Meg Whitman Real Estate Investment Group Buying into SF Waterfront

The southern waterfront of San Francisco is very prized territory for the new wave of major developments cropping up around the city. One of the more valuable prizes is the 21-acre Potrero Power Plant site which was just bought by a surprisingly small, nimble investor group that is led by Associate Capital. The group also includes Meg Whitman, CEO of Hewlett Packard Enterprise and chairwoman of HP Inc., and her husband, neurosurgeon Griffith Harsh IV – according to an article in bizjournals.com.

The investor group (that beat out 10 other more well known groups) for the property clearly shows a new trend of the super rich getting involved in large real estate investment deals. Chris Foley, a condo marketing and research expert, made this observation of the ultra rich: “Ultra high-net-worth investors, from the tech industry and beyond, are looking for investments that might generate better returns than venture capital or the stock market.”

Super rich clients can put anywhere from $100,000 to $5 million into targeted real estate development with the deals providing cash flow, tax benefits and high returns compared to other investments.

The power plant property is particularly valued as that it can developed into a mixed use complex. According to Foley the power plant is “one of the last premier large-scale development sites in San Francisco.”

An Amusing Attempt to Rebrand the Tenderloin into “Union Square West”

Not sure this is going to stick with San Franciscans (probably not) but one San Francisco real estate is trying to rename the Tenderloin neighborhood of a 16 square block area bound by Mason, Sutter, Jones and Market into “Union Square West.” Of course Union Square West doesn’t exist. It’s a marketing name de guerre in the ongoing battle for selling real estate based on what’s perceived as hot. The Tenderloin name is liked and loved by San Franciscans and the neighborhood has its own gritty-being-gentrified look and feel.

According to furious blogging (done mostly by younger, hipper, protective of SF culture people) going on in the city trying to equate the Tenderloin with Union Square or create some kind of real estate crossover is ridiculous and being hotly ridiculed.

And it’s not new. In the 1980’s a “Union Square West” highrise condo was proposed by a developer trying to drag Union Square into the Tenderloin but residents rose en masse to defeat the building and in 1985 rezoning in the Tenderloin barred future highrise development.

The real estate firm trying to create the new Union Square has presented in its brochures some amusing marketing terms that include a “psychographic” profile. An interesting “psychographic” profile for this 16 block Tenderloin area includes these folks:

• Metro Renters: 65% Educated professionals in their early 30s, largely white, with a median income of $52K
• Trendsetters: 20% Single professionals in their late 30s, largely white, with median income of $51k
• Social Security Set: 15% Late 40s, only high school diploma, diverse group with median income of $16k

Vacant Lots in San Francisco Are The New Gold Rush—It’s The Land

One could assume that real estate value in San Francisco is mostly based on the building itself, on all the design, materials and crafting and location that goes into a residential home or condo. But no. In SF that’s not true. According to experts 80% of the value in any given home property (and all properties) is in the dirt—leaving 20% value in the building itself. Arrian Binnings says, “There was someone in the 1880s who said there’s ‘gold in them thar hills’ and I’ve always said ‘those thar hills *are* gold’ because … it’s extremely valuable dirt we have here.” The land-to-house value ratio in SF is the opposite of what many other cities experience. In Dallas, Texas, the land is worth 10% of the total land/building value.

Currently there are only 18 vacant lots for sale in the city. And they are worth their weight in gold—almost. There’s a plot at 19 Arguello, adjacent to the Presidio entrance, is going for $5.5 million (with plans for a mansion thrown in). Over on 477 Eucalyptus Drive there’s a smallish, crumbling concrete pad on land that’s available for $1.6 million. In the Richmond District a small plot with weeds is going for $1 million.

Binnings says that buying a lot and building on it is a risky venture as the cost of construction can include unforeseen expenses and do-overs.

Sunday, Oct 16th: Step Back in Time on SF Victorian House Tour

Sunday, Oct 16th: Step Back in Time on SF Victorian House Tour

Here’s a once-a-year opportunity to step inside Victorian houses that come out of the very early 1900’s. The Victorian Alliance is staging its 44th Annual House Tour this Sunday, October 16th, from 1pm to 5pm. The walking tour is self-guided.

