While approved for the development of a 172-unit building with parking for 111 cars and 6,900 square feet of ground-floor retail space last month, the Potrero Hill parcel at 1301 16th Street is now on the market rather than preparing to break ground.
And according to the City’s tracking system, building permits for the project have yet to be requested, which means that even with a quick sale, the actual development is unlikely to get started anytime soon.
greater
fool
theory
correct.
developer is dealing with internal investor pressure to get out with a land profit while available, as rolling the dice on a 4-year investment exit – construction and 170 sales / rentals — is looking much riskier than it used to.
This will not be the last try for a late-cycle land sale.
Prices should have dropped by at least 10% to 20% from ($250,000/unit) peak land prices already.
4 years was a good estimate 3 years ago. Looks like sales are about a year out.
Actually, there have been a spurt of these “late-cycle” entitled land sales recently. SS has featured several – one I believe in the last few weeks.
It seems to have started with the Mt. Sutro developer putting up for sale his entitled luxury home project last fall. I believe the developer has had to cut the price he was originally asking for the site.
My question is does this project have a window within which to begin construction and to finish it? Or lose the rights to build? Or does that window kick in only after permits have been issued – which they have not here.
Louis / Dave: Both incorrect.
This owner has never developed projects into residential only done the leg work on entitlements. No partners on the deal, can keep buildings vacant for years. Bought it for about $6 million 8 or 9 years ago. If someone steps up for a big number it will be sold – otherwise he’ll wait for the market to come back again.
Thanks. My question was to do with permits issued and timeframes to build once that happens. Permits have not been issued for this project so no timeframe to have it completed in. But I have read of the Planning Commission extending permits when construction has not started and those permits have expired. During the past downturn for instance. That is what I’m not clear on.
well then, especially if he or she is inexperienced, and also does not have to split profits with new investors, i hope they are realistic about what a “big number” is because it may be a really long time before the deal they heard about at the peak happens again. tax laws and zoning could change too during the many (usually 5-7) years wait.
anyway… each of these deals is a bellwhether on the land market and expectations of investors and lenders on the SF market. most SF development land, even if not this parcel, has been acquired by newer investors driven by measures like IRR and they really dont want to, or cannot, “wait” till next cycle.
I think timtucker described an experienced and well-funded developer…
Louis, the project has a website and identifies Ronaldo Cianciarulo as the man in charge. A quick internet search reveals he manages maybe 8 to 10 entities that appear to be associated with developments in San Francisco and maybe one in Larkspur. The bio on the website says he’s been active in real estate since the 1970’s so I’m sure there’s more to the man than a quick internet search reveals. But even so, just off the instantly available info, I don’t think you have to worry about him or his partners ability to understand a real estate cycle.
A worrisome trend. Housing is just too vital a societal interest to be left solely to market forces.
During the next market downturn, the City could decide to pick up the slack in a Keynesian twist, using the lower cost of labor and materials as an opportunity to produce “permanently affordable” units at a discount.
Can somebody start working on this plan, so it’ll be ready to go once the time comes?
Orland, then you’d better start working to elect a whole new Congress. People who will bring back support for HUD and Community Development Block Grant to meaningfully support the development of social housing. Because there are not nearly enough resources to do so in SF alone.
Housing in America is most certainly NOT based on free market forces. You have an unelected cabal of failed ivory tower academics called the FED manipulating the borrowing rate, and some unconstitutional quasi governmental organizations known as the GSEs that are using taxpayer money to backstop private loans. American politicians do everything in their power to keep housing prices propped up sky high and then turn around and talk about spending even more taxpayer money to create “affordable” housing.
All of those combined would not be so bad, if we didn’t also have restrictive zoning.
I propose a contest…which project had the best timing in this cycle?
My entry, the redevelopment of 100 Van Ness.
A unique project though and shouldn’t be compared with new construction, since remodeling an already built tower takes much less manpower, planning, litigation, and timing.
In related news: Development Deja Vu on Potrero Hill
I just walked by here this morning. Half of the building has been painted white and the H.D. Buttercup Outlet logo has been painted on the front. Does that mean no development of an apartment complex and Sightglass coffee?