base of operations will be the 54,000sf current home of PSX, formerly Personal Stamp Exchange, at 360 Sutton Place in Industry West Industrial Park in Santa Rosa. Currently, Sweetheart operates out of 11,000sf in two buildings on opposite sides of U.S. 101 in Rohnert Park. The two-site operation requires extra coordination in moving cabinets from the production plant on the east side of the highway to the finishing shop on the west side.

Turned down $3 million

The new location will allow Sweetheart to further streamline its production schedule, install automated equipment, and prepare for increased production because of a new entry-level product line and a contract to make cabinets in North America for a high-end British designer, according to Mr. Moeller.

“We will be able to stay on schedule, without extremely long lead times,” he says. “We would be narrowing it to 12 weeks. There was a time when it was 18-20 weeks. Last year, we turned down $3 million in work, because we couldn't get it through the facility.”

The cabinet shop has experienced 50% year-to-year sales growth over the past three years, Mr. Moeller says.

After a slowing to 2.0% in January, year-over-year growth in sales of custom cabinets nationwide rose to 11.9% in May and settled to 6.4% in July, according to the latest data from monthly member surveys by the Reston, Virginia-based Kitchen Cabinet Manufacturers Association. For the first seven months of this year, sales of custom cabinets grew 10.8%, compared to just 1.4% growth for stock cabinets.

The continued strength of the remodeling sector has helped offset weak cabinet sales because of slowing home construction nationwide, according to the association. That assessment is reiterated by local remodelers who say they are still very busy. [See story, “Remodeling contractors see no sign of a slowdown,” Sept. 3, 2001.]

Custom elements on a mass scale

While Bay Area-focused Sweetheart installs its cabinets in homes as far away as Silicon Valley, it has gleaned half its business in the past few years from the North Bay, thanks to dot-comers and Telecom Valley professionals who bought high-end homes and wanted high-end cabinetry, according to Mr. Moeller.

Sweetheart is looking to capture a wider customer base in the North Bay, especially in Sonoma and Napa counties, through a new line of cabinetry that costs 20%-25% less than the company's two existing lines. To be introduced in the near future, the Vintage Collection line will have custom elements but will be made on more of a mass scale.

“We found that we have a lot of people who come in and love what we do but can't afford us,” Mr. Moeller says. “Now, we have three tiers of price and quality, typically ranging from $30,000 to $200,000 for a kitchen, so customers don't have to go to elsewhere.”

Automation and staffing

Sweetheart's new facility will have the electrical capacity to handle the automated machinery needed to make the Vintage Collection on a cost-effective scale.

In addition, Sweetheart is ramping up production because of a recently secured exclusive manufacturing contract for United Kingdom-based designer Johnny Grey. In the works for 18 months, the North American license was secured in April. Manufacturing of Johnny Grey cabinets and kitchen islands accounts for a quarter of Sweetheart's production capacity already and is expected to grow to half in five years, accounting for $6 million to $8 million in added revenue in the first three years alone, Mr. Moeller says.

Another reason for pursuing automation is the difficulty of finding quality shop workers in Sonoma County and paying them enough to stay with the company, he says. Wages for his shop workers escalated as much as $10/hour last year, but the niche Sweetheart serves is priced high enough to compensate. The automated equipment also allows Sweetheart to concentrate its labor on finish work, such as spending 200 hours just in sanding on a kitchen put together in 600 hours total.

Despite the automation, the added production of the Vintage Collection and Johnny Grey lines will require Sweetheart to add 20 workers, mainly for milling and finishing, next year to its workforce of 30.

Ronald Reinking and Michael Crockett of Orion Partners Ltd. represented Sweetheart in the $3.8 million purchase August 15 of its new home in Santa Rosa. Bob Green of Coldwell Banker Polly Polly Madsen represented PSX.

Commercial building and leasing slow in North Bay

BY JEFF QUACKENBUSH
STAFF REPORTER
http://www.northbaybusinessjournal.com
© 2001 North Bay Business Journal


NORTH BAY -- The hard times that have befallen the tech-heavy commercial real estate markets of San Francisco, Silicon Valley, Peninsula, and East Bay have largely bypassed the North Bay.

