While the development team had been planning to break ground on the massive 445-unit Kirkham Heights project next year and the Environmental Review for what would have been the largest development in the history of the Inner Sunset was underway, Westlake Urban has formally withdrawn its application to move forward with the development at 1530 5th Avenue.

While a detailed reason for abandoning the development hasn’t been given, according Westlake Urban’s managing director by way of the Business Times, the firm is “being very selective” about which projects they’re continuing to pursue in the current environment, such as a 197-unit development in the East Bay next to the San Leandro BART station.

54 thoughts on “Developer Spikes Plans for Massive Inner Sunset Project”
    1. The only reason we got this last bump was hope for Trump passing some policies that would let businesses and individuals keep more of what they earn. Now it’s looking like he can’t get anything done. And while mega cap tech remains strong, the tech euphoria is definitely fading. Credit growth is basically stalling across the board.

  1. This kind of hesitancy will buoy other projects that are already underway.

    If they “call off” the EIR now, I wonder how long the pre-Prop C grandfathering of 13.5% BMR on new units is retained?

    Also, having to re-build 86 rent controlled units doesn’t help the As-Complete cap rate. If we set the cost hurdle high enough on new housing, what we’ll achieve is no new housing!

    Meanwhile, the decrepit sad stucco of the avenues accretes value, ever higher.

    1. “Meanwhile, the decrepit sad stucco of the avenues accretes value, ever higher.”

      Hey, hey, hey…us owners like that decrepit sad stucco that accretes value….

  2. Any word on whether they will put the entitlement up for sale? IIRC a nearby project of 40 or so single family homes was backed out of by the developer a year ago and that entitlement put up for sale. Not sure what the current status is of the latter.

    Maybe its starting to hit home that population and job growth is stalling and that the uber density being pushed is simply not needed. Even if the Hub 2.0 gets approved, its hard to see the proposed residential towers being financially viable in the current market – which could last for a decade or more. The SF metro area is lagging in projected population growth. By 2030 Seattle is expected to add a million residents and the SF area just several hundred thousand. Places like Atlanta and Phoenix are projected to experience even more robust growth than Seattle.

    It’d be nice if there was a city fund that would allow this land to be purchased and kept as permanent open space.

    1. Just so I’m clear: Knowing that we have the highest housing costs of any city in the nation, you think that because job growth is slowing (which couldn’t have anything to do with the lack of availability of housing) that more density is not needed, and that instead we should be “preserving as open space,” an existing apartment complex, using taxpayer funds.

      Do you even read the Socketsite articles? Or do you just say some stuff to work in something about Seattle?

      1. These developments have not provided affordable housing. The housing crisis has worsened despite the 2 million a pop high-rise condos. Or in this case a mid-rise development having just a 13% BMR component.

        If SF was serious about housing they would not be proposing only 7K units of such in the Central SOMA yet 48K new jobs. Or in HP/CP only 10K units of housing, but up to 5 million feet of office space.

        There is plenty of additional density coming the HP/CP, TI and the proposed Central SOMA plan. More density in and of itself is not the answer to the housing problem as recent years have demonstrated.

        1. Most of the density in Central SoMa is OFFICES. Every neighborhood is unaffordable, and as such, they all need more units. And actually, many many articles have shown that the influx of new condos has had an impact on their prices (finally dropping slightly). Much more housing at all income levels is still needed in the Bay Area before we will see any impact on pricing across the board.

          1. Also FWIW, Seattle consistently produces double the amount of housing units we do.

          2. @paulish – it’s not just that Seattle consistently produces more than double the new housing units we do, Seattle is creating a broad range of housing in terms of affordability. The 40% affordable housing program there pales anything SF has done – even the new higher Prop C mandate.

    2. If SF lags in population growth it’s because we don’t build enough housing.

      The cause is the slow housing growth, the effect is lower population growth. Another effect is our high prices.

      1. Actually, the relatively slow population growth being projected through 2030 is for the SF MSA and includes San Mateo County and the East Bay. FYI, the San Jose MSA is also projected to have sluggish population growth through the same period. One factor is the Bay Area is running out of buildable land while places like Phoenix and Atlanta have significantly more undeveloped area which is ripe for building new housing and business centers.

        1. Which is why we should build more housing in the Bay Area. We’re running out of land, but we can build up.

          By the way, Phoenix? Please.

          With global warming, Phoenix will be getting hotter, with less water (it already doesn’t have enough water), and now planes won’t be able to take off because the air is too thin. Phoenix. Zero relevance to SF housing.

          1. And there in lies the rub. More density, building up? Yes, but not all that density can be squeezed into SF. SF is maxed out per current infrastructure realities.

            Unfortunately there is no regional cooperation here and that is now coming home to roost as Bay Area tech growth noticeably slows compared to a number of other areas.

