June 18, 2007

RESEARCHRANTSM Compliments of...

Investment Services Group

Michael Speers - Dan Wald - Gary Willard

“It’s tough to make predictions, especially about the future.” - Yogi Berra

Click here for a pdf… http://www.naibt.com/Rant/ResearchRant--06-18-2007.pdf

DEALS IN THE NEWS

SAN FRANCISCO – “Boston-based AEW Capital Management is in contract to buy 650 California St. for nearly $300 million, the latest in the steady stream of high-priced downtown office deals.”

“If the deal closes, the $620-per-square-foot price tag would be double the $138 million that the current owner, the Pivotal Group, paid for the building in October of 2000. It is nearly the same price per square foot that Principal Global Investors recently paid for the Wells Fargo building at 333 Market St.”

“The 490,000-square-foot 650 California was developed in 1964 for the Hartford Insurance Co. Major tenants include Littler Mendelson, Fastiff, Tichy & Mathiason, Jefferies & Co. and Credit Suisse First Boston.”

“More than $6.5 billion of sales transactions have closed in 2007, nearly twice the amount changing hands last year. The blockbuster deals have included Morgan Stanley's $2.6 billion acquisition of the Equity Office Portfolio at an average of $675 a square foot and Broadway Partners purchase of the four-building Beacon Capital Partners portfolio for an average of $502 a square foot.” http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2007/06/18/story12.html

SUNNYVALE – “Mathilda Place, the three-building Sunnyvale office complex built in 2002 by Silicon Valley developer John Mozart, is being placed on the market, and the asking price for the 473,000- square-foot trio could reach $700 a foot, experts say. At those prices, the development could sell for up to $330 million.”

“According to Mozart Development's Web site, major tenants at the complex include Broadcom Corp., Seagate Technology Inc. and Impac Medical Systems Inc.”

“Mathilda Place also is within walking distance of Sunnyvale Town Center, a mall on 25 acres, that a RREEF partnership acquired in April. The developer plans on demolishing the mall, creating a mixed-use development of residences, office space and retail.” http://sanjose.bizjournals.com/sanjose/stories/2007/06/18/story10.html

BAY AREA – “Talk about coming full circle. A former West Coast REIT is buying assets from a private equity giant that acquired them from another former West Coast REIT in a deal that helped launch the privatization trend last year.”

“In its largest transaction since being acquired by GE Real Estate in May of last year, Los Angeles-based Arden Realty Inc. is acquiring 38 suburban office properties from The Blackstone Group LP.”

“In San Diego, Arden will acquire the largest number of assets: 13 totaling 30 buildings and 1.6 million square feet. The deal also includes six assets totaling 16 buildings and 791,433 square feet in Orange County, four assets totaling 12 buildings and 707,862 square feet in Salt Lake City, two assets totaling four buildings and 434,391 square feet in the San Francisco market and two assets involving six buildings and 275,193 square feet in the Portland market.”

“Last week, Arden widened its Northern California footprint by closing on the purchase of a portfolio of six flex office and R&D assets in Santa Clara and Sunnyvale in the Silicon Valley.” http://www.costar.com/News/Article.aspx?id=4BF406D075059A75990CF7D3A455454A

SAN CARLOS – “Mark Logic leased 21,638 square feet in Building 2 of the Skyway Technology Center, at 999 Skyway Road in San Carlos, CA. The company signed a four-year deal. Built in 2000, the Class A office campus consists of two three-story buildings totaling more than 231,000 square feet.” http://www.costar.com/News/Article.aspx?id=7613DCA7467C29F4E44CBFF58D4772FE

SAN FRANCISCO- “San Francisco State is soaking up 18,353 square feet more at the Westfield San Francisco Centre, bringing its total presence in the new mall-office complex to 125,000 square feet. With the expansion, S.F. State will occupy all of the fifth and sixth floors, said Frank Fudem of NAI BT Commercial, who represented the university. Microsoft signed a deal in December for 75,000 square feet on the seventh and part of the eighth floor. Forest City, which is a joint partner with the Westfield Corp. in the venture, also has recently taken space on the eighth floor.” http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2007/06/18/newscolumn1.html?page=2

SAN FRANCISCO – “BankServ, an electronic money transfer service, subleased 17,886 square feet from Heller Ehrman at the 333 Bush St. office tower in San Francisco's Financial District. The company signed a seven-year deal for the entire 26th floor of the Class A building.” http://www.costar.com/News/Article.aspx?id=4E506A83CC982E4CF150B252299AC364

MILPITAS – “Waldman Management Group has purchased an industrial facility in the Ames Industrial Park for $10.2 million, or nearly $60 per square foot, from Ames Industrial Partners Ltd. The 174,600- square-foot building is on about eight acres at 1000 Ames Ave. in Milpitas, CA. It features a fenced lot, seven loading docks, heavy power and 19 drive-in bays.”