The Victorians being visited this year are around the Duboce Park and in the Duboce Triangle. As a special feature this year a Victorian church is open to the tour, including gorgeous stained glass windows and finely crafted woodwork in the church’s sanctuary. Complimentary refreshments are served in the church and the Alliance’s gift shop will be set up for early Christmas shopping.

An illustrated program is provided to the tour walkers. Shoes should be comfortable and clothing layered. Be prepared to climb stairs to the home’s upper floors. The Alliance urges using public transportation as street parking is limited.

This is a fundraising event that benefits The Victorian Alliance Grant Program. This program has awarded more than $350,000 to historic preservation projects since the organization’s founding in1973.

Click here for the Victorian Alliance’s announcement and to buy tickets.

Housing On Top of New Hotel in SoMa Neighborhood Proposed

It’s raining hospitality construction proposals in SF these days. Another one landed just recently to plant a new hotel in the very hot SoMa area. There’s one difference here: the seven story 120-room hotel structure will have an 8th floor with five fine residential units constructed into it. The hotel/housing combo will be erected at 300 Fifth Street, with the proposal filed by Stanton Architecture, acting for the Wong Family. Currently, there’s a Shell gas station occupying the site.

The building’s ground floor (certainly an amenity for the residential unit owners) will include a lobby, bar and breakfast room and retail shops along with offices and back-of-house spaces. It could be that for the residential owners on the 8th floor the hotel is offering concierge service.

This proposed project is one of several that are already swinging cranes near AT&T Park, at 55 Howard St, at 1125 market St, at 744 Harrison St, and at 399 5th St. The new spurt of hotel projects has observers speculating that hotels are being developed over residential housing because of the city’s passage of Prop. C in June, requiring more affordable housing to be built into market-rate projects. Recently a SoMa condo project has morphed from condo to hotel construction.

Mainstream National Media Reporting on Steep San Francisco Rent Drop

The Wall Street Journal and other mainstream financial news outlets are now caught up in reporting that a fairly serious crash is going on in the rental markets in New York City, San Francisco and San Jose. New York is being impacted to the tune of a 20% downturn in rentals even as rents go down or incentives to rent (like free rent for a up to six weeks) go up.

Ken Rosen, chairman of the Fisher Center of Real Estate and Urban Economics at UC Berkeley says, “San Francisco and New York are leading the way in the downturn. People are going to be surprised that this is happening but they shouldn’t be. It’s been too far, too fast.”

What’s happening is that there are so many rental units coming on the market in a kind of perfect storm of supply glut. The rental market in these big cities has been in a long boom. Seven million new renter units have been built nationwide since the foreclosure crisis in 2006-7 plus a trend toward urban living. The home ownership rate declined to a 51-year bottom.

In San Francisco there’s been a one-two punch of a reduced job availability in the middle and upper class ranges and a huge jump in multi-unit housing coming on the market. By the end of 2018 there will be 6,500 more apartments to fill with tenants. New York is projected to have 42,000 new units on tap in that same period. San Francisco, Oakland and San Jose are seeing a 76% surge in new apartment units in 2016. One of the results is generous incentives offered by luxury and semi luxury towers to get people to move in—from giving away free bikes to four weeks of free rent or $1,000 discounts for renters saddled up with tech companies like Apple. And some rent prices are coming down in the luxury level class.

July 2016 S&P Case-Shiller Index Report Affirms Ease of High End Prices

The much anticipated Case-Shiller report for the 5-county SF Metro Area just came out. Basically this report shows patterns for the entire SF Bay Area including comparison snapshots back to 2000 through the dotcom bust on through the great recession of 2008 and on up to July 2016.

The overall take away from these charts is that the higher priced home segment (houses and condos) has hit plateaus and is cooling down while the more affordable market homes are slowly appreciating. This conclusion is in line with other reports that have come out over the past month.

Our complete report is here.

All the numbers on C-S charts refer to a January 2000 home price of 100. Thus a reading of 228 signifies a price which has appreciated 128% above that of January 2000.

image002

However, the mid-price and high-price tiers have exceeded their previous peak values in 2006-2007, while the low-price tier, though climbing rapidly, is still well below its subprime-loan-fueled high point.

image004

The appreciation rate for higher priced homes was significantly lower this spring than in the previous 4 spring selling seasons, and has generally plateaued in recent months. This plateauing is not uncommon during the summer months.