What follow are assessments of how the markets in Sonoma, Marin, and Napa counties are faring and what the future might hold.

Sonoma County

Though Sonoma County for the most part is insulated in a “bubble” from the rest of the Bay Area, it should be studied in the context of the regional commercial real estate market, because a significant part of local growth in the past, and into the future, has come from the South Bay, the Peninsula, San Francisco, and Marin, according to Kevin Canady, partner of Santa Rosa-based Keegan & Coppin•ONCOR International.

He compares office rents and vacancy in markets to the south with those in Sonoma County. Last year, rents reached $10/sf/month NNN with 2%-3% vacancy in San Francisco and $8/sf and 2% vacancy on the Peninsula. Now, rents in the city have fallen to $6-$7.50/sf, and vacancy has soared to 12%-17%. The Peninsula has fared worse, with rents plummeting to $3-$4/sf and vacancy rocketing to 20%.

Sonoma County, on the other hand, has not seen retreating rents, and overall vacancy has remained at historically normal levels of 4%-6%. Even as companies such as Optical Coating Laboratory, New Zealand Milk Products, TrueTime, and ACCPAC sublease space, vacancy overall remains below the 10% level considered healthy for tenants and owners, Mr. Canady notes.

Transaction activity has slowed from the frenetic pace of the past three years, but it hasn't “dried up and blown away,” he says.

“We've had a lot of fun talking about Telecom Valley and high tech,” Mr. Canady observes. “Telecom has slowed down in taking space, but other sectors are doing well. There is still interest from tenants in the marketplace.”

Indeed, the rapid growth among telecom and other high-tech companies such as Agilent Technologies, OCLI, Alcatel, Cisco Systems, Advanced TelCom Group, TrueTime, Advanced Fibre Communications, and several startups drove much of the 1,200,000sf of construction in Sonoma County over the past couple of years. Today, almost all of that has been leased, Mr. Canady says. What speculative space is under construction -- amounting to some 170,000sf of office and flex space in three Petaluma projects and about 70,000sf in Nokia's Santa Rosa project -- will likely be leased by the end of the year, he believes.

“The balance of supply and demand is where we were two years ago,” Mr. Canady says. “At that time, we were building a lot and leasing a lot. Now, were building at a slower pace and absorbing at a slower pace.”

Fly higher, fall harder

Compare Sonoma County's balanced office development to that of San Francisco and the Peninsula, says Basin Street Properties president Matt White. Some 4,000,000sf is under construction in San Francisco, with half for the now-deflated dot-com market, and four 700,000sf campuses on the Peninsula are empty.

“Those buildings don't break down for multiple users,” he adds. “Most buildings in the North Bay can break down for 15,000sf-20,000sf users. Twelve months ago, the average deal size [in Sonoma County] was 50,000sf; now it's 15,000sf. The higher you fly, the harder you fall. We're not building 500,000sf buildings, so the risk isn't as great.”

Speculative development in Sonoma County is far from dead these days. In fact, local businesses thrive on it, because largely they look for space when they need it rather than going the build-to-suit route, which can take 18 months, Mr. Canady says. Some 500,000sf of speculative space is planned and scheduled to break ground this year with availability in mid 2002. Keegan & Coppin is projecting prospective tenants will get serious about signing deals again in the fourth quarter of this year.

“The development community has done a nice job in not overbuilding the market,” Mr. White says. “That allows for continued development in a down market, though not as much.”

Marin County

More than 400,000sf of office sublease space in Marin has lifted the overall vacancy rate for the county from the 2%-3% range in 2000 to a healthy and historically normal 10%, according to Haden Ongaro of San Rafael-based Orion Partners Ltd.

In his 15 years of handling Marin commercial real estate, Mr. Ongaro has seen overall office vacancies average 10%-12%, what he considers a healthy level.