            More density? Yes, up-zone the stretch of El Camino from SSF to Burlingame – thousands of units could be built there in mid-rise developments. Instead of stuffing more jobs in the Central SOMA shift the job expansion to Oakland which is, transportation-wise, far better to handle it. How does Brisbane get away with a massive office project (IIRC it will be larger than the CP/HP office development) and no housing.

            Region wide issues that demand an answer and action but one gets none and this is now having a real impact on the viability of the Bay Area and is why so many plan on moving away.

          2. There is no evidence of that tech growth is slowing. Consider how much VC funding flows to SF compared with anywhere else.

            SF should plan for a future where the tech economy is much larger than it is today.

            [Editor’s Note: A bit of data from last quarter versus your January 2016 link: “Venture capitalists invested about $6.7 billion in the Bay Area, closing 386 deals in the first three months of [2017]. That’s down from $7.8 billion and 557 deals during the first quarter of last year, which was a drop from [over 600 deals and $8 billion in] the first quarter of 2015…”]

          3. Sorry for the shorthand. Shall we consider the increase in market value of Apple over the last year? It has gained about $250B in one year. Google–$120B. Facebook–$100B.

            How do those register as ‘slowing’?

          4. How is that a pivot? Are google, Apple, and Facebook not considered part of the tech economy?

            Do they not have thousands, maybe tens of thousands, of employees in San Francisco?

          5. We were being generous with our characterization of a pivot.

            You presented (outdated) funding data to support your assertion that: “There is no evidence of that tech growth is slowing.” And when we noted that said data actually contradicts your very claim, you abandoned the dataset and ‘pivoted’ to the market cap of three (3) peninsula-based companies instead.

            But once again, despite the performance of those three companies over the past year, the real estate market in San Francisco proper has not only slowed but actually pulled back.

            And now back to the Kirkham Heights project which the development team has spiked…

          6. The moderator makes good points and, to be fair, signs of weakness exist throughout the Bay Area. Including a slowing of tech job growth in the SV and the net exodus of population which occurred in SCC and SMC not too long ago. Mentioned on SS at the time. A sluggish population growth is forecast for the region over the next decade plus with the Seattle MSA adding significantly more residents than the SF and SJ MSA’s combined.

            This trend was already visible a few years back and is now becoming clearer. As far as I know, this is the first major project to be canceled though a number of entitlements have been put up for sale in the past year. One occurrence does not make a trend, but it will not be too surprising if more major projects are canceled. If the margin is not there it is not there. Google is purchasing 300 efficiency modular units to house it’s employees in the SV – that is a sign of a region in trouble.

          7. And yes, Juicero failed. So what? Stupid ideas fail. (And it’s juicing. Very optimistic to call it ‘tech’ anyway)

          8. San Francisco’s population has exploded over the last 15 years. The only factor limiting its further growth is SF’s refusal to build enough housing. That decision also is responsible for our high housing prices.

          9. Juicero hasn’t failed, yet. And I agree it’s a stretch to call it ‘tech’, but our opinion doesn’t matter; the fact is that the VC funds that gave them money to start up solicited funds from their LPs to invest into ‘tech’, and those VC firms choose to fund Juicero. Ergo, Juicero is a ‘tech’ firm because people with money on the line say so.

            Before Amazon started AWS, Echo hands-free speaker, etc. they just put consumer items into a box and mailed them to you. Were they a ‘tech’ firm just because they had a website and a mobile app?

          10. @SFRealist – do a google on tech jobs, growth and Bay Area and you will find tech job growth, both in SV and SF, is slowing. Some hits say slowing quickly. The job site Indeed found 38% of its Bay Area tech job seekers are looking for work outside of the Bay Area. Very similar to the BA Council poll showing 40% of Bay Area residents hoping to leave the region in the next decade. The trend of higher paid earners moving out of the Bay Area is reflected in the drop in prices in the top 1/3 tier of the housing market which is being seen not just in SF, but on the Peninsula an in parts of the East Bay.

          11. Ah. So SS is in a pedantic mood today. Fair enough. We can all be pedantic.

            1. Are Apple, Google, and FB part of the tech economy?

            2. Do they employ thousands, if not tens of thousands of SF residents?

            3. Are they growing over the previous year or shrinking?

          12. VC funding is more relevant to the future. As the Bay Area dominates VC funding that implies that the future of the tech economy is brightest here, even moreso than in Dave’s present hobbyhouse, Seattle.

          13. And Dave, sure some people will leave. That’s been happening for 30 years. Others will come, especially with the enormous gulf in venture capital between the Bay Area and everywhere else.

          14. @SFRealist – actually my hobbyhouse is Portland but, as a small scale real estate investor, Seattle is where I’ve invested starting in 2014.

