A Lack of Appreciation for the Largest Penthouse atop BLUAugust 8, 2017
Purchased for $2.8 million back in February of 2011, the 2,623-square-foot “Penthouse D” atop BLU at 631 Folsom Street returned to the market in April of last year priced at $4.198 million, a sale at which would have represented total appreciation of 49.9 percent over the previous five years or roughly 8.2 percent per year.
Reduced to $3.85 million after two months on the market, to $3.695 million last August, and then to $3.3 million in November, the penthouse was listed anew for $3.295 million at the beginning of this year.
And having just closed escrow with a contract price of $3.0 million, the sale of 631 Folsom Street #PHD is officially “within 5 percent of asking” according to all MLS-based stats and reports as its list price was reduced to $3.15 million last month.
The sale represents total appreciation of 7.1 percent for the penthouse unit over the past 6.5 years or roughly 1.1 percent per year on an apples-to-apples and straight line basis (not accounting for any possible up and down between).
For those running the numbers at home, the current HOA dues for the three-bedroom, three-bath unit #PHD, which comes with a dedicated parking spot below, are roughly $980 per month.
And on a related note, the list price for 631 Folsom Street unit #7D, which was purchased for $1.458 million in the fourth quarter of 2015, was reduced to $1.375 million last month and then taken off the market without a reported sale.
Comments from Plugged-In Readers
This type of “depressed” sale is why so many entitlements are being put up for sale. Rather than being built. It is hard to know if things will just stay more or less flat for the next 5 years in the condo market or if there is some additional downside potential. Neither outcome makes pending projects where the developer paid excessive amounts to purchase and entitle a safe bet – let alone a sure bet.
This area is “sketchy” to me. Insofar as there is nada street life – note the empty storefront in the photo – and nothing really to “recommend” it. Why would anyone have paid 2.8 million in 2011?! Irrational exuberance is the only answer. There is no here, here and good luck to those others who may have paid too much in recent years in this “hood”.
But Dave it’s in “The City”….certainly that’s worth several millions. And the dearth of amenities won’t be much of a concern for people who don’t plan on spending any real time there anyway…in fact it’s close to the freeway, to keep the time to an absolute minimum.
I suppose it’s a matter of personal preference. I’ve been in love with BLU Penthouse C since its completion. Three levels, sun room, office nook. I think the area would be great to live in and there is tons of great shopping and places to drink and eat very near. I think it might be nice to return home to a quieter “hood”.
I absolutely love the area in the immediate environs of 2nd/Folsom and believe it should have a name of its own as a sub-neighborhood to Rincon Hill.
The proponents of renaming virtually all of South Beach and Transbay “The East Cut” are being ridiculously over-ambitious, but that would be the perfect name for the area bounded by First/Howard/Third/Bryant as actually encompassing where the bulk of the excavation was done.
This is a terrific neighborhood. Walking distance to work downtown, walking distance to AT&T Park, walking distance to the Embarcadero, easy bridge access to Tahoe.
Also, walking distance to the new Warriors stadium. Terrific neighborhood!
A bit dead after 6, but plenty of entertainment options not too far away.
I agree this is a great and increasingly active area. And its much less bland than the emerging rincon hill, and i think it will stay that way because its more like a student / gallery / museum area vs a corporate HQ / beehive area, though it does have several big companies like linked in and yelp and others in the area, it also has SFMOMA, the arts/student strip around the acadamy, and all those galleries and cool pubs in the alleys around there….so i actually quite like this area, and the opening of the transbay park will really help, plus the hotels they are talking about around there, which i think there are at least 2-3 in planning.
Not sure we should call it appreciation. According to usinflationcalculator, the same item purchased 2011 for $2.8M should be worth $3.05M in 2017.
This unit was bought near the bottom of the market no less, and is now is a loser when adjusted for inflation. Not to mention 5% to the brokers. Interesting data point.
This is why so many entitled projects are on the market. The bloom is off the rose in the “City”. The Emperor no longer has nay clothes – or at least not as many.
Population and jobs have peaked in SF IMO. There is no here, here applies to “the City” in general. as well as to the Blu neighborhood.
From an investment perspective the time to get out was 2014.
“Population and jobs have peaked in SF”
Which is why the city grew by 10,000 people last year.
The population change you’re quoting, which was actually 10 percent less (9,000), was a provisional estimate as of January 1.
