Supervisors Reject Sale of Mid-Market Tower SiteDecember 9, 2015
While the sale of the City’s five-story building at 30 Van Ness Avenue, a building which sits upon a parcel which is zoned for development up to 400 feet in height, was authorized for sale by San Francisco’s Board of Supervisors with a price of “no less than $87 million,” the City returned to the Board with a deal for $80 million, as we first reported last month.
And with Supervisors Avalos, Breed, Campos, Kim, Mar, Yee and Peskin having voted against the Mayor’s resolution to ratify the sale of 30 Van Ness to Related California yesterday, the $80 million deal, which was structured with a leaseback to the City until late 2018, was formally rejected.
The outstanding debt on the building is now around $28,900,000. And after paying $400,000 in broker commissions and $40,000 in marketing costs, the City would have received roughly $50,600,000 in net proceeds from the sale, not including Related’s agreement to pay the City’s $2 million transfer tax, to help finance the City’s proposed development of a new 17-story building at 1500 Mission Street, on the eastern half of the Goodwill site at the intersection of Mission and South Van Ness Avenue. The proceeds would have also been used to pay Related $14.9 million in rent and operating costs for 30 Van Ness through 2018.
Related had also agreed to offer 15 percent of the development at below market rates, versus 12 percent as currently required by law, with an option for the City to increase the percentage of affordable units to 33 percent, but the City would have had to pay all of Related’s development costs for the optional units while Related would have retained the rents.
Comments from Plugged-In Readers
This is a step in the right direction. Bravo to the Supervisors who voted to stop this.
I guess it may be hoping too much that this could lead to a halt to the Mayor’s efforts and other to up-zone this corner. I don’t know if One Oak can be blocked at this point, but the Gooodwill site and the former auto dealer site across the way are being pushed by Planning for a way too out of scale up-zoning.
Why in the world would you want to block One Oak. Like donuts?
On what planet do you live?
The upzoning of those sites is the best thing that has happened to them in the last 20 years.
Are you a charter member of the drug dealers union?
At any point, you dont even know how this works. The sites have ALREADY been upzoned. Its done. You can block individual developments, but the sites have already been upzoned as part of the market and octavia plan after roughly 400 years of public comment.
In the case of the Goodwill site, the project proponent wants to increase the height ABOVE what the MO Plan had approved. They are changing the rules in the middle of the game. Also that particular site is a mere 40 feet from residential that is only two story 45′ height (across Mission to the south on Lafayette to Minna). Seemed particularly brutal at the time the plan was proposed/approved and seems more so now that they want to further increase the height.
Then upzone the opposite side of Mission and build more appropriate high-rise residential.
why would you not want to upzone this commercial ugly corner with the best transit in the city and on the corner of the 2 biggest streets in SF?
with all the big buidlings being planned, Van Ness Station is going to be a joke, and the F line will be too, everyone will just drive their stupid cars
As Yogi Berra said, “Transit is so crowded, nobody takes it anymore.”
Can’t tell if you are trolling or serious. Your post reads like you truly believe what wrote.
Thinking the exact same thing. If he is trolling, Dave is doing some fine work.
400 feet is out of scale at the intersection of the two widest roads in the city? What planet do you live on?
I think this is good, as we never saw a good explanation why the $80M figure was the most the City could get – presumably the initial $87M authorization was based on something other than speculation.
Going to miss the next cycle as well.
Marquee intersection in a showcase city flanked by a 24 hour donut shop and a goodwill store.
gah!!!! so lame
WE ARE IN A CRISIS.
THEY SHOULD SELL IT TO SOMEONE FOR $150MM AND DEMAND 90% OF THE UNITS BE AFFORDABLE. AND EVERYONE SHOULD GET A PONY.
allowing only open space and precious single family HOMES! on the site.
Along with a homeless shelter for drunken homeless who cannot dry out!
“open space … single family HOMES … with a homeless shelter”
So then the homes and the homeless shelter would all be underground? What if the city of San Francisco became a massive green park, and all its residents moved underground and became mole people? That sounds like the basis for a dystopian science fiction story.
You’re describing Houston 8 months out of the year.
Just think of all the “affordable housing” units they could build on these sites for $1M / per!
Restore it to its original condition! Bring back the native sand dune vegetation! Think of the butterflies!
what kind of pony
who will pick up the crap
who gets to use the crap… I mean manure.. I mean fertilizer….
A tragic missed opportunity. Thank you liberal supervisors cabal.
