Quote:
Originally Posted by enigma99a
No way a simple mid rise goes on this lot. Far too much money has already been sunk into it. They basically have a 70 million dollar piece of land right?
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Hello everyone. Haven't been here for awhile. A few comments.
I think the above is probably correct. CalPERS is still an investment fund that has to deliver a target return to demanding investors. Mid-rise probably won't get them there. We know high-rise anything is pretty risky in Sacramento, so I'd look for heavy office with smaller residential and commercial components. Something along the lines of 65% office, 30% residential, 5% commercial. this mix assumes that, as we've been told, anchor tenant already in place (and no way they announce who that is until deal is done). A move of that magnitude needs early commitment and plenty of lead time, so I wouldn't expect Hines to sit on site for too long before moving forward. I wouldn't be surprised if this anchor tenant pressured CalPERS to replace CIM for lack of progress and threatened to go elsewhere if no movement.
High-rise with that mix probably still doesn't pencil, so expect Hines to demand a significant waiving of City fees to reach viability.
City desperate to get that site filled, so I imagine they'll find agreement.
We should all be delighted that Hines replaced CIM. I've had minimal acquaintance with each, and that was awhile ago now, but the Hines teams were always among the sharpest I'd ever encountered.
Absolutely first-rate personnel and no reason to think that's changed. They don't like to screw around either. They'll drive a hard bargain with the city, and that could cause some delay, but overall I'd say the chances of something good happening on this site just went way up.
Quick point about apartments instead of condos. It's just too expensive and difficult to build mid-priced condos in California anymore. Everything to do with building in California, from fees to taxes to construction costs, is obscenely expensive and cumbersome, but the coup de grâce that prevents condo building in California is liability. The legal lobby in our state makes it far too easy to sue, and keeps the developer and builder on hook for far too long.
This results in only two types of product: Luxury, where you can better absorb costs through high prices and HOA fees, and publicly-supported, low-income housing. Please also note that even in this latter category, government demands, rules and regulations can often put your per/unit costs to over $500,000. That's not a typo, I've seen plenty of "low-income" projects that had a per unit cost of that or higher.
Also note that with low-income housing, the rules are so byzantine that there are few players involved and those that are are typically very "cozy" with local/state authorities. This burdensome and expensive process also impacts supply as with costs so high, it makes little sense to train a even a talented team to, in essence, learn "on the job" while they navigate the process. It's a classic barrier to entry that plays a role in even this market being addressed in California.
The result, with some exceptions of course, is few middle-class condos built in California now. It is particularly frustrating when you contrast the number built with demand.
So, to fill the need for housing, at least partially, you have little choice but to build apartments instead.
Just a quick example re costs - to get some multi-family projects insured today, you have to stipulate that you won't even put a map on it for 10 years (liability period). So you can't even take the first step to a for-sale product without incurring significant additional costs. This is just one of a thousand things, big and small, that drive up the cost of housing in California.
Vote for whomever you want everyone, but don't pretend for a moment that who's in the Capitol and City Hall doesn't have a severe impact on housing costs, affordability, and supply.
If you're still renting after 10 years in a good job, this is why.
As far as what type of product "should" go on what site, just remember that it doesn't matter what the developer thinks should go there, what the city thinks should go there (unless it's prepared to write a huge check), what activists think should go there, or what those of us who enjoy forums like this think should go there.
All that matters is what the lender thinks should go there, and as noted before, they are risk-adverse.
As always: here comes the caveat. I could be 100% wrong about all of this. There are few industries as easy to be wrong in as development.
So yeah, Hines tomorrow could announce twin 1000' towers and another Amazon HQ to fill one and condos starting at $325k to fill the other.
Should that happen, I will celebrate with you...
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if the weather permits i will try to get some new pictures snapped, inno8 has some skills on the photo taking, hope to see some new ones.
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