Originally “released for sale” in March 2007 with prices “from $1.2 million to $1.8 million” for the 14 townhomes raning in size from 900 to 2,350 square feet, it was six months before that One Rincon Hill’s Fall 2006 Newsletter was advertising “13 luxury townhomes along Harrison Street, starting at $1.4 million…”
Today, a One Rincon Hill two-bedroom plus den townhome (489 Harrison #302) hit the MLS asking $925,000 for 1,542 square feet ($600 per square). Call it a drop in sales office pricing of at least twenty-three percent (and likely over thirty).
A comment thread from 2007 starts:
“Condos can easily drop 30-40% in SF during a correction. Any buyer at these new buildings should be prepared financially for this sort of event whether it happens or not. It is definitely a risk.”
The classic (mis)conclusion at the time: those making such irrational statements must either be “disgruntled renters,” “fence sitters” willing the market down, those who recently lost a home to foreclosure, or “people that missed out on early pricing at 1Rincon/Infinity.”
And the 2009 versions? “Haters,” “armchair amateurs,” and “schadenfreude sickos.”
Wow, SS, defensive much?
Back to ORH, the townhomes have all the drawbacks of tower (terrible location) and none of the advantages (views). Not surprised they dropped.
When it comes to buildings other than the infinty or 1rincon, I’ve noticed SS being pretty defensive and unkind too.
“people that missed out on the early pricing at 1Rincon/Infinity”
That is a ridiculous claim. I hope SS was being sarcastic about it. The Infinity and ORH had their “friends & family discount” back in early 2007. With the discount, their listing prices were STILL inflated.
BLESS YOUR SOUL SOCKETSITE! Do not pay attention to the negative banter that is likely to come from this post. [Removed by Editor]
wharton, you may have misread the context of that quote.
I dont think SS is being defensive at all. they’re just reporting on the facts…and giving some opinions.
$600/sqft… FINALLY something reasonable in SOMA.
SS definitely being defensive for being called “haters”.
anyhow, i am one who is definitely not surprised by the drop in prices at the tower in the middle of nowhere…definitely not the real SF…barely SF at all. Guess you can call me a hater of that rincon hill neighborhood. if it can be called a neighborhood at all.
“Back to ORH, the townhomes have all the drawbacks of tower (terrible location) and none of the advantages (views)”
They had these drawbacks when purchased.
The additional drawback now that causes the fall in price is the lack of gushing speculators.
The townhomes suffer more than the tower for the lack of “completeness” to the neighborhood. No Rincon Tower 2, no other nearby towers. All you’re left with is a gas station and an on-ramp. Yuck. At least in the tower you can rise above the awful surroundings in your box in the sky.
I’ve never been a Rincon lover, but this is just sad.
“One Rincon Hill boasts breathtaking views of the City and the Bay and has become an iconic lifestyle building that offers a sense of status….”
Did anyone see this on the MLS description. Status is so 2007….but note they don’t offer ACTUAL Status, only a sense of it…
As I understand it, the listing on MLS is from the sales office as opposed to a resale. Much like the ‘Treetops’ at the Infinity, these units with no views would be expected to trade at a psf discount to the tower. Agreed that the $1.2m to $1.8m initial pricing expectation was probably too optimistic.
“The townhomes suffer more than the tower for the lack of “completeness” to the neighborhood. No Rincon Tower 2, no other nearby towers. All you’re left with is a gas station and an on-ramp. Yuck. At least in the tower you can rise above the awful surroundings in your box in the sky.”
This is true. The neighborhood is still-born.
Two Rincon Hill – it’s all but officially dead. Some of the towers planned for the area have been abandonned and when the city tried to get bids for an empty lot not far away a few months back there were few bids. The city, to the consternation of those who did bid, pulled the whole effort.
I think for years to come this will be a neighborhood of empty fenced lots or lots turned into parking spaces (the lot at 2nd & Howard) or ground floor retail space left vacant.
It’s sad for those who bought (literally) into the promise that this was going to one day be a vibrant, happeneing neighborhood.
These town homes are pleasantly spacious compared to most of the tower. From here there are views of the bay just looking down the street. Rincon Hill may not be for everyone, but it is easy walking distance from downtown and entertainment areas.
The second tower will eventually happen because there is room for it and the it was permitted in the past. That doesn’t matter much because there are plenty of amenities like the pool area available now.
The only really serious problem with these is the price, and there the trend is the buyer’s friend.
OK, this is definitely a challenged location that makes little sense without a view. (However the unit is probably one of the more spacious 2 bedrooms with a very functional design.) A quick calculation shows at the current rates with 20% down your monthly P&I payment will be approximately $4500 a month. Add the $800 HOA plus taxes and it becomes a very expensive proposition. I suspect further downward adjustments in price is coming if this unit is to sell.
