July 1, 2009
Park Terrace Developer (Opus West) To File For Bankruptcy
Opus East and West (which developed Park Terrace at 325 Berry in Mission Bay) will file for federal bankruptcy protection, with Opus East expected to go the chapter 7 route while Opus West is expected to reorganize under chapter 11.
Opus West has been active in the Bay Area, developing 75 acres of the 120-acre Sierra Point office campus in Brisbane in the late 1990s. In 2007, Opus West announced plans to build more office space in Brisbane — a 448,000-square-foot, $225 million office complex at 3000 Marina Blvd. — but the economy soured and the developer never went forward with the project.
Opus North and Northeast are expected to continue as-is. No word on how the Opus West filing will impact (if at all) any future Park Terrace claims.
First Published: July 1, 2009 5:00 PM
Comments from "Plugged In" Readers
I think California is going to lose at least 5% of its population over the next 3 years. At minimum. For anyone who stays, they can enjoy higher taxes and lower quality/quantity services in return. This will jack-hammer commercial real estate. To top it all off, energy prices will remain stubbornly high. Eventually, a great deal of new hiring--if it even takes place--will occur outside the state. You will simply not be able to attract workers.
Posted by: SurveyKid at July 1, 2009 5:42 PM
Services? Like what?
Only services most middle class people care about are: 911 response, road maintenance, and schools if your kids are of school age.
Beyond that, state government can shove it.
Posted by: Jimmy (No Longer Bitter) at July 1, 2009 6:15 PM
"Services? Like What?"
How about; clean streets, GREAT schools, safe clean parks, good well run safe clean public transit, services for the homeless, healthcare for the needy, better state transportation infrastructure, developement of better water resources and conservation, energy infrastructure and green alternatives, etc. etc.
California was the leader in the country in the 70's and 80's in many of these fields, now we are way behind many other states.
Posted by: anon at July 1, 2009 6:38 PM
Why would one even try to attempt this project? It reminds me of Willie Brown/Newsom and the new stadium with a "retail center" - lol. Make it simple and, at least, have a store within a couple of miles.
Posted by: PDT at July 1, 2009 6:51 PM
SurveyKid - LOL. Lose 5% of our population? Where are they going to go? That would require basically all births to stop, deaths to go through the roof, all immigration to stop, and domestic outmigration to skyrocket. One of those four is unlikely to happen, let alone ALL four.
Posted by: anon at July 1, 2009 7:05 PM
[Removed by Editor]
I predict the opposite...when times are bad, you will see people gravitating to the cities where the few remaining jobs are...not to the countryside
Posted by: Rincon Hill Billy at July 1, 2009 8:46 PM
Hope and Change...and we've just begun.
Posted by: Rich at July 1, 2009 8:47 PM
"California was the leader in the country in the 70's and 80's in many of these fields, now we are way behind many other states."
That what tax & spend & spend & spend policies will get you, eventually - they've managed to kill the goose that laid the golden eggs, b/c guess what?
Businesses move to greener pastures when you tax & regulate them to death.
Posted by: avwh at July 1, 2009 8:57 PM
We are going to see a lot more commercial real estate related BK headlines in the next 12 months with the hotel BKs leading the way. Atlas Hospitality Group in Irvine reports that 175 California hotels are currently in default and says that with the decline in room revenues combined with the jump in cap rates that hotel values are currently 50 to 80% lower than at the market's peak in 2006-2007.
Posted by: FormerAptBroker at July 1, 2009 10:43 PM
Gosh, the responses to this one remind me of the Chronicle comments. Right wing wingnuts. Bad sign socketsite....I think real estate fatigue is setting in.
Posted by: curmudgeon at July 1, 2009 11:32 PM
"I predict the opposite."
Really? The population of 25 to 34 year olds in the city dropped by 28.26 percent from 2000 to 2006".
And these job seekers are going to move to $2300 one bedroom apartments in San Fracisco? There is an urban trend taking place for people under 30, but it is not to S.F., L.A. or NYC. Spend about 4 minutes with the search engine of your choice and you will see that they are moving to low priced mid sized cities. These smaller cities are also where companies and jobs are moving to. The all time population high for San Francisco was decades ago despite the best efforts of city government agencies that try to boost the results for federal funds.
Posted by: anonwideawake at July 2, 2009 2:30 AM
i bet your grandfather and mine were friends. mine united the afl and cio here in norcal back in the day.
