Entitled, Permitted, Excavated and…Stalled Out in Central SoMaMay 12, 2023
Entitled in 2017, subsequently permitted and having since broken ground, the excavated site, approved plans and entitlements for the 127-unit building to rise up to eight stories in height on the western side of 5th Street, between Shipley and Clara in Central SoMa, are now on the market, positioned as an “unparalleled opportunity for an experienced developer.”
According to the un-priced memorandum for the opportunity that’s now making the rounds, over $7 million has already been spent on hard costs for the project, likely to help release two mechanic’s liens that were attached in 2021. Over $4 million of impact and permitting fees for the development have already been paid as well. And as approved, only 14 percent of the 127 units would be required to be offered at below market rates (BMR).
Comments from Plugged-In Readers
So either the project no longer “pencils out” despite having sunk $11 million plus into it, or the project financing used a floating interest rate that now makes the project infeasible? I have a hard time imagining what else could cause a developer to walk away from a project they’ve put this much into. This isn’t the typical “entitle and sell” project since they’ve actually done site prep and started construction.
Regardless of the reason, this is not good news for housing construction in San Francisco. This probably won’t be the last we see of this kind of thing.
This more or less confirms SF’s chief economic analyst’s comment that multi-unit residential construction is not viable in SF right now – even if there were zero inclusionary requirements. The great unknown is how much prices will fall for this type of unit in the coming years. Too much of a risk to move forward for anyone so don’t expect a quick sale of the entitlement. The growing uncertainty is not helped with Veritas Investments, the biggest residential landlord in SF, about to lose control of a more than a third (2000 plus units) of its apartment portfolio as its lenders seek to sell $1 billion in delinquent loans tied to its properties.
the neigborhood has also gone way downhill over the last 4 years, so i doubt the price projections they have still stand
Roger that jimbo. The elephant in the livingroom.
The project was entitled in 2017, and according to the developer, the building was supposed to be ready for occupancy in late 2019. Had they actually requested the building permits when they should have, and broken ground thereafter, they would have been done prior to the start of the pandemic.
The developer only has themselves to blame here, and this is not their first time at the rodeo.
Very true. The period from 2017 or so up to the pandemic was a period of irrational exuberance in the SF real estate industry. Many of the entitled projects from that time were meant as flips. Get the entitlement, hold for a few years and sell it for a nice profit. So many of these entitled projects won’t be built which will do “wonders” for the SF housing pipeline going forward. Take 115 Mission which was to have 400 units and this project and voila – this week alone 527 units less in the pipeline.
Veritas is the new City Apartments
Considering they bought most of their properties from Lembi I’d say that’s fitting
Yes. One of the ways that Yat-Pang Au (of Veritas) was able to amass his current empire was buying up buildings formerly owned by the Lembi family, the owners of CitiApartments, Inc. shortly after the 2008 financial crisis. The same thing will probably happen this time, the buildings will change hands to someone with access to more or better-termed financing.
It’s worth noting that Veritas no longer calls itself an apartment owner or even a landlord, but “a technology-enabled real estate investment and management company”, so it appears they have taken a page from Adam Neumann’s playbook.
They NEED to build on this site. If you walk by there you’ll hear and smell diesel generators running 24/7 to power a sump pump continually trying to drain a swamp at the bottom of the pit they dug. It’s an absolute mess that will only be solved by building something there!
Part of the water is from the unseasonably wet winter. Water absorbed by the hills will continue to seep out for several months. Check out the gutter runnings in southwestern side of Noe for example. As a silver lining home shoppers will see about the worst possible cellar and retaining wall seepage conditions this spring. If it doesn’t leak now, it is probably good for years.
Something something about a hole in the ground you dump money into…. Nice rendering though.
Will be interesting to see if/where the empty Saitowitz project trades at the foreclosure auction next month.
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