San Francisco Eyes Downtown Buildings for Rail Hub

The Transbay Joint Powers Authority (TJPA) is budgeting $170M to acquire up to 10 downtown properties so it can demolish them and make way for a rail extension that will connect Caltrain with the Salesforce Transit Center.

The agency is prepared to seize the specified properties using eminent domain if owners do not agree to sell to make way for the rail connection, according to a report in the San Francisco Business Times.

The list of downtown properties targeted by TJPA includes a 41K SF office building at 180 Townsend Street that traded in 2022 for what was close to a record price, $71M, which translates into $1,731 per square foot. The Sobrato Organization purchased 180 Townsend, which is fully leased by VC firm Andreessen Horowitz through 2031.

The Caltrain line currently ends at the Fourth and King Street station in the SoMa section. The rail hub that Transbay is planning ultimately will service not only Caltrain, but a future high-speed rail service that may connect San Francisco with Los Angeles.

The properties that Caltrain wants to acquire, which include seven buildings and a surface parking lot, sit above the planned route of an underground rail connection. They will become unsafe to occupy when construction of the rail line begins.

TJPA estimates that its acquisitions could displace as many as 53 businesses and/or landlords. The agency will cover moving costs, as well as re-establishment costs up to $25K for eligible small businesses; businesses also can opt to receive a lump sum of $40K in lieu of moving and re-establishment payments, the report said.

TJPA is expected to make offers to purchase the properties this summer, depending on the availability of funding, an agency spokesperson said. The agency currently has about $100M in hand for its right-of-way acquisition program.

In addition to 180 Townsend St., the properties designated for acquisition by Transbay include 191 Second St., a 28K SF office building; 181 Second St., a 20K SF office building; 217 Second St.; a 27.5K SF office building; 205-215 Second Street, a 15.5K SF office building; 689-699 Third Street, a 6.2K SF retail building; 580 Howard Street, a 15-unit loft complex; and 201 Second Avenue, a surface parking lot.

TJPA also indicated that two other properties may be acquired, depended on the finalization of design plans for the rail connection, which currently are about 30% designed, the report said. The two additional properties are at 165-171 Second Street, a 25K office and retail building, and 589 Howard Street, a 15.6K SF office building.

The new rail connection is the second phase of a rail line extension that began in 2010 and involved seizing three properties using eminent domain.

Last summer, TJPA published a timeline for the second phase that envisioned acquiring or seizing property for the Salesforce Center rail connection by early 2025, but a spokesperson told the Business Times that this timeline has shifted.

According to the report, the properties designated for acquisition in phase two have known TJPA has had them in their sights for several years, and a few of them of worked out advanced agreements with the agency on the terms of an acquisition.