Posted by: james at July 2, 2009 4:56 AM
I don't think that CA will lose 5% of its population. However, I do think it's likely that CA will lose 5% of its productive taxpayers. I'm sure there will be plenty of net government service drains to replace them, though, so no worries when it comes to census figures.
Posted by: LMRiM at July 2, 2009 6:07 AM
> Gosh, the responses to this one remind me of the Chronicle
> comments. Right wing wingnuts. Bad sign socketsite....
> I think real estate fatigue is setting in.
In the 1930’s my Grandfather was active in Democratic party politics and San Francisco Labor Unions (he never let us forget that the police shot him and other Union protestors with buckshot on Market Street).
In the 1930’s other Democrats called him a “left winger” and Republicans called him a “Communist”. Today as a Catholic that didn’t support same sex marriage and as an legal immigrant that didn’t support illegal immigration he would be called a “right wing wingnut”…
Posted by: FormerAptBroker at July 2, 2009 6:19 AM
> I don't think that CA will lose 5% of its population.
> However, I do think it's likely that CA will lose 5%
> of its productive taxpayers.
It looks like California has already lost more than 5% of the state’s productive taxpayers with unemployment going from under 5% to over 11%...
Posted by: FormerAptBroker at July 2, 2009 6:33 AM
The population decline is forecast to continue through 2014 in San Francisco for those under 35 years old.
Posted by: anonandon at July 2, 2009 6:56 AM
Relating this post to the comments is a trip. Here is a big, ugly office development that serves no purpose other than bankrupting those responsible for it. Conclusions? This situation in Sierra Point will be accompanied by eminent depopulation of California, this is just like plans for a stadium with a retail center, Mexican families having babies is part of the cause even though at a national level they are all that is keeping us from demographic collapse, this has something to do with Obama and his upbeat rhetoric, businesses will decide that being cheap matters more than having experienced R&D workers available to engineer new products, people who flee to the East Bay from the City no longer count, and so on.
Finding balance in all this is nearly impossible, but it might be worth taking into account that the developers who are hitting the wall in this case were until recently proudly productive taxpayers and probably have similar dim views of the local population, stadium development plans, Mexicans, Obama, taxes, experienced knowlege workers, and all the rest. Somehow, oddly enough, viewing economic activity through the lens of an agenda did not help them. Having opinions, even really classy ones, is not very hard. Finding occupants for these buildings and making money from what they can be rented for will be difficult even for politically correct internet critics. This development is a mess that is poorly integrated with transit options and compares poorly to available buildings all over the Peninsula and South Bay.
Posted by: Mole Man at July 2, 2009 8:17 AM
"In the 1930’s other Democrats called him a “left winger” and Republicans called him a “Communist”. Today as a Catholic that didn’t support same sex marriage and as an legal immigrant that didn’t support illegal immigration he would be called a “right wing wingnut”…" And your point is? Times change, ideas change.
Posted by: bvneighbor at July 2, 2009 9:00 AM
"I don't think that CA will lose 5% of its population. However, I do think it's likely that CA will lose 5% of its productive taxpayers."
True dat. Plus the inverse effect may come into play if more people get forced into homelessness. California has the mildest weather and makes a great place to live if you have no roof. SF's generosity also attracts those who are without means to support themselves.
Mole Man brings up an interesting point - new commercial office buildings targeted towards tech face an uphill battle against hundreds of vacant properties further south. What a difference compared with a decade ago when vacancy was near 0% and access to office space was one of the factors limiting tech growth.
Posted by: The Milkshake of Despair at July 2, 2009 9:09 AM
If the builder filed for bankruptcy, does that mean the the warranties no longer exist for the home owners who were expecting 10 years?
Does anyone know?
Posted by: owner at July 2, 2009 9:26 AM
Santa Clara office vacancy rate looks to be north of 30%. You can get a furnished building for $1 psft.
No one is going to rent significant space in SF to do tech for years. The older office buildings and ones located not so centrally located will command lower and lower rents, until it becomes the highest and best use for their owners to convert them into condos.
But all of this is good for a recovery. As salaries and rents plummet in the bay area, businesspeople like me will be able to start new businesses that weren't feasible at even 80% of the rents and salaries of last year. Because of all of the taxes, etc, we'll make sure those businesses have as few people as possible, and we'll make triple sure to pay way less than ever, but that's how you get people back to work for real.