            As to VC funding – the gap is narrowing and past performance as they say. VC funding is but one trend to follow in trying to determine where real estate and metro areas, vis a vis one another, are heading in the coming decades.

            People always move out of regions at the same time others are moving into them. But when 40% of a region’s residents say they want to leave per the BA Council poll and when stats from Redfin and others find the Bay Area is number one in searches by local residents looking for homes outside of the area something is amiss. Quality of life – in the end a city can have the tallest building or the most density but, if it does not have quality of life for its residents, it has nothing They will move out over time and businesses will follow as they can’t attract employees.

          15. As for quality of life, not everyone measures it the way you do. Plenty of people like living in tall buildings in dense areas. Granted that you may not feel that way, but other people do. For those people, quality of life flows from having density.

          16. What I don’t quite understand is this comment that housing is becoming too small and too expensive and that the city is becoming too dense, and that people will leave in droves and the employers will too. That clearly is not true for New York, Hong Kong, Tokyo, and Paris, all of which are extremely dense and extremely expensive. You don’t see Chase and Sony fleeing for Milwaukee.

            And Dave, the other thing I’m curious on is age and neighborhood you live in. I’m 29 and live in a skyscraper in Mid-Market, and there are thousands of people in their 20s and 30s who are absolutely loving dense, high-rise living, and would choose it in a nanosecond over the more suburban areas of San Francisco. In fact, the neighborhoods in consistent high-demand for 20/30/early 40 somethings are almost consistently the densest. Perhaps does that say something about the changing tastes and preferences of SF residents? I believe it was written somewhere that you live in Westwood Knolls, or something close. No offense, but my wife and I would never consider living there, and neither would a single friend or colleague of mine. They all want the compact Marina/Cow Hollow area, or the dense Mission/SOMA/Russian Hill areas (depending on personality). Density IS the preference and goal for the current generations. I understand you hate it, but your inability to see that as nothing more than a personal preference, and an increasingly dated one at that, is dumbfounding.

            What I do agree with you is on the dramatic underutilization of El Camino Real, and I’d even extend your zone further from Burlingame all the way down to Sunnyvale. Even in Palo Alto, gigantic surface lots exist all down ECR. Menlo Park had the best plan of dealing with theirs, but both of those large projects seem held up. Redwood City has actually done a very good job with their downtown. I wish the other cities would follow suit.

          1. There are roughly 7 million people in the Bay Area. I am very confident that 2.8 million of them are not going to leave.

            That being said, I’m also considering leaving. If someone made me an offer to earn the same salary in Miami, I’d be out of here. That makes me a “yes” in this poll, right?

        2. Dave and other doubters of SF’s place in the global economic future – via the World Economic Forum:

          “A new report from AT Kearney, a global business-consulting firm, ranks 128 cities based on their projected levels of importance and competitiveness in the future. The ranking combines cities’ scores across various data points, including environmental performance, patents per capita, the number of business incubators and Fortune 500 companies, and quality of life.”

          Guess which city is the “top city of the future” worldwide, #1 in the 25 Global Cities Outlook?

        3. @JWS – SF is already the densest city on the West Coast. It offers less and less variety in housing which is why millennials are flocking to places like Pittsburg. Housing affordability and variety. Personally I would not live in a high-rise. The only place I might, if I had to, is the Golden Gateway Center. SF does not have to pave over every piece of green space. Other cities (Chicago is big on this) are “greening”. SF is not. .

          Density has its place, but only if the infrastructure is in place. NYC’s transportation and that of Tokyo are far, far, far more robust. The tube is at capacity as is the Bridge and yet Chase Stadium was approved which wil help bring much of downtown to a standstill. 48K new jobs in the Central SOMA and most of those folks will not be able to afford a home and will be pushed onto the at capacity Bart and Bridge.

          Until there is real transportation infrastructure improvement tied to development then I have to oppose most of these projects.

          BTW, I live in pneumonia gulch and there are many young homeowners here who fit in your designated age range. They tend to move to the mid Peninsula or the Lafayette area with the second child. My point being SF is hurt as the variety of housing options is reduced and though many like the hi-rise lifestyle just as many don’t..

          1. Yes but nobody is proposing highrises there, Dave. And this project aside, very few (if any) other projects are “paving over green space”. Most of the projects you bemoan are replacing warehouses and surface parking lots in areas with scant (if ANY) existing residential buildings.

            The 48K new jobs in Central SOMA won’t have an issue if we continue to allow development in Western SOMA, Central SOMA, the Hub, and Transbay/Rincon Hill. Thousands and thousands of units will hit the market in those areas in the next few years. Thus, they’ll easily be able to walk, bike, or take one/two BART stations to work. And they don’t pave over any green space, nor do they threaten the suburban density of your neighborhood. And yet these are projects you decry time after time. If we don’t build any of those projects, then yes we’ll have a problem.

