A Global Perspective on the Downtown San Francisco Condominium Market

One of the great perks of travel is seeing other parts of the world and comparing them to yours. Maybe I have a bit of one ups-manship in my blood; heck, I wouldn't be in sales if I didn't. I love comparing and contrasting different products and markets and dicing and slicing what creates desirability and value. Having just returned yesterday from almost three weeks in New Zealand, Australia and The Solomon Islands, I had the opportunity to check out some new residential development in all three. You may consult your atlas for The Solomon Islands... now.

Just as I did a few months ago after my visit to San Diego (see the 7/21/09 edition), lets take a look at some Pacific Rim metropolises and see how their real estate markets are faring in the global economy after the event the rest of the world refers to as The GFC (Global Financial Crisis).

Auckland, New Zealand

Downtown Auckland is similar is age, size and scale to San Francisco's. It's also a port city with a deep affection for sailing that did not wane with the advent of suspension bridges and automobiles. During the boom market, Kiwis took advantage of cheap money just like Americans and they snapped up high rise flats and renovated historic lofts with equal gusto. With the ensuing run-up in prices and the GFC's unfortunate visit last fall, values and sales volume took a tumble. Things are starting to look up, but the New Zealand economy has been slow to recover. With an enviable lifestyle including water views and a wonderful food and wine culture, don't cry too hard for Aucklanders.

Brisbane, Australia

Long derided as the country bumpkin cousin of Australia's better known and more glamorous Sydney and Melbourne; Brisbane is literally on the rise. This river city boasts a thriving arts district, a pedestrianized Downtown and a skyline transformed in the last ten years by both residential and commercial development. Australia's economy thrived in the 2000's, but had the benefit of more thorough regulation than the US and other markets. The result ? A better safety net and less job losses after the GFC and a housing market that has lost little value since last year.

Honiara, Solomon Islands

Downtown Honiara has a ways to go. Lacking sidewalks, consistent pavement and traffic signals, it's the capital of cinder block chic.
I admit that one doesn't go to The Solomon Islands looking for urban sophistication. It's more of a beach and diving destination better known as the setting for some pivotal naval battles in the Pacific theater during World War II. High end housing Honiara style is a walled compound in the hills above town. Although it's not much right now, foreign investment has come to town and it hasn't been deterred by the crisis, primarily because it's so cheap in the first place. Give Downtown Honiara another fifty years.

It's great to be home in the best City in the world.

I Can Finally Say I Like Millennium Tower

Millennium Tower and I have had a tumultuous relationship since we were introduced a few years back.

At first, the renderings and floor plans seduced me into a brave new world of 5 star luxury without the hotel component attached, like St Regis and Four Seasons.

But as the building rose toward the sky and plans for the new Transbay Tower adjacent were finalized, I became disenchanted. Live next to a construction site for the next 15 years ? $1200 per month HOA dues ? No terrace ?

I reluctantly put Millennium Tower on the back burner and started seeing other developments.

After the building was finished I went for a tour. The Tower looked great. Finishes, amenities, views; everything was there. But the same misgivings I'd had before came up again. Still, it was great to see the finished product, even if it felt a little desolate.

Flash forward to last Sunday and the realization that sometimes, you need to look at property through someone else's eyes to see it's true appeal.

My clients and I have been searching for a new construction high rise pied-a-terre and have seen all contenders. Must-haves include views, two or three bedroom's and an environment that's conducive to enjoying The City with as little fuss as possible. Especially with two young children and a lifestyle that includes a primary residence a few hours drive away and frequent travel.

Pulling into the driveway, the valet took our cars and we were greeted by the Doorman, and then it hit me. This is how they do it in Manhattan. It would be daunting to drive up to your building on a busy city street and manage cars, children, luggage, et al without assistance.

Millennium Tower units are also larger than average. The typical 2-bedroom plus den is about 1600 square feet compared to 1400 square feet or less elsewhere. A four person family wants to be able to spread out a little, even in town.

Pricing has been adjusted by 15% for many months. That, and being open to lease-to-own agreements has led them to be 30% sold. A lease-to-own agreement may sound odd for a building of this caliber, but a buyer willing to part with almost $2 Million these days appreciates the opportunity for a test drive.

After we completed our tour my client summed it up: "I thought it was going to be old-school and uptight, but it's exactly the way we pictured living Downtown without knowing what it could look like."

I'm happy that Millennium Tower and I are seeing each other again and that I introduced it to my clients. It may be a perfect match.

For pricing, availability and details on the lease-to-own program at Millennium Tower, make certain to contact me.

