Commercial April 9, 2022

Next Up for Tesla’s Elon Musk: Robots and Self-Driving Cars

Tesla Also Plans More Production of Cybertrucks

Tesla CEO Elon Musk spoke about the future at a grand opening party at the company's new factory in Austin, Texas, on April 7. (Tesla)Tesla CEO Elon Musk spoke about the future at a grand opening party at the company’s new factory in Austin, Texas, on April 7. (Tesla)

Elon Musk, Tesla’s CEO and the world’s richest person, has just opened his new factory to make vehicles fueled by electricity in Austin, Texas, and is already talking about what’s next: new products including a Tesla robot as well as self-driving cars and taxis.

The autonomous vehicles and a humanoid robot called Optimus that can do mundane tasks are all essential elements of sustainable energy goals like the cars built at the new factory, according to Musk. He added that Tesla plans to expand its full self-driving software to North American customers this year.

Cars without drivers will “transform society,” Musk said at a grand opening party showcasing the factory. “The car will be able to take you anywhere you want, ultimately 10 times safer than if you were driving it yourself. It’s going to completely revolutionize the world. This is one of those things that comes along very rarely.”

As for robots: “Anything humans don’t want to do, Optimus would do it. It’s going to be an age of abundance,” he said.

Musk, sporting a black cowboy hat, spoke about his goals for about 30 minutes Thursday night at the event Tesla dubbed a “Cyber Rodeo” that featured the first deliveries of Tesla electric vehicles manufactured in Texas.

He also discussed another important part of Tesla’s goals for sustainability: building factories close to a critical mass of Tesla customers because, he said, making cars without having to ship them overseas benefits the environment.

“You want to build the cars where the customers are,” Musk said. “It’s going to be way better to build the cars locally.”

Choosing Texas

Tesla started building the Austin factory in 2020 after choosing the Texas capital over Tulsa, Oklahoma, as the location for its next major U.S. automotive factory. The company bought about 2,500 acres in East Austin, about five minutes from the Austin-Bergstrom International Airport and about 15 minutes from downtown Austin, for the factory and for what turned out to be its new headquarters. Musk announced Tesla’s headquarters relocation from Palo Alto, California, to Austin in 2021.

“California is great and we’re continuing to grow in California, but we ran out of room,” Musk said at the event. “We need a place where we could be really big, and there’s no place like Texas.”

Tesla received millions of dollars in tax incentives from local government entities to locate its factory in Austin. Musk, who topped Forbes’ 2022 list of the world’s richest people with a net worth $219 billion, well ahead of Amazon’s Jeff Bezos, who was second on the list at $171 billion, also personally relocated from California to Texas during the pandemic.

The Austin factory is 15 city blocks long and if it was vertical, it would stand 3,826 feet tall, taller than the Burj Khalifa, the world’s tallest building in Dubai, United Arab Emirates, that is 2,722 feet tall, Musk said. The Austin factory has 10 million square feet of floor space and is Tesla’s first factory where all critical parts of the manufacturing process are under one roof, including making the battery packs.

The Austin factory is “the machine that builds the machine,” Musk said. “This is the largest factory in the world, by volume. The factory is the product.”

Tesla’s completed new factory and headquarters in Austin, Texas. (Tesla)

Musk said the Texas factory would eventually be the highest-producing vehicle factory in the United States. Tesla has delivered 1 million cars worldwide over the past 12 months, representing about 1% of total car deliveries, but Musk said he hopes to expand the auto manufacturer to deliver about 20% of total vehicles.

“In order to make a difference, a really big difference to sustainability, we have to make a lot of cars … to transition the world to sustainable technology as quickly as possible,” Musk said. “We’re going to move to truly massive scale, a scale that no company has ever achieved in the history of humanity. That has to happen in order to transition the world to sustainable energy.”

Growing Popularity

While electric vehicles currently make up a small percentage of both the number of cars on the road and overall car sales, their popularity is forecast to increase, especially considering the $5 billion of federal investment intended for charging-station infrastructure and ongoing concerns over gas prices. President Biden issued a goal to have at least 50% of new vehicle production be electric by 2030.

Tesla is planning to make 500,000 of its Model Y vehicles a year at the Austin factory, Musk told the crowd. The company is also hoping to start production of the Cybertruck in Texas next year. The Cybertruck, Tesla’s first battery-powered, all-electric truck, was first announced in 2019 but production has been delayed several times. A prototype of the Cybertruck was on stage Thursday night, with the latest version not having door handles.

