The minimum bid amount of $340,000 for 909 Tennessee attracted nine bidders this past November with bids ranging from $377,000 to $1,310,000. As we noted a few weeks ago, however, the “winning” high bidder (Wayneco Heavy Industries) has backed out of the buy.
While the winning bid had been placed without contingencies or conditions of purchase, and a 10 percent deposit was placed into escrow by Wayneco in early January, “due to potential disclosure issues that Wayneco Heavy Industries has raised regarding the sale…the City Attorney’s Office and [Wayneco] are in discussions over how much, if any, of the $131,000 in escrow” will be returned.
In addition, it turns out the second-highest bid for the property came in at $906,000 (30.8 percent less than the “winning” bid) and San Francisco’s Real Estate Division has decided to re-bid the property with a minimum bid of $1,310,000 rather than offer it to the second-highest bidder citing “an improved real estate market in 2011.”
Keep in mind that an appraisal for 909 Tennessee came in at $340,000 in June 2010 reflecting “significant repairs [required] for any type of use,” such as a 2005 Department of Public Works estimate of $2,151,370 to return the building to active fire station use.
Comments from Plugged-In Readers
I’m glad they figured out how to make a clusterhug out of this property.
What a waste of time rebidding it is. They’re not going to get higher than the last chump, who wisely came to his senses and backed out.
Help me understand why the city would give back the $131,000 in escrow if there were no contingencies on the offer?
@Willow — Don’t know if an auction obviates this, but in a general a seller is required to disclose all known defects of a property. Maybe the city messed up.
…and the city is going to let the 10 percent deposit go back to the winning bidder, even though they aren’t required to, in order to head off civil litigation.
Agree with diemos. The bidding should start at $906K. $1.31M is a ceiling, not a floor.
“it turns out the second-highest bid for the property came in at $906,000 (30.8 percent less than the “winning” bid)”
The backing out bidder should lose his whole 131k deposit just for being such a sucker. This being SF though I agree with the comment that the city will give it all back to him.
If the highest bidder who backed out is still interested by the property, the city would be foolish to make an enemy out of him.
Plus 1.31M as a floor? That’s a pretty bold move. No-one except the now-withdrawn bidder ever came close to that. They should stop wasting everyone’s time and pick the second bidder as a winner.
If they did, they could keep the 10% down. 1.037M is still a pretty good outcome.
Presumably there is an issue with the disclosure sever enough that they are considering to refund the deposit. It’s presumptuous to think that the runner up wouldn’t have an issue with the disclosure, or that they are still interested.
This is just another signal that the city is really messed up and can’t even get a simple sealed bid auction right. The market has now been revealed for such a property such than an auction may not even provide the best outcome.
What a joke. The reason for the new min bid price is probably because someone already spent the money.
Well if the parties involved in the first offer does not get their deposit back that is one pricey mistake. I have been in that situation before and if the seller plays hardball they have no incentive to give you a single penny. In most cases the cost of litigation is not worth it and arbitration can be difficult to enforce. Based on what’s been presented it looks like the city has all the leverage with Wayneco.
There’s so much I’d like to say about the deal but I’m going to leave it for the moment that we’re still in escrow, we always have been, we have not withdrawn or failed to perform in any way, we intend to close and working with the City has been a learning experience.
We still love the fire station, I still intend to close the deal and buy it but everything has been at a standstill while we all (Wayneco and the City Real Estate Dept.) waited for the BoS to vote to approve resolution # 101479. Last Tuesday, Feb 15th, they did approve a highly edited & rewritten Feb 9th version, submitted by the acting City director of Real Estate.
Now we all wait for Ed Lee to sign the approved resolution into law.
Then and only then will we have an opportunity to complete this deal and close escrow.
I’ll post more when I can, I’m a quite open person about all my dealings but while the deal remains unfinished, there’s really only so much I can say except that we’ve been working with the City since we won the auction on 23rd November to get this done and it’s just taking a long time to wind through the required legislative and bureaucratic process.
Thanks for the information Wayne. The resolution language is available online:
“The reason for the new min bid price is probably because someone already spent the money.”
This is probably not far off. $725K has already been allocated to the 2010-2011 budget for SFFD. The remainder of the $1.31M, less $65,963 in administrative costs, must either be used for permanent housing for the homeless or allocated to the city’s General Fund.
In case you’re wondering, $39K of the $65,963 was allocated to staffing for the Real Estate Division, and the remainder of the $65,963 was allocated to preparation of the property by SFFD (used currently for storage).
There’s a lot of information in the link I sent above.
From a cursory read of the resolution it seems as if the FD legally cannot just sell the surplus property without allowing various and sundry other city agencies to propose their projects to use this city owned site. For example another city agency might want to use this property as a homeless shelter and since they’re internal they would get first dibs before being offered to sale to the public. Of course that could take a lot of time and effort to assemble the parts of a viable conversion project.
So instead this resolution was constructed to cut through the legal morass and dispose of the property to a public buyer.
Did I get that right ?
Also interesting is that the city’s internal overhead costs incurred in this sale are almost exactly the 6% that a normally brokered retail sale would cost. Coincidence ?
And thank you Wayneco LLC for fighting the good fight. It will be interesting to see how your project turns out.
FYI, the original draft resolution was here:
Then the acting director of real estate re-wrote it and resubmitted it at the last minute. This is the resolution the BoS passed last Tuesday:
You’ll notice that a LOT was removed between the one drafted in November that was current up until Feb 9 when it was almost entirely replaced with a new copy that incorrectly states that we had “withdrawn” and were “not performing” — those statements are wholly incorrect.
Yikes. Good luck. I predict you will get it.
Good luck Wayne! The fire and police buildings on that corner have a lot of potential and it’s a shame they are virtually abandoned. Thanks for helping turn them to a productive use.
PS: I think this area is only zoned for “light” industry 🙂
Another utility structure (though probably more difficult to re-purpose) just sold for almost the same price; a London tube station : http://bldgblog.blogspot.com/2011/02/buy-tube-station.html
Does London have as strict “historic” preservation laws as SF does? If anything, the former station property might be more valuable for that reason.
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