Grey Gardens, San Francisco Edition: A Tour of The Bourn Mansion at 2550 Webster

When was the last time you were able to tour a crumbling Pacific Heights mansion ? For many Realtors, architecture enthusiasts, neighbors and looky-loos, Tuesday was the day. 2550 Webster Street at Broadway (aka The Bourn Mansion) was designed by renowned San Francisco architect Willis Polk in 1896 and is an unusual Jacobean/Georgian Revival style hybrid.

Now in foreclosure, the manse was built for the man that founded what would later become PG&E, but that's not what makes it so compelling. The current owner is the infamous Arden Van Upp. A Bay Area eccentric that purchased the house in the 1970's and subsequently became an erstwhile counter-culture doyenne. In the swinging 70's, Van Upp hosted huge, days long parties whose guests included rock stars, celebrities, hippies, society swells, druggies, politicians; you get the picture.

During the 1990s, there was a marked reversal of fortune and the parties stopped. The once "shabby but genteel" mansion started an inexorable slide into oblivion even though it is a registered San Francisco landmark. Given this back story, who could resist a peek inside ?

The mansion is foreboding and seems to swallow you up as you enter the large, dark central hall that rises four stories. The elaborate woodwork throughout is spectacular, the layout is original 1890's with nary an update in sight. Some rooms were chock full of furniture. clothes and personal effects, others vacant. As you entered the original kitchen the extent of neglect became obvious, The back of the house had literally fallen off and was exposed to the elements. This is not what you expect to see in Pacific Heights circa 2009.

The most amazing part of my tour ? A black clad Arden Van Upp herself sat in a broken chair parked next to a jumble of personal effects in her crumbling Drawing Room. The sense of despair was palpable as she watched the crowd mill through her home.

I wanted to say something to her, but couldn't bring myself to. My much bolder friend complemented her on her home and asked, "What are you going to do with everything in the house, sell it ?" referring to the detritus of 40 years stacked all around. Lightning suddenly flashed behind her previously forlorn eyes, "NOTHING is for sale here!" she exclaimed.

Every house has a story, some more compelling than others. I'm glad I had a chance to see the end of this epic chapter in 2550 Webster's history before a brave buyer begins the next. I hope it's a happy ending.

If Good News Is Boring, Prepare to be Bored.

Welcome to the fourth quarter of 2009. It was just one year ago that the sky started to fall as most investment banks and the stock market sank like snitches wearing cement footwear in the bay. It was a scary time. The first few quarters of 2009 didn't make people feel any better with job losses mounting, foreclosures rising and no end in sight to the federal bailout-palooza.

That was the bad news. The good news ? Here we are, one year later and... things seem to have stabilized. Although employment numbers in the Bay Area could be better, we haven't seen the massive job losses other regions have endured.
Why ? San Francisco and the Bay Area have a diverse employment base. Tourism, finance, software, technology, government, and bio-tech have all helped the region weather the storm. People continue to move to San Francisco for jobs. Evidence ? The new rental complex Strata in Mission Bay is fully leased after three months of marketing. Most tenants are transferees.

But what about real estate ? San Francisco has seen some values slide a bit. The first six months of the year, buyers and sellers were trying to get a grip on where the floor was for prices in all city districts. As Spring turned to summer, Downtown buyers found comfort in where pricing had landed and came out in droves. With the lending climate thawing, it was a perfect storm and developments like The Infinity and The Hayes booked record numbers. As I mentioned in this space before, we did not see that high a rate of absorption even at the height of the boom.

Another sign of stability: Multiple offers. If the price is right and value is obvious, properties are garnering multiples. This isn't true for all property types, but does prove that there are plenty of buyers out there that are qualified and ready to purchase. Example: A single family home in Eureka Valley was priced aggressively two weeks ago when it went on the market as a short sale with a lender approved list price. It went into contract over asking with 14 offers.

Cheers to a peaceful September and have a great Labor Day.

Questions about the current value of your property or what your dollar will buy you Downtown ? Let me help.

Downtown Inventory Sampler: Back-To-School Special

It was July 7th when we last visited our ten pet developments. Summer was just kicking off and now, sadly the season is almost over. But this isn't Nantasket nor Nantucket. Any San Franciscan worth their salt knows that September and October are the warmest and sunniest months of the entire year. The best is yet to come.

Inventory in San Francisco is typically low in August with summer buyers completing transactions and vacations taking priority for others. The numbers below seem to bear that out with the anticipated September inventory bump right around the corner.