“Fred Eder of NAI BT Commercial San Jose represented Ames Industrial Partners.” http://www.costar.com/News/Article.aspx?id=89B87C53432CAB92B2AD26C6E3103E9D

SAN JOSE – “Xactly Corp., a venture-backed sales consulting firm, has subleased the historic Metropole building at 35 S. Market St. in San Jose, CA, from McClatchy Interactive, a Raleigh, NC-based company. Xactly will fully occupy the 23,973-square-foot building for the remaining four-year term beginning next month. The property was taken as-is for roughly the asking price of $1.35 per square foot/month.” http://www.costar.com/News/Article.aspx?id=31CDF4A60E0ADFCAC2D89F43D0117FF8

CAMPBELL – “Casoni Investments LLC acquired the 10,890-square-foot office building at 603 Campbell Technology Parkway in Campbell, CA, from Duc Properties LLC for about $3 million, or $275 per square foot. The two-story building was constructed in 2002 and is in shell condition. It sits on a little more than a half- acre. Duc Properties acquired the property in 2005 for $2.25 million.” http://www.costar.com/News/Article.aspx?id=4E71D20E54BCF54AE2D2A6E4AB62E19F

NOVATO – “Safeway Inc has leased 55,000 square feet of retail space at Highway 10 and Nave Drive in Novato for a new store from landlord Grosvenor USA Ltd.”

SANTA ROSA – “Orchard Supply Hardware LLC has leased 35,563 square feet of retail space at 2330 Cleveland Ave. in Santa Rosa for a new store location, according to brokers.”

SAN FRANCISCO – “Technology advertising agency Godfrey Q and Partners has leased 20,173 square feet of office space on the ninth floor of 100 California St. in San Francisco. The agency, which counts among its clients Symantec Corp., Dolby Laboratories and Cisco Systems, plans to move from its 10,000-square-foot headquarters at 153 Kearny St. to the California Street location this month.”

SANTA CLARA – “Brion Technologies Inc, which provides semiconductor design and wafer manufacturing equipment for advanced lithography, has leased 30,495 square feet of research-and-development space at 4201 Burton Drive in Santa Clara.”

SAN MATEO – “Teracent Corp., a firm that helps online advertisers determine which of their products is selling well, has renewed its headquarters office lease for 3,604 square feet of space at 400 S. El Camino Real in San Mateo. Teracent was represented by Tyler Hooper of NAI BT Commercial.”

SAN CARLOS – “Maxx Metals Inc. has leased 12,000 square feet of office space at 355 Quarry Road in San Carlos from the building's owner, Waldman Management Group.”

SAN CARLOS – “Athens Chiropractic Clinic has leased 4,000 square feet of clinic space at 951 Industrial Road in San Carlos. The clinic plans to move from its current location at 1100 Industrial Road. Randy Arrillaga of NAI BT Commercial represented Athens.”

HAYWARD – “Tek Seonh LLC has purchased a 9,200-square-foot building at 24782 Hesperian Blvd. in Hayward from Boca Bargoons, a discount fabric retailer in San Francisco, for an undisclosed sum.”

(From the Chronicle’s weekly Strictly Commercial column.) http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/06/19/BUGBAQHBK01.DTL

MORGAN HILL – “Montebello Investments purchased an 82,000 sf eight-building industrial project at 16840 Joleen Way from Burt Development for $6 million, or about $73 psf.”

SAN CARLOS – “Tesla Motors leased 27,775 sf of office space at One Circle Star Way from Emptoris.”

LOS GATOS – “Akeena Solar leased 26,691 sf of office space at 16005 Los Gatos Blvd from landlord CHL Ventures.”

MENLO PARK – “Aesthetic Sciences leased 24,045 sf of office space at 1455 Adams Drive from landlord Menlo Business Park.”

PALO ALTO – “Foley & Lardner leased 23,744 sf of office space at 975 Page Mill Road from Wilson Sonsini Goodrich & Rosati.”

MENLO PARK – “Foundation Capital Management leased 20,453 sf of office space at 250 Middlefield Road from landlord 250 Middlefield Associates.”