That corner is an eyesore.
Its Related Companies. Those guys are sharks and negotiate aggressively. (The CEO owns the Miami Dolphins fer chrissakes). Good for the BOS for playing hardball and demanding more cash or other benefits on the barrelhead.
As updated above, Related had also agreed to offer 15 percent of the development at below market rates, versus 12 percent as currently required by law, with an option for the City to increase the percentage of affordable units to 33 percent, but the City would have had to pay all of Related’s development costs for the optional units while Related would have retained the rents.
So what’s next? Further negotiations with Related, or do they start the whole bidding process over?
What housing crisis?
yay! increase the city’s debt on the building.
frankly they should just not have a height limit and let developers get creative. I’d love to see what people would propose if they really had some flexibility. it’d be cool to have a system of height limits similar to LA or NYC, but I can only dream.
Yeah! Downtown LA is just SOOOO beautiful!
Yeah, like these supervisors have SO much experience in business and real estate development that they can out-negotiate a serious developer, and make a better determination of the actual market value of the site (um, the market value is what the best offer is when it’s marketed – in this case that happens to be the $80 million that’s been offered….)
Related will probably walk away, and no one else will be willing to take it on. The site remains the same….
No, they’ll pick it up for $55 Mill. in 6 mos.
It was noted in this morning’s Chron story on Peskin’s swearing in that he urged his colleagues to reject the deal. Lee should have run out the clock on him till next week’s meeting.
I asked on the previous post how they could accept $80 million when the minimum allowed was $87 million. I didn’t get an answer then, but now I see the answer is “oops!”.
Exactly! its like telling your realtor the minimum you’d accept for your home is a million and he accepts 800K w/o your consent.
If there was an issue with the price minimum the proper thing would have been to back to the BOS and discuss it.
I doubt the developer walks away. I expect if the BOS holds firm they will pay the 87 million.
If the developer were to walk away? No great loss IMO. Does the City really need a new office building? Was a study done to see if leasing existing space was maybe more economical?
the vacancy rate is miniscule. not a lot of existing space
I didn’t see info on the # of units that Related was proposing – maybe it’s too speculative at this point to know… but if it’s in the 200 unit range, the additional $7M would be only $35,000 per unit. Granted, that’s “only”, with some sense of irony / what world do we live in head-shaking…. but the point is that if these units cost, say, $350,000 each to build (which based on recent articles is low-ball), then Related and the sales market can readily factor in the additional $35,000 per unit.
As linked above and previously reported, the site can support between 500 and 600 units. The City has been modeling based on the lower number.
Actually, from the hearing the head of real estate said the drop in price was due to the buyer doing their “due diligence” on the existing building, which apparently needs significant seismic work. Not sure how that translates to $7M loss in value in 5 months, but that’s the excuse he gave.
But isn’t the whole point of this to TEAR DOWN the existing building?!
The City had a deal to sell the building to Carmel at 95 Million. Carmel couldn’t perform and the City did a deal w Related whom they are building Goodwill with. Related put in a deal w the City that other developers were willing to match but b/c Goodwill is with Related, and the office tenant occupying 30 Van Ness moves into the new Goodwill building, it made sense for the City (and better sense for Related).
It’s interesting that the City would put this to the board at 80 Million when there were multiple offers during the process at over 85 and a couple above 90 and the City didn’t go back to those developers instead went to Related.
This should definitely be built. It’s a dump now.
Watched the BoS debate on this, as I was curious about the rationale.
The opponents brought up 3 main issues: not enough BMR (developer only promises a minimum 15% up to a possible 20%, and the city has the right to buy right to buy up to 33%); cost of BMR too high (city payment for additional BMR units would be $450-550K each); and total price was too low.
They made a big point that the standard on BMR has moved – the city requirement of 12% is woefully too low, and there are now lots of examples where developers have agreed to significantly higher percentages, and a higher requirement is likely going to voters next year. Also much made of the fact this is city-owned land, so there are real and symbolic reasons to press for more affordable.
Of course, not one of the opponents were faced with the question – what if this turns out to be the best deal we can get? Is the bird in the hand better than the proverbial 2 in the bush? Peskin was particularly aggressive and bombastic – his shtick would get old quick if I had to listen to him everyday!
“Avalos, Campos, Kim, Mar ” aren’t they all going to be obsolete soon enough? Campos – term limits, Kim – term limits, Mar – term limits, etc? It’s going to be a different board again.