“Marin doesn't have the highest absorption statistics, but when space goes on the market, it will get leased,” he says.

Looking at the bright side of the subleasing, it has provided opportunities for 8,000sf-10,000sf blocks of space in all the Marin submarkets, contiguous space virtually nonexistent before, he notes.

In addition to the sublease space, a few speculative projects are under construction in Marin. Mill Valley-based Samuelson Schafer plans to deliver 41,793sf of office space to downtown San Rafael by September as part of the Rafael Town Center project, which also includes 113 apartments and 25,000sf of retail space. Office rents are quoted at $4-$4.75/sf full service with utilities excluded.

The first phase (158,000sf) of Wilson/Equity Office's 15-acre, 410,000sf San Rafael Corporate Center project is expected to be available late in the year or early next year, with rents quoted at $4.50/sf/month full service.

By August, Barker Pacific/Prudential plans to have 164,000sf available in three renovated aircraft hangars at their Hamilton Landing project in Novato, and 54,000sf Hangar No. 3 is already available. Rents are quoted at $2.90-$3/sf.

Basin Street Properties also has a 90,000sf Woodside Office Center project in downtown Novato, currently undergoing site work.

Waiting in the wings are the 130,680sf project at 4300 Redwood Highway in San Rafael expected to start this summer for delivery in mid 2002, GateCapital's 116,000sf project at 2350 Kerner Boulevard in San Rafael, and the 55,000sf Novato Creek Landing project in Novato currently involved in a legal dispute.

New product can force rents down because of the increased supply. However, the new projects have rents quoted above market rates, allowing owners of competing older buildings to raise rents accordingly, Mr. Ongaro says. Also, developers of some of the new projects, such as Equity Office, have nationwide reach and can attract new businesses to Marin.

Napa County

Southern Napa Valley is dealing with its own surplus of space: some 1,000,000sf of mostly industrial space.

More than half of that resides in some 400,000sf Hasbro/OddzOn left at 50 Technology Way and 150,000sf of warehouse and office/flex space Wine.com gave back after filing for bankruptcy this spring.

Whereas Marin has flat or some rent inflation, southern Napa County has become more of a tenants' market, according to Michael Miller, partner and manager of Keegan & Coppin's Napa office.

“Prices will get softer,” he predicts. “We're finding more concessions from landlords, such as the date available, rental rate, and free rent.”

It will take a while for the space available to be absorbed, but it will be, he predicts.

Napa Valley Gateway Business Park leasing agent Vince “Buzz” Butler thinks the south county's commercial real estate market will do fine, buoyed by the wine industry that makes up some two-thirds of the market.

“Napa never really surges in hot markets and doesn't fall back in tough markets,” Mr. Butler says.

By building a wastewater treatment system that can handle enological byproducts and getting its own ZIP code, American Canyon is now prepared to accommodate more wine-industry development, especially bottling facilities, in its business parks, Mr. Butler says.

Other projects on the horizon for Napa County are two 200-unit multifamily housing complexes proposed for the city of Napa, a 60-acre golf course proposed by San Francisco-based HCV Partners for industrially zoned land north of Napa Valley Gateway Business Park, and a 12-acre hotel and retail services project said business park has entitled.

For more information, call Mr. Canady at 707-528-1400, Mr. White at 707-795-4477, Mr. Ongaro at 415-472-8700, Mr. Miller at 707-252-1400, or Mr. Butler at 707-252-8533.

A nonprofit organization that provides legal assistance to Native American tribes and another nonprofit seeking to establish what may be the first Native American-run museum and cultural center in the state have purchased the 23,527sf office building at 5250 Aero Drive north of Santa Rosa for $1.9 million.

The main reason for the purchase is providing a home for the California Indian Museum and Cultural Center, according to board member Joseph Myers. The center would have 7,000sf of historical and art exhibit space and offer lectures. For six years, the group tried to start the museum in the Presidio in San Francisco, before pulling out two months ago because of lack of support from the Presidio Trust, Mr. Myers claims.