PALO ALTO – “Vendavo leased 19,782 sf of office space at 1029 Corporation Way from landlord C&J Office Buildings.”

(From the weekly transaction summary in the Mercury News.) http://www.mercurynews.com/businessheadlines/ci_6175434

SACRAMENTO – “Four months after it was put up for sale, the 18-story Emerald Tower office building at 300 Capitol Mall has sold for $130 million to a joint venture between Sterling American Property Inc., of New York City, and Hines Interests of Houston.”

“The $339-per-square-foot price is at or above expectations from commercial brokers for downtown Sacramento space. In February, predictions suggested the building could fetch $115 million or more.”

“The Emerald Tower was acquired for $76 million in 1999 by VV City USA LP, which a subsidiary through a long chain of a private German bank. It was built in 1984 as one of the Capital's first premier office towers. It is 80-percent leased by the State of California. The largest tenants include the State Comptrollers Office and the Department of Insurance. Overall, the building is 98-percent leased.” http://sacramento.bizjournals.com/sacramento/stories/2007/06/18/daily22.html

DEVELOPMENT ACTIVITY

SAN FRANCISCO – “The new China Basin is taking shape. With the last of 3,150 tons of structural steel scheduled to be hoisted to the top of 185 Berry St. on June 19, China Basin owners McCarthy Cook and RREEF are on schedule to complete the exterior of their 175,000-square-foot expansion by December.”

“The addition, being built atop the existing 230,000-square-foot structure, will represent the first new speculative biotech space coming to market since Alexandria Real Estate Equities completed 1700 Owens St. in December 2006. And with Alexandria just starting construction on four more biotech buildings, China Basin will likely have the city's only new biotech space available before early 2009.”

“Richard Hayes, a former Equity Office Properties executive recently hired to head up leasing at China Basin, said the space will be flexible enough to accommodate both life sciences and more traditional offices. ‘The good news is we can hunt from both camps,’ said Hayes. ‘We could go all office, or all lab. It will likely be a 50-50 mix.’”

“The project has just 2 percent vacancy, with Cisco, iCrossing, Level 3, and LoopNet all growing there. The owner had agreed to terms with a tenant for the entire addition, but the company -- a South San Francisco biotech -- backed out after an unsuccessful clinical trial. Rents for the new space, which will have 15-foot ceilings and a bronze glass curtain wall exterior, will be about $48 a square foot, triple net.” http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2007/06/18/story13.html

SAN FRANCISCO – “Millennium Partners is pushing up its sales schedule on the $350 million Millennium Tower by six months, seeing heavy demand at the highest echelon of the condo market.”

“Sales on the $350 million, 60-story blue-gray tower will kick off in November, rather than spring of 2008, according to Millennium officials. Driving the decision is demand for resale units at the city's two hotel- condo projects, the Four Seasons, which Millennium owns, and the St. Regis.”

“‘The market is right,’ said Millennium Partners Managing Director Richard Baumert. ‘Our office gets 10 to 12 calls a week for re-sales on the Four Seasons. With that demand, we see a real advantage to coming out with a product that is comparable to the Four Seasons and the St. Regis.’”

“The decision to advance the sales schedule comes after the Ritz-Carlton Club and Residences sold out its 57 condos and the St. Regis has seen strong re-sales. One unit on the 26th floor of the St. Regis sold May 31 for $2.7 million, or $1,617 a square foot, a 59 percent increase over the original $1.7 million price a little more than a year earlier. Another unit on the 34th floor sold for $1.6 million in 2005, for $1.95 million in March of 2006, and again for $2.4 million in December of 2006, according to Malcolm Kaufman of Maguire Real Estate.” http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2007/06/18/story1.html

SAN FRANCISCO – “Apartment developer AvalonBay has bought the last remaining parcel in Mission Bay's north of Mission Creek area from condo builder Signature Properties, an indication that rental housing is gaining steam as some segments of the condo market cool off.”

“The price of the fully entitled project was about $26 million, but that includes project design work by Miami- based Arquitectonica, as well as piles that Signature had already purchased for the development, according to Meg Spriggs, development director for AvalonBay.”

“The parcel at 353 King St., between IntraCorp's Arterra and AvalonBay Phase I, had been entitled for 260 condominiums. AvalonBay has slightly reduced the size of the building to accommodate the apartments, which are generally smaller than condos, but the number of units and the overall design will remain the same.”