What we've seen for the last ten years was a fake. One bubble after the other, with money pouring in from outside the country to feed it, all of which ended up outside the country: all we were left with was overconsumed stuff, and a lot of debt. Going forward, the only way is for lower and lower salaries and prices of land and buildings. Without the stimulus of two consecutive bubbles, there really is no other way to get everyone back to work.
Posted by: tipster at July 2, 2009 9:33 AM
Whoah. From their website: "Opus is currently ranked #2 among the Top 25 Office Developers by National Real Estate Investor." This was a major national developer of real estate that just imploded.
Posted by: Miles at July 2, 2009 10:03 AM
Interesting article form the economist on bankruptcies being driven by CDS that got us into the mess in the first place. We will definitely be seeing more of this ans the economy continues to falter and creditors have a vested interest in the failure of their debtors.
Posted by: SFSnob at July 2, 2009 10:37 AM
@Mole Man: great comment! :)
@anonwideawake: re your "And these job seekers are going to move to $2300 one bedroom apartments in San Fracisco?" comment... Which San Francisco are we talking about? I'm actively involved in the 1BR rental market. Currently, a really nice 1BR in a good area is going for $1800 (leased, not asking -- there's about a $200-$300 spread between them mow), and the trend is still sliding downward. You need to update your mental spreadsheet with some current data.
All the moaning about both rising prices and falling prices tends to be focused on the immediate transient moment. If you take a deep breath, and look a little longer term, basic econ 101 takes control. Eventually you reach a new price equilibrium, and when that equilibrium is reached, surprisingly, none of the depopulation / implosion of government / destruction of society / mass extinctions / zombie invasions seems to ever happen. Just the usual percentage of people who take short-term investment risks getting burned. Oh, and those short-term investors freaking out in online forums about the coming zombie invasion.
Posted by: Kurt Brown at July 2, 2009 11:30 AM
thanks for trying to get us back on point 'owner'.
we should be talking about how this affects the folks in 'park terrace'.
Posted by: james at July 2, 2009 12:07 PM
I can agree with LMRiM that we may lose a significant amount of our "productive taxpayer" population, whatever that means to anyone. However, an actual population loss of 5% would be absolutely decimating and would have to happen because of some ENORMOUS external force. Michigan and Ohio have never had decades where they lost population, in spite of having every perfect economic storm of the past 50 years hit them dead on. Actual population loss on a statewide scale takes something ENORMOUS.
We'll likely simply lose some people who are replaced by births, immigration, etc. We may be a poorer state in a few years, but not a depopulated one.
Posted by: anon at July 2, 2009 12:17 PM
"Michigan and Ohio have never had decades where they lost population..."
Those states also have significantly lower CoL compared to California.
The theory is that the driving force behind outmigration is job loss or income reduction that causes people to move to where they can make ends meet.
Where would people priced out of the Michigan and Ohio housing markets move to ? Indonesia ?
Posted by: The Milkshake of Despair at July 2, 2009 12:42 PM
The theory is that the driving force behind outmigration is job loss or income reduction that causes people to move to where they can make ends meet.
That's my problem with the theory. Ohio and Michigan have had tremendous job loss and income reduction over the last 30 years. Sure, CoL is lower than California, but if you aren't employed, jobless benefits, family, other social services, and cultural resources (as in, if you speak mostly Vietnamese, being around others who also speak Vietnamese) matter more. That's why 10%+ unemployment in MI and OH didn't equal emptying of those states during the past 30 years. California has all of those factors + 5 compared to those two states, hence my feeling that we'll just see a slowly declining median income and rise of a larger lower class, rather than population implosion.
Posted by: anon at July 2, 2009 1:14 PM
> If the builder filed for bankruptcy, does
> that mean the the warranties no longer exist
> for the home owners who were expecting 10
> years? Does anyone know?
It depends on the BK, sometimes the court can get some cash for warranties (or in the case of GM and Chrysler as a thank you to Union voters Obama is making the taxpayers honor the warranties), but in most BKs anyone with a warranty from a BK company is SOL...
Posted by: FormerAptBroker at July 2, 2009 1:31 PM
I think there are some causality issues at play here. Won't a declining median income and rising lower class require a lower cost of living to begin with? How else would they survive here? The primary variable in cost of living (depending on definition) is usually cost of shelter. Value meals and sixers of Natty Light don't cost 3x more here than in Ohio. But apartments do.