“The second tower will eventually happen because there is room for it…”
Mole Man: I don’t share your optimism on T2 getting built soon. I think in the current economic climate, the best case scenario is perhaps within 5 years but I feel it will most likely be closer to 10.
“Mole Man: I don’t share your optimism on T2 getting built soon. I think in the current economic climate, the best case scenario is perhaps within 5 years but I feel it will most likely be closer to 10.”
The SF Business Times had an article several months back in which a real estate person said it will be at least a decade before another high-rise condo is built in SOMA. I think 10 years may be optimisitic but we will see.
even in this downturn, it seems 1 bedroom soma condos have no problem selling in the 400K price range when sellers are willing to mark it down to there (down from the 600K range at the top of the market). is it not profitable to build and sell condo’s for 400K 1 bedrooms? how did developers profit in the past, before prices took off to the stratosphere.
I was at One Rincon the other day. Have to admit I liked the driveway and lobby. The place has a nice vibe.
“how did developers profit in the past, before prices took off to the stratosphere.”
I was wondering the answer to this question too, condoshopper. Do “luxury” condos cost materially more to construct than non-luxury condos? Obviously, the furnishings within the building make a difference in cost, but do furnishing costs overwhelm fixed costs such as steel, concrete, glass, elevators, etc. that are essentially identical for both?
Was the calculation different in the past? Or have buildings taller than 4 stories (i.e. when you might need a steel frame instead of a wood frame) always been “luxury”?
No second tower anytime soon and a decade or more sounds about right to me. Given the scale of this meltdown 15-20 years would be my best guess from this point.
“No second tower anytime soon and a decade or more sounds about right to me. Given the scale of this meltdown 15-20 years would be my best guess from this point.”
15 – 20 years seems to be the consensus, however that presents a problem.
As these permits expire is the city going to indefinitely give extensions? One extension is maybe OK, but 4 or 5?
As the city does not get income from these vacant sites, will the sites be opened up in the next 10 – 20 years to smaller scale development?
Cause small scale development is all that is going to occur for a long time.
Mercy West I think is the name of a “low income” housing development for seniors and disabled in the heart of Mission Bay and it is pretty awesome. Can more projects like this maybe take some of the vacant lots?
Or projects like the one on 3rd between 19th and 20th?
That begs the bigger question – given that the grand plans for SOMA are dead for maybe 20 years, is it time to revisit the whole concept and re-do the plan to emphasize smaller more intimate development. Development which still pencils out. Cause these towers only pencil out if you can charge 700K and up for a 1 bedroom and those days are gone.
Now a message for those who are paying attention to the progress in Rincon Hill:
Emerald Fund has asked open space advocacy legend Isabel Wade and our nearby neighbor (Mission Creek) Corinne Woods, who is also known for her open space advocacy in this region of SOMA, to moderate the first Rincon Hill neighborhood meeting to discuss the design of a new community park that will be built as part of the 333 Harrison Street project. The meeting is December 8th from 6pm – 8pm at One Rincon Hill (425 1st Street) in the Hospitality Room. If you are a Rincon Hill resident, I hope you’ll join us to provide input into what our open-space starved neighborhood would like to see in this spot.
Also, the dog park that a few of our neighbors at Watermark have been leading the charge to establish for the past 1.5 years or so is well on its way to happening in 2010.
Guy Place Park is in the freezer until we have new development …. but I’m optimistic we’ll get there eventually.
Rincon Hill isn’t for everyone as I think I’ve said on here before when it was “let’s pile onto Rincon Hill day” at SocketSite. Rincon Hill has a ways to go to be fully developed, but I would say you’re pretty short-sighted to say it is DOA. Rincon Hill along with South Beach and Mission Bay are a region of the City that has come a long way in a short period, and thankfully still has room for even more high-density residential and office buildings located in areas where people can walk, bike, and take public transit as their primary means to get around.
Ask the folks who attended the Rincon Hill Neighborhood Association social mixer at the Cosmopolitan last week …
i concur controllio. i would guess the “luxury” features are only a small portion of overall costs. besides, “luxury” sometimes means there is a doorman, concierge, conference room, etc which do not add any construction costs, only upkeep costs. prices still seem pretty lofty to me but what we’re hearing is that these projects can only be built if they can sell for 2005-2006 prices.
Gil– I don’t know who is arriving at the “consensus” that “the grand plans for SOMA are dead for maybe 20 years.” Who has ever been able to predict what would happen in 10, let alone 20 years?
I can only speak to raw construction costs, which for high rise runs $200 – $250 per sf. That’s gross sf – net less garage, ammenities, circulation that the developer can sell is about 65% of the gross. That means sellable sf raw cost runs $308 – $385.