“Signature Properties President Michael Ghielmetti said AvalonBay approached them and "offered what we felt was a fair price." Signature has two other condo projects on Berry Street, 235 Berry and 255 Berry, which are selling, but not as fast as the developer had hoped.” http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2007/06/18/story4.html

NEWARK – “NewPark Mall stands to lose one of its major anchors, as Mervyns LLC has filed plans with the city of Newark to build a new store of nearly 81,000 square feet just north of the mall, where it has operated a store for 22 years.”

“Paige Allen, general manager of NewPark Mall, said her mall's owner, General Growth Properties Inc., the nation's second-largest shopping center operator based in Chicago, has purchased the 90,000-square-foot, two- story building now housing Mervyns.”

“General Growth had planned to launch an $80 million renovation of 1.1-million-square-foot NewPark in early 2005 that included a facelift for the 27-year-old mall's interior and exterior, a 20-screen Century Theatre complex and new restaurants, specialty stores and sub-anchor tenants. The project was delayed, however, when General Growth officials decided to conduct an in-depth "master plan" study of the southern Alameda County market to make sure any changes in the center reflect the desires of consumers in the trade area encompassing Newark, Fremont and Union City.”

“Clay Colvin, Newark's economic development manager, said the relocated Mervyns store will be part of a major redevelopment of an existing retail center on 13 acres across the street from NewPark along Mowry Avenue that will include the construction of four other new buildings that will be 15,000 square feet, 18,700 square feet, 25,000 square feet and 42,300 square feet in size. Though no other retailer besides Mervyns has committed to the project as yet, Colvin said city officials hope a sporting goods store will occupy the largest of the structures.”

“The redesigned project, which Colvin said will be called Mowry Center and will have more than 200,000 square feet of gross leasable area, will replace an unnamed retail area that once housed such big-box tenants as Staples, Kids R Us and Circuit City. While the latter store now sits empty, the buildings housing Staples and Kids R Us have been demolished, Colvin said.” http://eastbay.bizjournals.com/eastbay/stories/2007/06/18/story4.html

FREMONT – “Opus West will go vertical in the next 30 days for Fremont Tech Center, a 16-building development on the rise within Bayside Technology Park, a 4.4 million-sf development along Interstate 880 in Fremont. Phoenix-based Opus acquired the land for the project in May and has since been performing site work in advance of vertical construction.”

“Fremont Tech Center will total 214,000 sf. The 137,452-sf first phase will include 10 for-sale buildings ranging in size from 2,700 sf to 12,500 sf. Three of those buildings will have two floors of fully finished office space in front and warehouse/services areas in the rear. The other seven first-phase buildings, ranging from 5,000 sf to 12,500 sf, will be delivered unfinished so that buyers can customize their units. The 76,548-sf second phase will include six free-standing buildings that may be leased or purchased outright.”

“According to the web site for the project, list prices for individual units and whole buildings range from around $230 per sf to $380 per sf, depending on the buildout.” http://www.globest.com/news/932_932/sanfrancisco/161616-1.html

OAKLAND – “Developer Bill Garlock is reporting success in leasing a historic downtown Oakland office building he bought a year ago. At Garlock's 1500 Broadway, half of the 115,000 square feet was empty last year. Now he reports the building is 85 percent full, with the latest office lease being a full floor to TransFair USA.”

“Elsewhere in downtown Oakland, office developers are also sprucing up historic buildings at 1100 Broadway, former headquarters of the Key rail system, the old Bank of Oakland at 1212 Broadway and the old Bruener Building near Broadway and 22nd Street.” http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2007/06/18/newscolumn1.html?page=2 http://www.globest.com/news/931_931/sanfrancisco/161582-1.html

LENDERS AND LOANS

Compliments of Bill Brizendine's weekly e-mail...

“Last Tuesday, it sure looked like the sky was falling: the yield on the 10-year Treasury bond closed at its highest since April 4 of 2002, touching 5.30% at one point. However, before the week was through, things simmered down with news that the core rate of inflation increased at a very modest 0.1% in May -- an annual rate of 2.2% -- well within the Feds “comfort zone”. The 10-year yield fell back to 5.17% by Friday’s close, up a net of 6 bps for the week.”

“Tellingly (if that is a word), the big run-up in Treasuries came on Tuesday. There were no domestic economic reports to react to on Monday or Tuesday; but several foreign central banks had raised their interest rates. Our bond traders were forced to respond to the competition by offering higher yields, once again demonstrating that we are in a global market for capital, just as with automobiles, shoes and call centers.”

Key Rates as of Friday, June 15, 2007...