The Beacon

Three studios, five 1-bedroom, two 2-bedroom. Available units: 10. Total units: 595.

The Metropolitan

Six 1-bedroom, four 2-bedroom and one 3-bedroom. Available units: 11. Total units: 342.

Watermark

One 2-bedroom and one 3-bedroom. Available units: 2. Total units: 136.

200 Brannan

One 1-bedroom, Five 2-bedroom and one 3-bedroom. Available units: 7. Total units: 191.

The Brannan

Two 2-bedrooms. Available units: 2. Total units: 339.

The Potrero

No resale inventory. Total units: 155

The Hayes

No resale inventory. Total units: 128

Arterra *

No resale inventory. Total units: 269.

The Infinity *

One 1-bedroom, one 2-bedroom. Available units: 2. Total units: 364 (excluding Tower II).

One Rincon Hill *

Two 1-bedroom and One 2-bedroom. Available units: 2. Total units overall: 376.

* New inventory still available from the developer.

Expect these numbers to swell like the crowds at Dolores Park as the fall selling season kicks off after Labor Day.

For more detail and guidance on the Downtown market whether you are a buyer or a seller, contact me.

201 Folsom (Infinity Junior) Would Like A Three Year Delay Granted, Pretty Please ???

I just parked my VW on Main Street and was feeding the meter when I spied one of those Planning Department Public Notices which are always interesting. Sometimes the property owner or renter wants a license to serve alcohol. Others announce the desired intention to either demolish a building or get a project approved. This one however, I had never seen before:

"An application for an extension in the performance period for another 3 years from the original expiration date of Case No. 2000.1073C, Motion No. 16647, for the approval of a mixed use project consisting of an 80-foot podium, with up 725 dwelling units, 750 off-street parking spaces, 38,000 square feet of commercial space and 272 replacement off-street parking spaces for the adjacent USPS facility. No changes are proposed for the existing project as originally approved."

This was posted last Monday and the hearing occurred last Thursday at 1:30PM. Although I was unable to attend, I'd be surprised if The Planning Department didn't rubber stamp it and move on to someones illegal in-law unit in the Sunset.

With any luck, the plans for Infinity Junior (sorry) 201 Folsom will remain shelved; awaiting a more favorable lending environment for large-scale developments. One catch, though. A Tishman Speyer insider told me that the as-approved project would need to achieve prices of $1400 per square foot in order to break even. As optimistic as I am about Downtown condominiums, I don't see prices doubling five years from now. That would be the time these units hit the market if construction begins three years hence.

One never knows what the future will bring, but I'll bet you lunch at Prospect (which Nancy Oakes officially purchased in The Infinity's restaurant space two weeks ago ) that the current design will need some tweaking in order to pencil out in the near-term. That, and parking on Main Street is going to be a lot more difficult.

For the latest availability and pricing at Downtown condominiums, drop me line.

Would You Like Pre-Paid HOA Dues With That Condo ? Banks May Say, "Not So Fast..."

My clients and I were expecting our loan documents to be at title and ready to sign Friday afternoon. Friday came and went, no docs. We were told to expect them Monday for sure. As I write this, they have not appeared at title.

"What's going on ?" I asked the broker, who normally gets things done when promised and is quick with responses. The reason was twofold, and could have a big impact on the way we have been structuring new construction sales contracts for almost three years.

When the market started to soften in San Francisco toward the fourth quarter of 2006, developers had to get creative. I remember brainstorming ideas on how to create an incentive for new buyers while not alienating those that were already in contract by reducing prices. The answer was credits !

Credits to the buyer in the form of pre-paid HOA dues,design center credits, interest rate buy-downs and/or closing costs became all the rage.They allowed the sales offices to keep their prices high while offering value-adds to skittish buyers that were spooked by what they were seeing in the Las Vegas, Miami and Arizona markets.

Even when sellers finally bit the bullet and lowered prices late last year,credits were still the icing on the cake for most deals. It seems this is about to change.

I'm not clear yet on whether it's lenders, appraisers or both; but banks are starting to take the dollar value of those incentives and reduce the appraised value by that figure. This throws a huge wrench into the gears that have been making deals happen in new construction and could spell out a new reality for buyers and developer sellers.

No matter how you feel about these credits, it does make one wonder why banks and appraisers should be allowed to dictate how deals are structured when incentives have nothing to do with an appraisers job of justifying value.

Even if this does come to pass and credits are somehow eliminated from these transactions, I'm not overly concerned. Where there is a will, there is a way and a developer that needs to sell units can be very willful indeed.