The other nonprofit moving to 5250 Aero is the National Indian Justice Center, which has been in Petaluma since 1984, according to Mr. Myers, who also serves as executive director of the justice center. The center helps tribes nationwide develop their laws and governments and teaches tribal leaders about law. Eight tribes in Mendocino and Sonoma counties have given the center authority to decide cases and offer mediation.

Carlos Rivas of Orion Partners Ltd. represented the nonprofits in the sale, which closed October 16. Barry Palma and Preston Smith of Orion represented the seller.

South Sonoma Business Park
Fifteen months ago, San Rafael-based developer Monahan Pacific unveiled the South Sonoma Business Park project for west Cotati, and now the project is in the home stretch.

On June 13, the Cotati City Council voted 5-0 to reject an appeal of the Planning Commission's approval of the final environmental review and conditional use permits.

Monahan Pacific spokesperson Susan Barnes says the goal is to start grading on the 35-acre parcel at the northwest corner of Highway 116 and Redwood Drive this summer while beginning work on a 51-acre, $4.8 million environmental mitigation endeavor along the highway west of the project. The first 90,000sf office building is bound for final design review, but no hearing date was set at press time.

The six-year buildout of the $54 million, 583,000sf office and retail project calls for a 90,000sf and a 65,000sf office building to go up as part of a four-building campus in phase I. The first building could be available in spring or summer next year. Phase II would bring the retail space and 50 townhomes, and phase III would have two additional office buildings.

A general contractor hasn't been selected yet.

For leasing information, call Brian Eisberg of Orion Partners Ltd. at 415-472-8700.

***
Fountaingrove Executive Center
Another developer heard good news the next day.

On June 14, the Santa Rosa Planning Commission voted 7-0 to approve Santa Rosa-based Billa Enterprises' second attempt at a conditional use permit for its 209,000sf office project on 15.59 acres off Round Barn Circle in Fountaingrove Executive Center in northeast Santa Rosa.

The commission unanimously rejected Billa's first go-around for a $28 million, four-building project in December, mainly because of concerns from the neighboring Fountaingrove Cancer Center that the project would block the view of the valley.

Instead of appealing the decision to the City Council, Billa sat down with commissioners, city planners, and cancer center partner Dr. Harry Richardson. The result was a slightly scaled down project from 262,000sf to ease traffic concerns, a three-story building near the cancer center redesigned as a two-story structure, and a screen of trees to hide an 80,000sf three-story building from drivers on U.S. 101.

“We worked with the Planning Commission and the Design Review Board so as not to lose the original view of the project, which had landscaping and open space,” says Lukhbir Gill, head of Billa.

In addition, because of concerns from the city about a shortage of housing, Billa has applied to rezone a nearby property on Round Barn Boulevard, between Medtronic AVE and the 114-unit Vineyard Commons retirement complex, for 70 apartments.

Billa plans to apply for building permits in early July, starting on a 40,000sf office building between Round Barn Boulevard and Round Barn Circle immediately for delivery in May 2002. The building would be divisible to 5,000sf. As demand warrants, the 34,000sf, 55,000sf, and 80,000sf buildings would be started. Currently, there is no general contractor for the project.

Mr. Gill says there is “very strong interest in the project.”

Paul Gonzalez, Barry Palma, and Peter O'Brien of Orion Partners Ltd. are leasing the project and can be reached at 707-543-8300.

***
40,410sf office building
Larkspur-based Radius Development Group plans to break ground in mid to late July on a speculative 40,410sf office building in south Petaluma at Highway 116 and Corporate Center Drive.

Petaluma-based Midstate Construction is the general contractor and is taking subcontractor bids through June 28.

The building has no tenants currently. For leasing information, call Brian Eisberg at 415-472-8700.Orion Partners Ltd.
**

Innovadyne

Innovadyne, a recent spin-off of Rohnert Park-based biotechnology company Rheodyne, has secured its own home [see story, NBBJ, Oct. 16, 2000, p. 1]. The new company has subleased 25,000sf at 2835 Duke Court from TrueTime, which moved just after the first of the year into its new facility at 3750 Westwind Boulevard near Sonoma County Airport.