30-Day LIBOR: 5.32% 6-Month LIBOR: 5.41% 10-Year Treasury: 5.26%

William Brizendine Melody Capital Markets mailto:[email protected]

Thanks Bill!

REAL ESTATE NEWS

SAN FRANCISCO – “Zannel (the mobile video startup) is planning to zoom into San Francisco. …In August, the company will move its 26 employees into 8,000 square feet on Third and Brannan streets, where it will add more engineering and sales staff.” http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2007/06/18/story10.html

BAY AREA ECONOMY

CALIFORNIA – “UCLA economists say they are puzzled by the relatively weak impact a slowing housing market is having on the California economy. In the UCLA Anderson Forecast released Tuesday, economist Ryan Ratcliff says job growth has slowed only slightly and that there has been only a slight uptick in unemployment.”

“This is a conundrum, he writes, because it comes at a time when falling sales, weak prices and rising foreclosures have ruled the housing market and both national and state measures of construction activity suggest that real estate has been a drag on growth for close to a year.” (Correction: it is a conundrum because Mr. Ratcliff did not predict it, now he will alter his prediction to fit events.)

“Ratcliff believes that the answer lies in the timing and that it is in the final two quarters of 2007 and the beginning of 2008, job losses will manifest. He writes that mid-2008 will look better than the intervening period and that job growth will return to normal levels next year.” (Perhaps I should forward them my disclaimer?) http://eastbay.bizjournals.com/eastbay/stories/2007/06/18/daily12.html

SAN JOSE - “Silicon Valley's unemployment rate held steady at 4.4 percent from April to May as the number of employed in Santa Clara and San Benito counties grew by 1,200, data released Friday shows. The number of employed has grown in the valley by 21,100 in the past year.” http://sanjose.bizjournals.com/sanjose/stories/2007/06/11/daily67.html

DUBLIN – “Washington Mutual, whose Long Beach Mortgage unit is a leading subprime lender, is closing its fulfillment office on Dublin Blvd. in Dublin. The move will affect 120 workers, who were notified of the layoffs on June 1, according to WaMu spokesman Tim McGarry. The layoffs do not affect WaMu's larger operations in Pleasanton.” http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2007/06/18/daily7.html

PALO ALTO – “Continuing its West Coast push, Goodwin Procter LLP has opened a Silicon Valley office. The Boston-based law firm said it recruited six Bay Area attorneys to its new outpost. Partners from Townsend & Townsend & Crew LLP, Wilson Sonsini Goodrich & Rosati PC and Latham & Watkins LLP have joined Goodwin in its Palo Alto location.” http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2007/06/11/daily29.html

SAN JOSE – “The San Jose Mercury News said on Tuesday that it plans to cut 40 more newsroom jobs. The cut will leave its newsroom at 200, half of what it employed seven years ago.” http://sanjose.bizjournals.com/sanjose/stories/2007/06/18/daily35.html

NATIONAL ECONOMY

BAY AREA – “Homeowners in the San Jose metropolitan area have about a 49 percent chance of seeing their property devalue in the next two years, according to the quarterly PMI U.S. Market Risk index, released by PMI Mortgage Insurance Co.”

The riskiest of all markets are Riverside (65 percent), Phoenix (65 percent), Las Vegas (61 percent) and West Palm Beach (61 percent). Other California markets whose risk factor is more than 50 percent are: Los Angeles (59 percent), Anaheim (58 percent), Oakland-Fremont-Hayward (57 percent), Sacramento (56 percent) and San Diego (56 percent).” http://sanjose.bizjournals.com/sanjose/stories/2007/06/18/daily34.html

IN CLOSING

IMPORTANT DISCLAIMER! None of this was true. I made it all up. Any similarity between the characters and events of this e-mail and real life is purely coincidental. This e-mail should not be used as a basis for making any investment decisions. I’m just a researcher with an attitude - what do I know about this stuff!

Later, Jim

Remember the deal – we’ll send you this weekly e-mail for as long as you want to read it. If you have had enough, just reply with the words “I Surrender” in the subject line, and we’ll remove you from the list. And keep in mind, I’m just the research guy, so if you would like more detailed information about our other investor services, call Michael Speers, Dan Wald or Gary Willard at 415.781.8100.

Jim Scotland Investment Services Coordinator NAI BT Commercial | Investment Services Group mailto:[email protected]

The ResearchRant is presented to you by

Investment Services Group

Michael Speers - Dan Wald - Gary Willard http://www.naibt.com/