At the same time, having grown by 14,500 last year, the number of people living in San Francisco with a job (which is what really matters when it comes to driving the real estate market) actually dropped by 5,100 in the first half of the year (which was the first decline in the first half of a year in San Francisco since 2009) and is approaching negative growth, year-over-year.
Actually, SS, you’re making a different argument.
Dave was explicitly speaking of population. According to wikipedia, the city’s population has grown from 805K in 2010 to 870K in 2016.
That’s weird, we thought Dave had referenced “Population and jobs” (as you explicitly quoted). And that you had explicitly referenced the growth rate in the city last year to make a point about “peaking” (while either missing or ignoring what’s happened since the beginning of the year).
Regardless, with respect to your new frame of reference, employment in San Francisco was up by 110,000 from 2010 through 2016!
But once again, employment in San Francisco slipped in the first half of this year. And assuming you’re not stuck in the past and working with old data, what’s wikipedia say about the population change in San Francisco since the beginning of the year?
SS, if you’re not aware, population and jobs are separate numbers. Dave said that (a) population and (b) jobs have peaked. I pointed out that (a) population had continued to grow.
It is possible that a city which has grown by 65,000 people in the last six years has now peaked and will start losing population. Many things are possible. Maybe!
Well our SF household of 4 employed people (2 with jobs in SF, 2 with jobs in the East Bay) has packed up and moved out of SF (3 out of state and 1 to the East Bay). The 2 SF jobs left behind will likely be filled by people that do not live in SF. The below $1 million condo market seems to be holding up still, so fingers crossed. Job market still seems good in SF, but the cost of housing makes it difficult to live there and to paraphrase Yogi Berra, “no one lives there anymore, its too crowded.”
And you’re just giddy sitting on your perch in Diamond Heights. FYI, the City is still growing and there is a “here” here. Never met someone as negative as you Dave regarding what is happening in SF.
Even worse — Mt. Davidson.
Millions of dollars and they couldn’t fix the vanity light bulb prior to the shoot. Amazing…
Lack of appreciation or one dumb buyer? Same building, last 3 months:
9F — $750,000 to $1,210,000
15B — $799,000 to $1,265,000
6A — $770,000 to $1,350,000
Those are all great outcomes. This loser was ~2.3x the sq ft of the units listed above, but the buyer paid 3.6x for the unit originally. It never helps to be the most expensive unit in a building, and price per square foot should go down in a condo building as the unit gets bigger, not go UP by 50%. Someone got suckered into thinking “penthouse” was worth a 50% premium.
I don’t think it’s a matter of the buyer being dumb or smart here. Lower end condos are doing better than the high end. This buyer went for the high end. If they wanted the bigger, nicer place, I don’t think that forcing themselves into the smaller cheaper units in exchange for more appreciation would have been the smart move. Even renting, it’s not clear that they would have been better off — e.g. if they got an interest only loan for 2.8 million at 4% plus $1000 for HOA, that’s about $10K per month. I can see them spending close to that for an equivalent place, if one was even available.
If you’re going down the rent versus buy route, don’t forget to include property tax (which would have added around $3K per month). And unfortunately, you do need to take into account transaction costs (which typically average around 7 percent when including commissions, fees and transfer tax).
Well if you compare the original purchase of 15B to PHD, the price per sqft was $758 versus $1,067. Paying that large of a premium to be a few floors higher is IMHO dumb.
There is a hotel going up nearby on 2nd (or planned at least) which may affect this unit’s views.
The original buyer overpaid for the “penthouse”. Also, the building itself is simply outclassed by other developments in the area. It’s a nice unit, but that’s all it is.
Thing is, once you’re spending that kind of money in that neighborhood, you can look at The Lumina, a brand new luxury condo building. There’s more competition now than 2-3 years ago at the higher price ranges.
lumina is in a much more boring and bland and “dead” area, though only a few blocks down….see my post above. not to say in time the area around lumina will get a bit better (it will), i think it will ultimatley be a pretty boring corporate beehive living quarters, with a few shops, but mostly bland rich people with less “mixing” for the reasons i noted above in my post, amoung others.
the location differential of a few blocks is quite dramatic in terms of neighborhood feel in this case….though both are quite nice and lovely areas, the area around blu is much more authentic, unique, and diverse, as well as more urban feeling. but if you like copy paste “luxury towers” then rincon hill is your spot.
Lumina / Infinity are very close to embarcadero which has many activities.
Nobody want yo glass condo
In related news, Penthouse BLUs, Take Two (And Three).
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