            And don’t even get me started on SF being the densest city on the West Coast. Because first, yes. We are. And so if you’re decrying density as being un-San Franciscan, and yet it’s been ridiculously dense since its inception, then you need to reconcile your skewed view of what San Francisco “is” with the dense reality that has always existed. We’ve always had small units, we’ve always been “wall to wall”, we’ve always had skyscrapers and tall buildings. Second, we are far less dense than even Brooklyn, and there is plenty of empty/minimally used land yet. There are hundreds of warehouses and surface parking lots that can still be developed, many of them nowhere near historic neighborhoods, and not change existing neighborhoods like the Marina or Outer Sunset or whatever in the slightest. If we build and develop those well, we will be fine.

            SF is dense. Always has been. And will continue in that direction. You aren’t going to get single family homes at the intersection of Van Ness and Market.

          2. No – not hi-rises, but very high density is being proposed. This stretch is an oasis of green and some color in the fall – coming down 7th. Just for a moment you are not in a medium sized city, but the country. it’s quite a nice feeling and one that should be cherished. Other cities have green buy back plans where small parcels in dense areas are bought by non-profits and the cities to create permanent green space. The West of Twin Peaks area has some of the little open space left in the city and we are losing it. I live on the southern slopes of Mt. Davidson and there was a beautiful long yard backing into open space. Trees, wildflowers and all. The home sold and the new owner sold off the backyard. Fine, but the issue was 3 homes were squeezed in (with 10 foot backyards) where code allowed for just one. The neighborhood protested, but the dye was cast and our Supervisor no help.

            Build more density in the Central SOMA, but only when concomitant infrastructure projects/improvements are in place and not a pie in the sky promise for something 20 or more years away.

            Westwood Park is a rare neighborhood treasure and that the city is considering squeezing thousands of units right next door is a travesty. Only one of the 3 plans acknowledges Westwood Park, it’s architecture, its greenery. That is the one with 650 units or so. Quite and upgrade in density, but one that friends who live there and the neighborhood is willing to support.

          3. Building no housing and preserving San Francisco as the small city it was 50 years ago is the best thing we can do to jack up housing prices and make the city even more unaffordable.

  3. this is only based on nothing more than a dashboard survey, but I’d say about half the blocks in the Sunset would benefit from wholesale redevelopment like this. The west side and its small business districts would benefit from the additional density. The Sunset’s sad, stucco, mold-ridden living boxes on the market for >$800k doesn’t really help the “neighborhood character” argument.

    1. For sure, but again, what developer is willing to build while margins are squeezed? They [might] as well go elsewhere….and from the looks of it, that is exactly what is happening to this project (one reason or another). Our BofS think just because they say X that developers will do X. Wrong…

  4. Good for the developer. If the project does not pencil out because of the progressive regulations, go somewhere else . Would like to see the developer sit on the property no matter how long it takes.

    1. The progressive regulations specific to this project were already known and factored in to the project’s pro forma from the start. Any idea what else might have changed in terms of the development team’s assumptions and projected returns?

      1. Assumption changes likely include increasing construction costs due to the strength of the local economy. Contractors are busy and will bid new projects at increasing prices. Present construction prices are quite easy to ascertain vs. the uncertainty of future housing prices.

        Otherwise, it isn’t really good for the developer, for people who want to move into the city or anyone besides the people who are happy in their existing rent-controlled apartments, for this project to be delayed/cancelled.

        The owner is sitting on a low tax basis, sure, but (if my property record research site is correct) they are also sitting on a $55mm first loan from 2006 and a $7.8mm second from 2011. There’s a pretty good chance the actual debt load is different, because $63mm/86units means about $732K debt per unit, which seems quite high.

        Either way, the incentive to improve or maintain a property that might be demolished is diminished and the rents probably barely cover the fixed payments. (Yes, I hope they put the $55mm to good use elsewhere).

      2. I suspect the assumptions were changed due to scoping comments. Their attempts to ignore codes were challenged and their junk science Initial Study was exposed. No reason to weep over that.

      3. I doubt that’s true. With a project of this size, I’m sure the Developer has been asked for more and more as time has gone on. Norman Yee is not supportive of non subsidized housing production. Our housing crisis is due to politics, not administrative rules.

        What has certainly changed is construction costs have gone up more then rents over the past 3 years and construction financing for anyone other then a public company has pulled back to the most restrictive it has been in a generation.

  5. Well let me say that the prospect of having a bunch more cars lining up on 7th Ave. or working their way down to 19th and back again not happening gladdens my heart.

  6. doze those sad accreted stuccos before it is too late, or they replicate, or they’re worth too much!

  7. Build up? If you enjoy lack of sunlight, lack of sky, lack of open areas, claustrophobia, try prison and leave SF relatively the way you found it.

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