Innovadyne has 20 employees now, including new president and COO Joel McComb from a Palo Alto-based biotech instrumentation firm, and is looking for 10 more.

Barry Weitzenberg, recently hired senior vice-president of operations at Innovadyne, says Innovadyne plans to move in mid February with about two dozen employees. The company is currently sharing space with Rheodyne. He expects the new space will suit Innovadyne for up to four years.

Michael White and Peter O’Brien of Orion Partners Ltd. brokered the sublease.

On January 10, the City of Cotati released a draft of the environmental impact report for Monahan-Pacific’s proposed South Sonoma Business Park west of U.S. 101 in Cotati. Public hearings before the city planning commission are scheduled for February 26. Additionally, the city is hosting a roundtable February 5 for area experts to discuss the project.

Nokia Broadband Systems in Petaluma has signed the first lease for up to 180,000sf at the proposed development.

For information on South Sonoma Business Park, call Brian Eisberg of Orion Partners Ltd.
***

BY JEFF QUACKENBUSH
STAFF REPORTER
http://www.northbaybusinessjournal.com
© 2000 North Bay Business Journal/
680 Business Journal

The north bay is increasingly attracting commercial property investors, because commercial space rent hikes common in the rest of the bay area are starting to hit, especially in Sonoma County, says San Francisco-based CB Richard Ellis broker Gary Barboro, who played a role in last month's $8.4 million sale of 84,000sf of office space at Northpoint Commerce Center in southwest Santa Rosa.

He adds that government restraint in granting approvals for construction projects and development restrictions because of open space areas and urban-growth boundaries bode well for the north bay investment market.

Preston Smith of Orion Partners Ltd. in Santa Rosa says office rents of $4-$6/sf/month in much of the bay area, together with high housing costs, have turned the eyes of more and more tenants to the north bay. As a result, investors are seeing an opportunity to buy into the market and enjoy growth the next five years or so, he adds.

Yet more office space is on the drawing board for Petaluma. Larkspur-based Radius Development Group plans to build a 40,000sf two-story class A office building on 2.63 acres it has purchased on the new Corporate Center Drive off Casa Grande Road in Lakeville Corporate Center.

Managing director Gregg Steele says Radius was originally looking for space in Petaluma for a client but decided to undertake a speculative project because of the lucrative nature of the Petaluma market.

Radius is working with Sausalito designer Charles Stewart Architects to apply for city permits. Radius wants to start construction this fall or early spring and have the project available for occupancy in 2001. Brian Eisberg and Matt Krupp of Orion Partners Ltd./Colliers International are leasing the building.

This is the first north bay development project for Radius but certainly not the last. Mr. Steele says Radius would like to have multiple simultaneous projects.

On January 5, Airport Business Center sold 24 acres at 1631 Airport Boulevard to Santa Rosa-based SeaStack Enterprises. SeaStack invests the money Bill and Sandra MacIver raised from the $45 million sale of Matanzas Creek Winery to Jess Jackson, announced in March 2000. Plans for the land call for office and R&D development at some future date as well as the extension of the west segment of Aviation Boulevard.

On January 31, Airport Business Center closed escrow on 50 Old Courthouse Square in downtown Santa Rosa from The Meadows for an undisclosed sum as an investment. The six-story, 64,062sf building is 97% leased. Denis Plehn of Orion Partners represented Airport Business Center in the transaction, and Don Hildebrand of Sacramento-based VierraMoore represented The Meadows.

For Stories Below, Go to http://busjrnl.com/ and search for "Orion"

Should you sublease excess office space?
  - November 26, 2001

Fireman's Fund to sublease third of Novato campus - November 12, 2001

          California's reversal of fortune

Airport Business Center

EnviroNet sees fertile ground in North coast - December 10, 2001

Carmet Scientific taps biotech for rapid growth - November 26, 2001

  Delevoper still thinking big November 3,
2001