Lender Aims to Revive 40-Story Project in San Francisco

SAN FRANCISCO–First it was stymied by community opposition, then it was stalled by the pandemic. So, when a project to build a 40-story residential tower on Market Street and Van Ness Avenue was seized by its lender in a foreclosure last year. Three strikes and you’re out, right?

Not in the post-pandemic market in San Francisco, which needs more housing and is looking to rekindle flagging development in city neighborhoods like the one known as the Hub district, near the Civic Center.

After years of trying to move ahead with its One Oak tower at 1500 Market St., San Francisco-based developer Build Inc. lost the entitled development in a voluntary foreclosure last year.

The lender on the project, Washington Capital Management, is partnering with a local group, Emerald Fund, in an effort to revive the plan by adding more units and reducing funding that has been commitment to satisfy the city’s affordable housing requirements, according to a report in the San Francisco Chronicle.

Emerald Fund has filed an application with the city planning department to grow the project-originally planned for 309 condos in 2017 and then revised into 460 rental apartments in 2022-to 516 units.

The developer also is asking the city to reduce a $35-million fee that the previous developer agreed to pay in exchange for opting out of required affordable housing at the site.

The request for a 16.4% in-lieu fee reduction is now possible due to legislation enacted last year designed to stimulate the real estate market in San Francisco by temporarily allowing fees to reduce affordable housing requirements, which historically have been significant in the city, the report said.

The proposed project adjustments are not expected to require a public hearing. Dan Sider, San Francisco’s planning chief of staff, told the Chronicle that several developers have asked for affordable housing fee reductions as they attempt to pencil out projects in the midst of high interest rates and inflated construction costs.

Before the pandemic hit, the Hub district was targeted for significant housing development by city planners, who unveiled plans to adjust zoning on 18 parcels hoping to see more than 8,000 additional homes built in the area—a plan that was largely shelved during the pandemic.

Only three Hub projects were upzoned and approved, the Chronicle reported. The largest of them, the 47-story Hayes Point tower at 30 Van Ness, broke ground in 2022.

In May, Australian developer Lendlease announced that it is shutting its overseas construction projects and looking for a buyer for the unfinished Hayes Point project.