Tesla cars in the shape of a Texas flag in the parking lot of the grand opening event. (Tesla)

A lot will happen at the Texas factory between now and the end of 2023, Musk said, with a massive wave of new products coming out. Those products include the Cybertruck, the Roadster and the Semi, all of which would begin production in 2023. Semi is a heavy-duty, all-battery powered semi-truck. Tesla announced the commercial vehicle concept in 2017. The Roadster, meanwhile, is Tesla’s all-electric sports car.

The Austin factory is Tesla’s sixth factory. Previously, Tesla made most of its vehicles at its plant in Fremont, California. Other factories are in Sparks, Nevada; Buffalo, New York; Berlin, Germany; and Shanghai, China.

The Austin factory, which has more than 70,000 solar panels on the roof to help power the plant, is expected to make a new battery line that will be the industry’s first structural battery pack produced on-site for vehicles built there, according to a presentation.

“We think, over time, this will probably be the biggest [battery] cell factory in the world,” Musk said.

Commercial April 9, 2022

WeWork’s Adam Neumann Strikes Out on Biggest Deal Yet in ‘WeCrashed’ Episode 6

Coworking Company Leader Tries To Get Softbank to Buy Out Other Investors

Jared Leto plays WeWork CEO Adam Neumann and Anne Hathaway plays his wife. (Apple; Getty Images; Jelena Schulz)Jared Leto plays WeWork CEO Adam Neumann and Anne Hathaway plays his wife. (Apple; Getty Images; Jelena Schulz)

WeWork’s Adam Neumann, as portrayed by Jared Leto in the new Apple+ limited series “WeCrashed,” sprays the contents of a fire extinguisher around his largest investor, Softbank Chairman and CEO Masayoshi Son, on the rooftop of a Mexico City skyscraper.

The incident in the sixth episode comes shortly after the opening of a WeWork shared office site in the company’s 100th city, with Son finally telling Neumann that he was “crazy.” Neumann then unveils to Son a plan he’s formulated after nearly getting pushed out of his leadership position by increasingly skeptical investors, according to the dramatization. But stop reading now if you haven’t seen the newest installment.

The episode is called “Fortitude,” which is how Son describes Neumann’s courage in the face of adversity. In the dramatization, Neumann pitches Softbank on expanding its $4.4 billion investment to buy out WeWork’s other investors, including WeWork’s first backer, Benchmark Capital, in a proposed $20 billion deal that puts the value of WeWork at $47 billion. The deal, as Neumann pitches it to Son, has sticking points such as the co-founder retaining corporate control and preventing Softbank from investing in a WeWork rival. Son ultimately walks away from quadrupling Softbank’s stake in WeWork.

That leaves Neumann in this dramatization to deal with questions from other investors, such as why he had WeWork sign office leases in buildings he personally owned, why he told his real estate team to double the lease terms or up the lease rate to rapidly boost its footprint, or why he trademarked the word “We,” which he then let the company use for $5.9 million.

In watching Neumann’s wheeling and dealing, my real state broker watch pals, Thirty-Four Commercial’s Sarah Hinkley Kennington and Ruth Griggs, could only shake their heads, saying that this isn’t how office leases are done.

“It’s not uncommon for an investor and firm to own its real estate and then lease it, but to not have it disclosed properly is a bigger problem,” said Kennington, founder and partner of Dallas-based Thirty-Four Commercial.

Sarah Hinkley Kennington is a longtime Dallas real estate broker who founded Dallas-based real estate services firm, Thirty-Four Commercial.

Griggs, a senior vice president at the real estate services firm, added that “they were also negotiating at above-market deals, adding to it becoming a potential problem.”

Both Kennington and Griggs remember a time before WeWork had entered the Dallas market, when landlords chased after them hoping to bring what they considered to be a new concept to their doors. The two, who represent landlords in leasing office buildings, would go to New York City to visit WeWork locations and come back to Dallas in hopes of bringing the first WeWork to the city. WeWork finally opened its first location in Dallas in early 2017, at an office tower at 1920 McKinney Ave. in Uptown.

Kennington, who is leading the lease up of Uptown’s newest office tower, The Link at Uptown, said she had to turn away a “big scale” coworking provider at the beginning of the leasing process to initially make way for more creditworthy tenants before signing coworking tenants. The 25-story office tower is roughly 50% leased, with additional leases in the works, she said.