The past 12 months:

image011

Since the recovery began in 2012:

image012

Long-term trends for the high home-price tier in the Bay Area, which predominates in most of San Francisco, southern Marin and Lamorinda/Diablo Valley.

image013

Selling a Vacant Home—Simple, Effective Protection Measures

If you’re selling your home in SF and have moved out leaving the house empty and unlived in—meaning the castle is unguarded—one of the main concerns is How do I protect my house? Vandals and thieves are as evolutionarily adaptable as cockroaches so you need to stay ahead of them in the protection curve.

Here are some simple (and affordable) ways to protect your now-empty house:

1.) Check your insurance policy right away. What changes when you’ve left your home? How long will it cover the vacant home? There are vandalism and mischief coverage policies from some companies.

2.) The home’s exterior lighting should be beefed up. Timed lights and motion-activated lights are very efficacious deterrents to burglars and vandals. Include sheds and other outlier buildings. Timed lights indoors create the sense of being at home at night.

3.) If it’s impossible to visit your home off and on, ask a friend, relative or a neighbor to visit the home periodically. You may have to pay someone for this and there are companies that offer this service, plus taking care of any outdoor or other maintenance tasks.

4.) Be sure to alert the SF Police Department that you’ve moved out and the house is vacant. Submit a list of all people authorized to be on the property and make sure the police have your contact number, and the name, phone and address of a local person you have an arrangement with.

5.) Keep the home security system active. Don’t deactivate the system to save money. Vacant homes are easy targets for burglars and vandals (who strip everything that is of remote value down to basic plumbing) and the security and monitoring system can help keep them out. It could pay to have some kind of system installed to protect the empty house, as vandalism can be extremely costly.

6.) Replace weak or shoddy entry doors with hard wood or steal doors that come with strong locks. Perhaps set up an automatic timing system for lighting systems. Alert the home security company that your home will be empty. Set blinds partially open to look like you’re home and some light comes in.

California Migrations Into State for Home Buying Not So True for SF

According to a September 25th article in The Wall Street Journal there’s a sizable migration of homeowners moving out of California where home prices are steeply rising to states like Texas and Arizona where home prices are much lower compared to California, and are staying low.

The article states that between 2000 and 2015 2.5 home sellers left California for every 1 buyer coming into the state. On the other hand Texas, Arizona and North Carolina are showing the opposite: more buyers moving in and fewer sellers moving out. Further, as the housing recovery quickened the migrations out of expensive states like California and Colorado have increased. Prices for homes in Texas compared to California were up to 40% cheaper.

However, according to my experience and the data in SF’s real estate dynamics buyers of homes in SF are not necessarily coming directly in from out of state. They go from rent to buy over a period of time. The demand for housing in the city still far outstrips supply and the good stuff is still being overbid. My buyers who are not trade-up buyers typically have relocated from out of state within the past 3-5 years. When they arrived they chose to rent while they learned the neighborhoods and decided whether they wanted to stay long-term.

Modest High Sale and Fiercely Competitive Smallest Home Sale Last Week in SF

There was a battle in the same building last week for the lowest priced smallest home sale in SF, according to sfcurbed.com. Part of the Shipley House condo development in SoMa that just opened in the 2015 summer, #203 sold for $640,000. That bought a 529 square foot condo, 1 square foot smaller than the other 530 square foot unit that sold last week as well. Considering that square footage measurement isn’t standardized the two condos could actually be the same size. The #203 unit sold for the first time, and came in at its asking price.

On the high side of home sales last week, the top price was not nearly as tall in dollars as most of the “high” sales in a week that sfcurbed.com kibitzes about on Fridays. Usually the buys are at $8m or $6m or at least in the range of $4m but last week the high sale was #23 unit at 550 Davis Street, going to buyers for $2.6m which was shaved down from $2.8m. It went off the block at just after one week. So a fast buy at a comfortable multi-million price for this condo. The condo #23 is in is brick clad, large, elevated complex building on Davis Street. Built in 1981 the building was remodeled in 2011 by SF architect Olle Lundberg. The building is across from Sydney G Walton Square.