Posted by: Legacy Dude at July 2, 2009 1:32 PM
Won't a declining median income and rising lower class require a lower cost of living to begin with?
Yes. Housing prices will continue to fall, just as they did for the past 30 years (mostly, in real terms only, of course) in MI and OH. While that happens, many people will live with family and friends in the mean time, to survive.
Posted by: anon at July 2, 2009 1:45 PM
Won't a declining median income and rising lower class require a lower cost of living to begin with? How else would they survive here?
Maybe instead of having 2 or 3 people living in a huge suburban McMansion, we will see people living in more reasonably sized houses. Back in 1950, the average family size was 3.2 people and the average house was 1200 square feet. Today it is 2.5 people in 2600 square feet.
Maybe people will spend less on transportation. In 1969 we had 1.2 cars per household, now we have 2.3.
Posted by: NoeValleyJim at July 2, 2009 2:00 PM
Natty light! Who drinks that here or in OH? Also, when comparing you have to compare both the cost of the apartment and what you get paid for the same job, not just the cost of the apartment.
Posted by: sparky-b at July 2, 2009 2:02 PM
Ha ha...well, I drank rivers of that swill in college, sparky, along with "the beast" and a sundry repertoire of party liquors. Still haven't tried the double-X, BTW, but it's on my list.
Anyway, my point was that California's cost of living isn't really that much higher than anywhere else in the nation. Our cost of SHELTER is the overriding issue here, as food, gas, and other items are equivalent or only slightly more expensive. Many of the costs of doing business in California are either directly or indirectly driven by the same root problem: expensive shelter.
As NVJ wrote, you have one group of folks who could easily cut the surfeit (like 3 cars, 2nd homes, etc.) out of their lives to save money. The question is will they want to, or would they just move somewhere cheaper to maintain the excess? Who knows. Seems like half the people in Phoenix and Vegas moved there from the greater LA area because the McMansion/SUV lifestyle was offered at a 30% discount to the Inland Empire.
But the folks truly on the bottom - those working multiple dead-end jobs just to put food on the table - they're not going to stop eating just to stay in the Bay Area, or in California.
Posted by: Legacy Dude at July 2, 2009 2:46 PM
We drank Natty Boh in college, now that stuff is horrible.
My point was that with the cheaper housing comes less pay for the most part. You can't just move to a cheaper area and be better off. Here's an example, prevailing wage carpentry starts at $37/hr here; in OH it starts at $16/hr. Plus you have to work in 100 degrees and in 0 degree for large parts of the year. So, that apartment better be 1/3 the cost. The cheap beer is not as cheap (relative), and the fresh fruit and veggies are not as cheap (literally).
Posted by: sparky-b at July 2, 2009 3:01 PM
"So, that apartment better be 1/3 the cost."
Took a quick look at them innernetz. Here's a basic 1-bedroom apartment that seems to be in a fairly decent part of Columbus (disclaimer: I've never even been to Ohio, just running with the strawman du jour here).
$500/month. What would something like this cost here in the city? $1800/month? Maybe you get to parity in Daly City or Oakland. But then again, I bet you could find a one-bedroom apartment in an armpit of Columbus for much less than $500/month, too.
More importantly, on another thread folks were talking about how doctors and architects actually make more in the midwest than they do here, despite the cost of living/shelter being markedly lower. Aside from carpenters and government employees, I doubt most people would incur a 66% pay cut by leaving California.
So back to my point....you can cut expenses to a degree. But if the cost of California shelter doesn't keep falling, a material population loss is not out of the question, IMO. Especially if combined with increased future taxes.
Posted by: Legacy Dude at July 2, 2009 3:45 PM
Columbus=Sacramento, and that area is way out past the airport, but I am not disputing that the rents are cheap. They are, so are the houses. But you don't make much money:
My cousin is an architect in Ohio, and making more is not true. I used carpenter with prevailing wage as they are equally regulated here and there. Here is another example, my dad was offered a job in Santa Rosa and when they were talking salary he threw out what he thought was a nice big number, the responce was "ha, ha, not your secretaries pay, your pay."