Kennington and her team must make sure those holding the equity behind a newly constructed office building are happy with the risk they are taking with each office tenant. Often that means new space goes to long-term creditworthy tenants such as law firms, real estate firms, and financial services firms. Coworking might come later, she said.

“Landlords are constantly assessing risk with rents so thin the breakeven point for a landlord is only after a few years,” Kennington told CoStar News.

Ruth Griggs is a senior vice president at Thirty-Four Commercial.

For WeWork, the investment was always plenty of tenant improvement dollars — even if they signed at above market terms. In the “WeCrashed” episode, those favorable lease terms helped build a portfolio of 8.9 million square feet of leased office space in New York City, making WeWork the Big Apple’s largest landlord at the time. Kennington and Griggs said the statistic was “shocking,” but it likely didn’t warrant a party — or the subsequent hangover that led to Neumann being in tears at the end of the episode with a wife, played by Anne Hathaway, who couldn’t bring herself to comfort him.

Kennington and Griggs, both mothers as well as real estate executives, said they had never really heard about Neumann’s wife Rebekah’s pet project, “WeGrow,” which took root and became a school despite at least one investor in the episode telling Neumann there’s no money in running a school. Here are two lessons from this week’s episode:

  • Stay in your lane. Once you leave your core competency, it often leads to demise, said Kennington. Griggs adds: “Especially if you are not profitable in that lane to begin with, you should focus on being profitable before you start to grow.”
  • Relationships matter. Between mocking WeWork co-founder Miguel McKelvey to investors as an unsuitable candidate to run WeWork and telling Rebekah she did not help build WeWork, Neumann alienates those closest to him. In the episode, Neumann writes the word “We” on a glass of tequila, then empties it to turn it upside down into the word “Me.”
Commercial April 9, 2022

Developer Pitches Plan To Overhaul Site in One of the Nation’s Most Concentrated Industrial Neighborhoods

CA Ventures Chases Rising Demand for Logistics Space With Proposal To Revamp Waterfront Property in Richmond, California

Chicago developer CA Ventures is pushing a plan to redevelop the aging warehouse at 1411 Harbour Way S in Richmond, California, into a larger industrial complex that will cater to rising demand for logistics space. (CoStar) Chicago developer CA Ventures is pushing a plan to redevelop the aging warehouse at 1411 Harbour Way S in Richmond, California, into a larger industrial complex that will cater to rising demand for logistics space. (CoStar)

One of the nation’s most concentrated industrial neighborhoods is growing as developers scramble to assemble whatever land they can to meet demand for warehouse and logistics space.

Chicago developer CA Ventures is the latest to throw a proposal into Richmond, California’s construction pipeline with plans to overhaul a vacant waterfront property into a high-end industrial complex, according to a design review application filed with the East Bay city. The project would include demolishing the existing structure at 1411 Harbour Way S at the Port of Richmond and building an industrial complex with nearly 202,500 square feet of space.

The roughly 8-acre site is owned by the city of Richmond, according to public records and CoStar data. However, the city signed a 26-year lease agreement in 2020 for a portion of the port’s terminal with a joint venture group that included Orton Development, an Emeryville, California-based firm with a long track record of complex rehabilitation and redevelopment projects. As part of the lease deal, the city agreed to include up to about $10 million to restore what city officials described as a “degraded” property, which was built in the 1970s.

“This long-underutilized City of Richmond port property is perfectly positioned for distribution or manufacturing use and will contribute to the social and economic growth of the surrounding area through job creation and revenue generation,” CA Ventures Executive Vice President William Lu said in the statement. The developer did not provide additional details about the proposed plan or its potential timeline.

It isn’t clear whether CA Ventures will team up with Orton or take over the project entirely. Orton did not respond to CoStar News’ requests for comment.

Though significant, the Richmond project will be a drop in the bucket alongside the city’s supply of more than 17.7 million square feet, according to CoStar data, an amount that makes it one of the most concentrated industrial markets in the country.

Throughout the East Bay — the Bay Area’s largest industrial market — a recent surge of developments has boosted the region’s stock at the fastest pace since the late 1990s, according to CoStar data. More than 2 million square feet of industrial space was completed in 2021, adding to the nearly 5 million square feet completed in 2020, the highest annual total since 1998.