Avalos is termed out in 2016, not Kim. Though she may end up in Sacramento …
I don’t think Mar is term limited… but there’s already someone (Marjan Philhour) circulating flyers for the 2016 election in Mar’s district.
Mar is termed out next year. I hope and pray that the voters in District 1 can vote for an intelligent and pragmatic Supervisor this time.
me too. would love to see a moderate running.
The board as it is with Peskin on it will only last a very short time. It’s time to get rid of the regressive radicals and vote more towards the moderates.
Split the difference @ $3.5 million and call it a day.
It’s density not ISIS. it’s amazing to me how fear keeps the most transit rich part of the city filled with car dealers, vacant lots and one story warehouses.
I do not like Peskin, but we have too many condos already. Peskin may help avoid too many new housing units being built and help avoid a supply glut.
The only way we will ever see a supply glut within the 7×7 in our lifetimes will be the result of some sort of unpredictable catastrophe. Even a predictable event like the Big One won’t suppress demand below the suddenly reduced supply.
SF is a mature city so population growth will be very slow naturally. It is fully built. We should make the population to freely flow instead of building too many new units.
Currently rent control made most of the population stuck in the same housing unit for decades, which is unnatural and unproductive. People’s needs change over the life cycle, it is unnatural to live in the same rental unit for the whole life.
SF’s problem is in rent control. Supply is adequate at current pace.
Most of the population of SF renters are not in the same housing unit for decades. In July SS reported the EIR for the prop A bond found that the average RC tenancy was 9 years. Ted Egan, the main author of the report, commented on SS about their method. From their results and US Census data it is easy to calculate the average for non-RC is 6 years.
Clearly, RC gives people an incentive to stay put, but we shouldn’t exaggerate the aggregate effect. Not much solace for the unlucky owner of a small RC building that hasn’t had a turnover for decades, but their day will come.
Average length of tenancy nationally is 1.7 years. So even 9 years of rent controlled tenancy is 529% of the normal.
The US Census’ American Housing Survey (namelink) data does not agree with your 1.7 year stat. Their national and metro data is available online. From their spreadsheet of the most recent national data set online, the average USA rental duration was ~4 years.
You might have been working with the median, which is around 2 years and varies quite a bit depending on the volatility of the economy. When times are more volatile (boom or bust), short-term renter churn rates go up, affecting the median more than the average. The biggest factor in the average are units that have been rented to the same head-of-household for 10+ years. The biggest factor in the median are units that have been rented to the same head-of-household for 2 years or less. Very different stats because of the distribution, though people often confuse them.
Also average length of tenancy per tenant is not very useful. What’s useful is what percentage of rental units are turned over within 10 years. Most of the units with a longer tenancy will become decades of tenancy or permeant tenancy. The few lucky units will charge the market rate and rent to highly mobile young professionals, the average tenancy will be short and normal for these lucky units. But majority of the units are occupied by the same tenants for decades.
Just to make sure we are comparing apples to apples, and not averages to medians or some other such spurious comparison, can you please provide a reference or link to the source of your “1.7 years” stat. Thanks.
FTR, the Census data used in that EIR is by rental unit, not by individual tenant. This is stated in very first sentence of the SocketSite reported I linked to above.
As for the “percentage of rental units are turned over within 10 years”, you can get that data direct from the US Census. For example, for the 2010 Census the percentage of rental units occupied less than 10 years was 76.5% for SF, 87.5% for USA.
There were a number of offers above $80 Million for a higher tower than presently allowed (similar to Goodwill’s revised height) at 30% affordable but apparently the City deemed the Related offer superior, as after Carmel backed out they didn’t go back to those buyers. Probably b/c if there are delays at their Goodwill site, they can extend their lease at 30 Van Ness. If that’s the case, it makes sense for the City.
But, affordable housing loses in that case to the protracted beauracracy of building Goodwill which obviously the City needs for its agencies to effectively manage their tasks. Maybe that’s the final analysis here – the politics of the whole thing has an unintended consequence of limiting the affordable delivery so that the City has an assurance they’re not without a home while they go through the process at Goodwill.
Instead of some conspiracy of whatever, that’s a fairly reasonable case for this deal to be consummated and understandable as a San Francisco tax payer that civil servants NEED a place to work from or we are all in deep doo-doo.
Having said that, the conspiracy one is much more fascinating, and probably somewhat true.
UPDATE: Sale of Mid-Market Tower Site Tentatively Approved
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