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Bosa’s Buys Put It in Position Downtown

Nat Bosa

Downtown San Diego’s residential condominium boom of the early 2000s is not expected to make a comeback anytime soon. But Bosa Development, a prolific producer during that period, appears to be gearing up for the next wave.

Between 2000 and 2008, the Vancouver, B.C.-based company, led by President Nat Bosa, completed seven downtown condo projects with a total of nine towers, containing nearly 1,700 for-sale units.

It is currently building Pacific Gate, a 41-story, 215-unit luxury tower at Pacific Highway and Broadway — set for completion in 2017, with unit prices starting at $1.4 million — with plans in the works for a twin or similar tower at a nearby site in the same corridor.

The company now appears to be setting the stage for more downtown residential projects, spurred by recent demographic shifts showing retirees, other empty-nest baby boomers and 35-and-under millennials increasingly looking to live and work in active urban-core markets.

Property Acquisitions

Since December, according to CoStar Group and public data, Bosa has completed at least five downtown property acquisitions, totaling more than $132 million. Most of those sites currently contain nonresidential buildings that eventually would need to be cleared away or renovated to accommodate new condos and related elements, provided required city approvals are also obtained.

Most recently, Bosa acquired the 18,056-square-foot retail property at 1002 Market St. in East Village, which currently houses Grocery Outlet. The property, built in 1986 and renovated in 2008, was sold by Zephyr Partners of Encinitas.

That deal, which closed on March 1, followed closely behind Bosa’s late February purchase of a four-building downtown commercial portfolio in East Village for $10.5 million, from Cove & Sea Realty of Palm Desert. The buildings total 24,352 square feet and included a 1920-built office property at 1009 G St., a 1920-built manufacturing property at 1015 G. St., an auto repair building at 1055 G St. and a 12-unit apartment building at 650 11th Ave.

Those acquisitions followed Bosa’s February purchase of downtown’s Five Thirty B office tower for $53.2 million; its December acquisition of a downtown Shell station property for $8.5 million; and its December purchase of Zephyr Partners’ full-block site for a planned mixed-use development known as The Block, for $33 million.

The Block

Bosa has not announced formal plans for most of the acquired sites, though it will likely be following through on the already-approved Block project that it acquired from Zephyr Partners.

That $250 million development would replace several older commercial buildings currently standing on a stretch of Broadway between 7th and 8th avenues. The mixed-use project calls for 498 residential units contained in two towers — one at 41 stories and one at 21 stories — though developers have not announced whether the residences will be apartments, condos or a combination.

Bosa officials were not available for direct comment on the recent property acquisitions. In a recent statement announcing the start of previews of units at Pacific Gate, Nat Bosa said his enthusiasm for San Diego “keeps getting stronger since I first started acquiring land nearly 20 years ago.”

Bosa leaders pointed to city and regional data showing downtown residents with an average annual income of $73,000 and a projected 48 percent growth in downtown jobs by 2050, from the current 130,000 positions. Like most of the company’s past local projects, Pacific Gate will emphasize high-end design and amenities, with views of the surrounding downtown and bay area.

For the past two decades, Bosa has been focused primarily on urban, for-sale residential projects, with numerous condo developments completed in Western Canada as well as West Coast U.S. cities, including San Diego, San Francisco and Seattle.

Pinnacle’s Plans

Another Vancouver-based developer with a primary focus on urban condos, Pinnacle International, is also apparently gearing up to build more downtown units.

According to Cushman & Wakefield, Pinnacle recently acquired a land parcel at 11th Avenue, A and B streets for $10.9 million. The site is adjacent to the Shell station property and not far from the other parcels that Bosa recently purchased.

The property that Pinnacle acquired was previously entitled for a 22-story, 284-unit apartment and condo project, proposed in 2013 by San Francisco-based MB Property Acquisitions, led by developer Michael Blumenthal, who has completed several downtown San Diego condo projects.

Pinnacle’s past local projects include downtown’s Pinnacle Marina Tower, formerly known as Pinnacle Museum Tower, completed in 2005 with 182 residential units. In mid-2015, it completed and opened the first of two planned 45-story towers at its development known as Pinnacle on the Park in East Village, which currently stands as downtown’s tallest apartment building.

Russ Valone, president and CEO of consulting and research firm MarketPointe Realty Advisors in San Diego, said current financing and other fundamentals continue to favor apartments over for-sale condos, with several hundred downtown apartments currently being planned and completed by several developers.

However, he said the recent deal activity by Bosa and Pinnacle suggests that both companies are thinking well into the future about adding to the for-sale inventory downtown. In the case of Bosa, new projects on its acquired sites could be several years away if it has plans to reconfigure, repurpose or clean up the sites for residential uses, though it has shown in the past that it is willing to wait several years for the market to favor its product offerings.

Boom and Bust

Russ Valone

Downtown condo growth has been negligible since the downtown purchase market cratered around 2007, following a construction boom and price rise that lasted from roughly 2002 to 2006. Bosa’s most recent downtown project, the 232-unit Bayside, was completed in 2008, and downtown’s youngest current multiple-story condo project is the 155-unit Breeza, completed by Intergulf Development Group in 2009.

However, there are gradual signs of slow growth in the for-sale condo inventory, as units placed into the rental pool following the 2007-08 crash are put back on the for-sale market. “This has been happening over the past few years,” Valone said.

Brisk leasing activity currently being seen at new downtown apartment buildings will likely encourage Pinnacle and other developers to either convert existing apartments to for-sale condos, or put more condos in their plans for future development.

For instance, Valone said Pinnacle has leased more than 380 of the 484 apartments at its first tower at Pinnacle on the Park, suggesting a pace of around three leasings per day since the tower was opened. That’s better than the approximate one-per-day for other recently opened projects, and the demand may prompt Pinnacle to include more for-sale units in the second tower being planned at that site.

Rising condo prices could also spur new development. A recent report by consulting firm The Mark Co. said downtown San Diego condo prices were up 22 percent from a year ago in February, at $702 per square foot.

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