Even with the additional supply, year-over-year rent growth has hovered around 7% for the past decade and is now settled at nearly 7.2%. What’s more, the average vacancy rate for industrial properties scattered across the East Bay stands at a little more than 4%, according to CoStar data, well below the 10-year historical average of 6.2% and down significantly from peaks of more than 12% reported at the height of the Great Recession.

Commercial April 9, 2022

East Bay Leads Bay Area in Multifamily Construction Activity

Developers Primarily Target a Few Key Areas

The East Bay is the most active development market for new apartment units in the San Francisco Bay Area. With more abundant and cheaper land, robust public transportation infrastructure and population movement into suburban areas, the East Bay is poised to continue to lead the region in apartment construction over the next several years.

The East Bay has outpaced new construction activity in neighboring San Francisco and San Jose since 2019 and is now the largest market by unit count in the Bay Area. The nearly 8,500 units under construction in the East Bay is set to increase the total market inventory by about 5%. Those under-construction units will follow the more than 2,500 units delivered in 2021, the second-most units delivered in a year over the past two decades.

In addition, developers capitalized on improving market conditions in 2021 with the trailing year average in the East Bay registering around 1,000 units heading into 2022. Several East Bay areas have caught developers’ attention. Emeryville leads in terms of the percentage of supply under construction compared to existing stock, at over 30%. Other areas with significant activity include Pittsburg Antioch, Walnut Creek San Ramon, Downtown Oakland and Fremont/Newark.

Recent supply pressure has been a critical factor in vacancy rate volatility in the East Bay. But record demand in 2021 brought the vacancy rate back down to pre-pandemic levels. In CoStar’s forecast model, renter demand should effectively match supply growth, keeping vacancy in check and driving the overall rate back down below 5% over the next several years.

Commercial April 9, 2022

Affordable Housing Conversion Plans Kickoff With Bay Area Multifamily Acquisition

Integrity Housing, Ascenda Capital Expand Regional Portfolio With Deal To Close on Concord Apartment Complex

Integrity Housing and Ascenda Capital have closed on the Lakes apartment complex in Concord, California, for nearly $31.6 million. (David McClure/CoStar)Integrity Housing and Ascenda Capital have closed on the Lakes apartment complex in Concord, California, for nearly $31.6 million. (David McClure/CoStar)

A team of investors is expanding its stake in the Bay Area’s multifamily market with an acquisition and accelerated plans to address the region’s dearth of affordable housing options.

Integrity Housing and Ascenda Capital finalized a roughly $31.6 million deal to acquire the Lakes apartment property in Concord, California, one of the Bay Area’s largest cities and home to some of the steepest rent increases in the nation’s priciest housing market. The purchase equates to nearly $309,000 per unit for the East Bay property, according to Contra Costa County property records and Marcus & Millichap, which brokered the deal on behalf of the seller Ruder Family Investments.

Asking rents at the 102-unit complex have climbed by about 6% over the past year, according to CoStar data, and California investors Integrity Housing of Irvine and Ascenda Capital of Bervely Hills are taking the property in a different direction as part of a plan to create more affordable housing for Bay Area renters.

With the Lakes deal, the duo has since late February spent more than $145 million on a string of multifamily purchases. Its portfolio now includes four properties that total more than 400 units in the high-growth suburbs of San Leandro, Concord, Hayward and Belmont.

Integrity did not respond to CoStar News’ requests for comment. Ascenda Capital declined to provide details about its latest acquisition, but said of its previous three purchases that it was eager to grow its presence in the outer Bay Area, which it described as one of California’s strongest housing markets.

It has been only two years since Redwood City-based Ruder Family Investments acquired the property, at 1818-1850 Laguna St., for $26.8 million, or about $262,750 per unit, according to CoStar data. In the time since, Marcus & Millichap Senior Managing Director Levin Johnston said in an email, the trust made a number of substantial capital improvements, including modernizing units, installing high-end finishes as well as updating kitchens, exterior paint, deck enclosures and catwalk railings throughout the exteriors.

The upgrades, combined with rising demand for cheaper housing alternatives in the Bay Area, have pushed rents at the Concord property even higher. Asking rates are now nearly $1,950 per unit at the complex, according to CoStar data, substantially higher than in previous years but still shy of the neighborhood average of a little more than $2,000 per unit each month. What’s more, Concord remains a relatively affordable market compared to pricier, often smaller options in San Francisco, Silicon Valley or Marin County.

