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Posted Nov 21, 2008, 5:48 PM
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Join Date: Jun 2006
Location: San Francisco & Tucson
Posts: 24,088
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Quote:
Friday, November 21, 2008
Five developers vying to build at Transbay in S.F.
San Francisco Business Times - by J.K. Dineen
At least five housing developers are jockeying for the right to build a 550-foot residential tower at First and Folsom streets in San Francisco’s Transbay District, despite a devastating economic downturn that has depressed the value of the site and precluded some major builders from taking on the 597-unit project.
Developers looking at the site, known as Block 8, include Avant Housing, Intracorp San Francisco, the Emerald Fund, AvalonBay and Related Cos., according to interviews and a sign-in list from the redevelopment agency’s Nov. 13 “pre-submittal” meeting on the project. Developers expected to make especially strong bids include the rental real estate investment trust AvalonBay; Avant Housing, a joint venture between local builders AGI Capital and TMG Partners; and the New York-based Related, which is reportedly teaming up with Emerald Fund. Other developers attending the meeting included Chicago-based Mesa Development, luxury housing giant Toll Brothers and San Mateo-based SunCal Cos.
Mike Grisso, project manager for the San Francisco Redevelopment Agency, said he was “very happy” with the interest Block 8 is generating.
“People recognize it as one of the last great opportunities in this part of town,” said Grisso. “You always want to have a lot of people come out, and that can be challenging in troubled economic times.”
The 42,600-square-foot parcel is one of a dozen lots freed up when the elevated Embarcadero Freeway was knocked down after the 1989 Loma Prieta earthquake. While nine of the 12 parcels are set to be eventually redeveloped with housing — two will be parks and one a 700,000-square-foot office tower — Block 8 is the largest. It calls for a 550-foot tower reaching above two midrise affordable apartment buildings and a row of townhouses that will open onto Folsom Street, a thoroughfare set to be rebuilt as a shopping boulevard with wider sidewalks, new greenery and outdoor seating. Redevelopment rules require that the project be 25 percent affordable. The project calls for 447 units of market-rate condos in addition to 150 units of affordable or below-market-rate housing. Money generated from the sale of block 8 will help pay for the new Transbay rail and bus terminal.
For the redevelopment agency, the timing of the request for proposal is unfortunate. San Francisco’s astronomical land values have softened since 2006 when Jackson Pacific sold 45 Lansing St. for about $30 million, or $125,000 per approved unit. While it’s difficult to say how much Block 8 will command, brokers pegged the value between $35 and $40 million, or $100,000 per buildable market-rate unit.
Several developers originally seen as strong contenders for the site, including Forest City, Millennium Partners and Tishman Speyer, are not expected to makes bids due to the soft market, according to architects and engineers who have had discussions with those companies about the site.
“The timing couldn’t be worse for the Redevelopment Agency right now,” said Russ Gatschet, senior pre-construction manager for Bovis Lend Lease, which is in talks with developers on the project. “I don’t know what the expected land value is, but I’m sure it’s more than any developer is willing to pay right now.”
Given the weak condo market and relatively strong rental climate, the project might make most sense for an upscale apartment builder like AvalonBay. AvalonBay Senior Development Director Meg Spriggs said her company has assembled a team and will make a proposal.
“We are looking at Block 8 fully recognizing that the economic climate is very difficult. While very financially challenged, Block 8 is an opportunity to do good high density, transit oriented development and collaborate with the city in a meaningful way,” she said. “Block 8 is a complicated, challenging deal and our hurdle is higher than it has been in many years. But, we believe that AvalonBay is uniquely positioned to take on these types of challenges and we aren’t afraid to dig in and take a good hard look.”
Eric Tao, a principal with Avant Housing and AGI, said the slowdown actually creates a window to chase intricate public-private partnerships.
“I’m not building a lot right now, I’m looking at (requests for proposals),” said Tao. “What we’re doing is planting seeds for when the economy is healthy again.”
Tao said the Redevelopment Agency will have to accept that the land value has decreased from its height in 2007.
“The land value is depressed, but if you get somebody building there, that creates jobs, taxes and fees,” said Tao.
Clark Manus, a principal of the architecture firm HellerManus Architects, said Block 8 has the advantage of being on Folsom Street and on flat land.
“Folsom is really the boulevard of choice for this new residential neighborhood,” Manus said. “There are a lot of Rincon Hill projects that are approved and are stalled or stumbling. The question you have to ask is, ‘Is this site better by virtue of being on the flats on Folsom?’”
Developers who take the long-term perspective on Block 8 will do well, he added.
“If you look at the moment, it’s scary,” he said. “It’s challenging, but you have to look beyond that.”
jkdineen@bizjournals.com / (415) 288-4971
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Source: http://sanfrancisco.bizjournals.com/...ml?t=printable
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Thanks for clearing that up.
It just struck me that this will make a nice bookend opposite Jackson Square on the other side of the FiDi. Both have a central park with some low-rise residential surrounded by highrise residential and even taller office buildings nearby. It will be like a mirror image.
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