By Jon Peterson
San Francisco-based Newmark Realty Capital has put together a $24 million construction loan for a mixed-use condo redevelopment located at 611 Cowper Street in downtown Palo Alto.
“This project was a little tricky to put together. This was mainly was due to the fact that it has both a condo office space and one residential condo unit to be sold. This made it a little difficult to convince some lenders about the project,” says Jeff Wilcox, a principal with Newmark Realty in its San Francisco office.
The construction lender on the project is Walnut Creek-based Mechanics Bank. The developer of the property is Palo-Alto based R&M Properties. This project will not need any other level of financing going forward.
The project involves the redevelopment of two existing commercial buildings that have been demolished. The new property should be completed by the third quarter of 2015. This will include a Class A 30,000 square foot office condo and one single residential condo totaling 5,000 square that will be located on the fourth floor of the building.
The office space in this project could be marketed either for sale or lease. It could be leased to a single tenant or split up into a multi-tenant operation.
The project is located about one and a half blocks off of University Avenue in Palo Alto. It’s situated in one of the tightest office markets in the country. According to a Cushman & Wakefield first quarter 2014 San Francisco Peninsula market report, Palo Alto is bested only by San Carlos in terms of overall office vacancy on the San Francisco Peninsula. Direct vacancy in Palo Alto for properties that are outside of the Stanford Research Park was 3 percent in the first quarter of this year. Stanford Research Park on its own is at 1.5 percent direct vacancy.
“The Palo Alto office market is one of the best performing office markets in the country. The vacancy for Class A office space is sub three percent, and it’s very difficult to add new space to this market,” said Wilcox. These factors and strong tenant demand keeps the office vacancy low in Palo Alto.
R&M properties has been a developer in the Palo Alto and other surrounding areas since 1996. Its main focus has been with single-family homes.
Newmark Capital has had a very busy year arranging debt and equity capital for real estate properties in Northern California. “Over the previous two to three months, we have put together transactions totaling around $250 million in the region,” said Wilcox.