As we first revealed last week, Related California’s proposed development of 565 apartments and 460,000 square feet of office space along Mission, between 11th and South Van Ness, will likely be financed by way of $375 million of city issued mortgage revenue bonds.
And as a number of plugged-in readers quickly noted, the City of San Francisco has set its sights on the office portion of the development and is planning to pay Related an estimated $253 million for the building which would rise up to 17-stories along 11th Street and front Mission and South Van Ness Avenue as well.
The City’s letter of intent for the acquisition of the building to be built includes a non-refundable payment of $1 million and up to $250,000 toward schematic design costs to be paid to Related, but the acquisition will remain conditional upon the completion of the project’s environmental review and a final election to proceed.
While the City’s estimated purchase price would be $253 million based on the letter of intent, the actual purchase price would be equal to Related’s actual hard and soft costs for the development of the building, plus development fees of 5 percent and a 5 percent profit (on top of the fees) . And if the City should decide not to move forward with the acquisition, it could be on the hook for up to $7 million in design and development costs.
San Francisco’s Board of Supervisors will have until July 31 to endorse the plan and letter of intent and to authorize the City to make the non-refundable payments. Related is scheduled to close on their acquisition of the 1500-1580 Mission Street parcel in September and will pay Goodwill $65 million for the land.
If all goes as proposed and planned, the City will consolidate the Departments of Public Works, Building Inspection and Planning, and Retirement and Health Services System in the new building with occupancy in early 2018.
Which is more accurate — the massing shown here or the photocopied drawing from the previous post?
Is the 460,000 square feet of office space deducted from the annual Prop M quota? If so, it would tend to crowd out most private office development in the year it’s approved.
what, i’m pretty sure that city/county is exempt from prop m.
OMFG. Could the City please hire someone with a lick of business sense to negotiate LOIs? $1M non-refundable deposit before they even have entitlements? A purchase price based on actual costs? (I hope the City has some say over change orders and material substitutions!) A 10% developer kicker, *on top of* an unknown “developer fee”?
[Editor’s Note: Since clarified above, that’s 5 percent in development fees plus a 5 percent profit (on top of the fees).]
+1. This deal is a crime against the citizens of SF.
Unfortunately, cost-plus is par for the course in SF government contracts.
That’s simply because most of the people doing the “negotiation” are either bureaucrats or politicians who neither understand nor care about the distinction anyways.
Hey, in some cases they even prefer to have their projects or departments cost more money, because then they can brag about managing a larger budget.
plus it looks like the deco clock tower building will no longer be retained 🙁
Can’t they just buy a building?
It is amazing that a city government willing to make its own ordinary citizens beg for garages, parking, “dwelling unit mergers,” in-law units, fewer homeless people, and even sugary drinks, is willing to spend these sums of money to make Related even richer. I am very much in favor of development, but the city does not need to support private companies.
“Begging” for sugary drinks? Yeah. Sure.
Apparently the ‘city family’ is multiplying like rats in a mandatory compost heap. Could we have them work out of the Recology facility near candlestick and save ourselves some massive coin?
Does anyone know when the goodwill will close?
UPDATE: City’s Budget For Mid-Market Office Building Jumps To $327 Million.