Average rents in San Francisco, the nation’s most expensive multifamily market, are more than $3,000 per month, according to CoStar data.

Johnson did not disclose the value of the improvements, and Ruder Family Investments did not immediately respond to CoStar News’ requests for comment.

The investors financed all four acquisitions through tax-exempt bonds issued by the California Municipal Finance Authority, which helps provide capital for economic development projects and social programs on behalf of a membership base that includes local governments and other public entities in the state.

The joint power authority greenlighted up to $40 million for Integrity and Ascenda’s purchase of the Lakes as well as any additional capital necessary to put toward renovations at the 1960s-era complex, according to state filings.

The joint venture was also approved to spend up to $155 million for its previous three purchases, of which about $114 million has been spent on acquisition costs, according to public documents and CoStar data.

With the Lakes purchase wrapped up, Integrity and Ascenda will begin rolling out a conversion that will ultimately transition all 102 units into designated affordable housing, according to filings with the state. A 75% share of the units at the joint venture’s previous three acquisitions will be converted to affordable housing, according to public documents.

Commercial April 9, 2022

Hunt for ‘Undervalued Opportunities’ Lands LA Investor in San Francisco Bay Area Suburb

Benedict Canyon Equities Adds to $4 Billion Multifamily Portfolio With Martinez, California, Purchase

Benedict Canyon Equities has closed on the Hayden apartment complex at 486 Morello Ave. in Martinez, California, a fast-growing suburb in the San Francisco Bay Area. (CoStar)Benedict Canyon Equities has closed on the Hayden apartment complex at 486 Morello Ave. in Martinez, California, a fast-growing suburb in the San Francisco Bay Area. (CoStar)

A Los Angeles investor with a penchant for acquiring multifamily properties in fast-growing neighborhoods at a bargain is diving into a San Francisco Bay Area suburb with its latest $41.5 million purchase.

Benedict Canyon Equities closed on the 108-unit Hayden apartment complex in Martinez, California, according to Contra Costa County filings, where it plans to roll out its tried-and-true strategy of upgrading renovated properties to capitalize on rising rents. The deal with seller Pacific Urban Investors, a Silicon Valley firm, closed in late March.

The purchase price for the complex at 486 Morello Ave. shakes out to about $384,260 per unit, according to CoStar data. That’s below the roughly $401,500-per-unit average investors have paid for similar deals in the Martinez area, where rents have climbed by more than 5% over the past year as a result of rising demand and the neighborhood’s relative affordability compared to other Bay Area suburbs.

The typical renter in Martinez, about 30 miles northeast of Oakland, for example, pays an average $2,100 a month compared to the East Bay average of more than $2,350 per month.

For Benedict, the sale is the investor’s latest swing at targeting what it calls “undervalued opportunities” and repositioning them to capitalize on accelerating demand. The firm, which said in a statement that it has a multifamily portfolio valued at nearly $4 billion, said its sweet spot is acquisitions priced between $20 million and $45 million located in dense, urban neighborhoods and with plenty of room for improvements.

That strategy has played out well since the pandemic’s onset as renters have traded expensive city apartments for less expensive, more spacious alternatives in suburbs or secondary markets. What’s more, the population shifts since early 2020 are expected to continue as factors such as remote and hybrid work allow employees to live farther away from commercial hubs.

The multifamily market in Martinez hasn’t posted nearly the same levels of growth as other previously overshadowed markets such as Sacramento; Reno, Nevada; Tempe, Arizona; or Boulder, Colorado. However, proximity to the Bay Area Rapid Transit System, major thoroughfares connecting the neighborhood to nearby San Francisco or Silicon Valley, as well as dwindling supply has helped elevate its standing in the broader region’s multifamily market.

Investors have funneled more than $235.7 million over the past year into the city’s apartment market, according to CoStar data, exponentially higher than the roughly $36.5 million reported over the prior 12-month period.

The strengthening multifamily market has proven to be a boon for Pacific Urban Investors, which acquired the Hayden complex in November 2019, just months before the pandemic took hold. According to CoStar data, the Silicon Valley investor paid $30.3 million for the property, or about $280,560 per unit.

Neither Pacific Urban nor Benedict immediately responded to CoStar News’ requests for comment.