I think the costs that got out of hand were the Chris Daly “fee” extortions. ORH fees $21,500,000 / 390 units = $55,128 per unit. Add to that the interest and carrying fees the developer has to pay on this money and each buyer likely coughed up $65K indirectly to the City that has absolutly nothing to do with any intrinsic value of their property.
Lots of these projects had high levels of mezzanine debt at high interest rates. Most of the pre-construction proformas showed sales prices in the $900 – $1000 sf range for the projects to pencil.
“Lots of these projects had high levels of mezzanine debt at high interest rates. Most of the pre-construction proformas showed sales prices in the $900 – $1000 sf range for the projects to pencil.”
Interesting OneEyedman. So with these units at around 600/sq ft, it seems the developer is taking a big hit.
I had heard too that it was around 1,000 sq ft for the SOMA mega-projects to pencil. Guess that is why the developers are bailing on most of these at one time approved buildings.
What is your take? Short of the city backing off on the high fees imposed and the increased construction costs it seems to me the remaining projects can never be built because the developers will be taking a big loss.
^^ Construction costs are coming down, but not as much as they should be. I think speculators are keeping commodity prices artificially high. Gold’s at a record, and unfortunately for the construction industy silver, copper, aluminum follow gold to a certain extent. Do I think the City has the collective brain power to figure out the role they play in this and fix what’s broken? No. I posted yesterday with a link to a 4 mo old Examiner article that showed City fees on a project that were 18% of the construction cost. That’s just the extortion fees – nothing to do with building permits, sewer connection fees, etc.
Those aren’t what’s the real issue here. The problem is there’s no money. None. Zero. Unless your getting grants to build BMR crap. Developers are a pretty fearless lot and well aquainted with the risk/reward equation. Bear in mind most of their assets are real estate also – so they cannot borrow against their assets. Can they sell what they own? Maybe, if they have enough equity.
There’s also a supply issue. ORH, Blu, Millenium, SOMA Grand, Infinity – lots of vacant units still to sell as evidenced by this post. Lots of big rental recently and upcoming. Avalon Mission Bay, Argenta, Trinity Plaza, etc. All these compete with the pent-up supply (love that term) coming from ARM resets and underwater specuvestors causing distressed properties in buildings that are still trying to sell inventory – think Candlestick Cove.
This whole thing is not going to sort itself out anytime soon IMHO. The upcoming other shoe drop in CRE is going to create havoc as well. Think developers that build residential and commercial such as Tishman Speyer.
Man, I hate being a bear, but I just can’t see what the new normal might even look like.
One Rincon Hill was constructed using a newly developed method for assembling the structure that saved a very large fraction of the cost. Much of the development expense is in the public record. My recollection is this building is closer to $500/sqft for profitability. That so much of the building has already sold at high prices helps bring the overall numbers up, although taking this long to sell drives the costs up and having fewer units mucks up the HOA.
Driving development to make use of the currently unused portion of the site might make sense, but that takes time and would have to avoid conflicts in the small space. If local retail or some other potentially compatible use were in strong demand that might be a possibility, but the whole market is down right now and simple recreation may not be a compatible use.
Building low has many advantages, but the vast majority of the City is built low and some people have money and property and a preference for urban cliff dwelling. Proposals that include an alternate location might be helpful, but density holds an important segment of the market and needs to go somewhere.
Fee extortions and a permit process gone mad are obstacles, but demand for units in the City is still way out in front of construction.
Rincon Hill is one of the City’s special places. Sunrises viewed from there are frequently spectacular.
“There’s also a supply issue. ORH, Blu, Millenium, SOMA Grand, Infinity – lots of vacant units still to sell as evidenced by this post”
Does anyone have updated figures on the % of ORH, The Infinity and the Millenium sold or rented (I’ve read where the devlopers have taken to trying to rent out the unsold units)?
thanks for the insightful posts on construction costs and city fees.
Wait, it’s almost 2010, and I can still ask my favorite SS question… “Hey, how’s groundbreaking coming on that second tower?”
The 1RH bulls of 2007 have clearly been routed.
That said, I agree with Jamie… I don’t expect blight to creep in; everything’s just happening in slo mo…
Thanks for your thoughts, OneEyedMan.
Rincon Hill reminds me of an aborted pregnancy, useful but undesirable.
I’d be afraid of things that go bump in the night in that ‘hood.
Thanks, OneEyedMan, for the info on construction costs. On what basis was the city extracting fees out of the developers for ORH?
Mole Man — do you (or anyone else for that matter) have any detail on this novel construction method?
I’d be afraid of things that go bump in the night in that ‘hood.
You don’t get out much, do you?
An interesting thing is that low floor 1/1s at the Metropolitan were selling for $287,500 pre-sale (this would probably be in 2003, since the building opened in 2004).
So wait, it is okay for the editor to call out excessively bullish calls from previous posters, but not okay the hoi polloi to point out similarly excessive bearish posts? Just asking.