Posted by: sparky-b at July 2, 2009 4:06 PM
I think most people on this site (because of the demographics of the average reader of the site) really don't understand the lower middle class and lower class of California that well. Using the OH example above, housing would be 500 as opposed to say 1500 in an average one bedroom here (1800 is waaaaay on the high end these days - even 1500 is probably pretty high for the average one bedroom apartment in SF now renting).
If your take home is $2000 a month in OH, you're spending 25% of your take home on rent. If you're here and say making $3500 a month (less than twice as much), you're spending 40% of your income on rent. However, your after housing dough is $2000 compared to $1500. Is everything else 33% more expensive? Perhaps, but most low to lower middle income people don't know or care about that. They look at how much money they have left after paying rent each month, not percentages. When you're living paycheck to paycheck, percentages don't matter.
Posted by: anon at July 2, 2009 4:25 PM
There's definitely a spectrum of "cheaper" in America. We moved (temporarily) to Buffalo, NY, poster child of cheaper America for family reasons and really, the grocery bill isn't lower. The rent is, but of course that's offset $300/month heating bills in the winter and the gas to get anywhere or do anything here. We could buy a damn block of houses for what it would cost us in Cali, but we're still moving back to Cali at the end of the year.
Oh and we're doing a hell of a lot better than our friends in Detroit & Dallas who make comparable engineering salaries, but then, we didn't buy matching SUVs and a house.
Posted by: ish at July 2, 2009 4:47 PM
If you want to see "outmigration" when a city loses its leading industry - just think Pittsburgh and Steel.
This outmigration is one of the reasons you can frequently find at least one Steelers bar in every major city. I think there are four in San Frnaciso (www.steelerbars.com)
If you want to bring up MSA, the Pittsburgh MSA is down 15% in population from 1970 to 2008.
Posted by: JustLooking at July 2, 2009 5:04 PM
Conveniently enough, the WSJ runs a story today about how cities are now growing faster than suburbs, complete with growth rates for major cities:
SF has been growing at 1%+ since 2005 and grew at 1.2% last year.
Looks like the apocalypse will have to wait until next year.
Posted by: NoeValleyJim at July 3, 2009 1:20 AM
According to the chart in the story, Oakland AND San Jose both grew by more than SF. Because population growth is indicative of home prices, I guess prices in Oakland are going to zoom right up to the sky! NOT!
Posted by: tipster at July 3, 2009 7:13 AM
Yet you and others said opposite, repeatedly. You said SF has been steadily losing population. Nice straw dork.
Posted by: anon at July 3, 2009 8:40 AM
"Looks like the apocalypse will have to wait until next year"
Considering the data was from 2008, I agree! :)
Note the first-derivative divergence in the SF data relative to San Jose/Oakland (which could easily be random).
I doubt SF (and certainly the bay area) will lose a significant number of people. SF is a great place to be unemployed and especially U-4 thru U-6 unemployed. If you have no immediate prospects (no reason to move out), even more so.
Muni is cheap and works great if your time has no value, there are plenty of free & cheap things to do, and the weather is nice. If you load up on roommates you can keep your housing costs down.
Anecdotes: I've got two youngish facebook friends (but both >= 30) who are living this way now (they had jobs a year ago, one is U-3 unemployed, the other is probably considered U-6). At least one (possibly both) are still drawing unemployment. Both probably pay less than 1000/month in rent because of roommates.
One has moved twice in the last year for cheaper rent, so rents must be going down, I don't follow that. Neither is in the housing market :), one of them has a car, the other a motorcycle.
I'm sure both of these bright 30-something folks would rather be working, so when the next boom comes, they'll be right there, ready to take advantage!
Posted by: dub dub at July 3, 2009 10:58 AM
It is pretty obvious what is wrong with the development which is the subject of this article.
Anyone with even the slightest knowledge of California real estate would tell you that the correct name is
Posted by: Jus7tme at July 3, 2009 11:32 AM
not relevant to this post, but does anyone know anything about the litigation that is going on at 325 Berry (Park Terrace) in Mission Bay? I was looking at some redfin listings and noticed that it stated that there was "pending litigation." I went to the SF superior court website and saw that the home owners association "Park Terrace at Mission Bay Homeowners Association" is alleging a "contract/warranty" lawsuit against the developer (or at an llc I think is the developer). Is Park Terrace the next Beacon? Anyone have any insights on this?
Posted by: oscar at September 4, 2010 10:15 AM