Real estate prices "stickier" in top tier SF neighborhoods

In a sign of the uneven toll the housing downturn has taken on San Francisco homeowners, home values in some of the city's poorer neighborhoods have fallen more steeply than in tonier areas. Median home values fell most sharply in Bayview and Visitacion Valley on the city's southeast fringe, dropping 36% and 28%, respectively, in June from four years earlier, according to real-estate website Zillow.com. The declines were less dramatic in more affluent neighborhoods such as Glen Park and Pacific Heights, where median home values dropped 7% and 6% over the same period.

SOURCE: WSJ

201 Folsom on hold for up to 3 years

Via Socketsite comes news about 201 Folsom, Tishman Speyer's project across from the Infinity:

Tishman Speyer has been granted a 3 year extension to start construction on two approved residential towers of “350 and 400 feet above an 80-foot podium, with up to 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” at 201 Folsom.

SOURCE: SOCKETSITE

Millennium Tower over $100 Million closed

Mission Bay ready for its close up

It's taken four mayors and three planning directors to create what is now the last swath of San Francisco land where planners can create a neighborhood from scratch. So far, 3,000 people have moved into the 300-acre rail yard south of the Giants baseball park. The neighborhood is 35 percent built, and 15 years from now, it's expected to have 11,000 residents.

Mission Bay feels as if it escaped the economic downturn - stores are opening, buildings are going up, and young professionals are zipping out of $700,000 condos to get to work. Most live in a six-block area north of Mission Bay Creek. These pioneers say it's now starting to feel like a place worth staying in on the weekends.

"It's changed a lot. It's way more crowded now," said Claudia Arrenberg, 27, who shopped for pasta and fruit with her 2-year-old daughter at the new Mission Bay Farmers' Market.

All in all, it's starting to feel like a neighborhood. Hopefully SWL 337 won't take as long to complete.

SOURCE: SFGATE

The Price is Right (in Miami)

Are you listening, San Francisco developers? Want more sales? It's all about pricing. Get in front of the market again and you'll make sales.

Are the good 'old days of real estate back? It appears so in Downtown Miami.

In recent weeks developers have sold hundreds of condos, in a flurry of activity they haven't seen since the peak of the housing market. Some builders are actually running out of inventory. The first building to sell out, Brickell on the River, happened quietly and quickly selling 120 units in just six weeks time.

"It's pretty impressive when you walk into a sales office and you have 20-30 people waiting to see units. Sounds crazy but it's actually happening now," Andres Asion, with Miami Real Estate Group, told CBS4's David Sutta.

Before Asion could deposit the checks, he had sold out the entire building out; something developers in this area have not been able to do for the past three years.

So how did Asion do it?

Price. They dropped it roughly a $100 thousand under their closest competition. The final prices were half of what units sold for at the peak of the market.

"You could see it in the pricing. When you could buy a two bedroom condo for $220,000 in which before it was $450,000 people are really pulling the trigger," Asion said.

SOURCE: CBS 4

2001 Market renderings

Prado Group released new renderings of the proposed development at 2001 Market Street

Park Merced development latest victim of economic downturn

Via Socketsite comes news that SummerHill is backing out of their proposed development at Park Merced:

The owner of the Park Merced Shopping Center has decided to lease up the building after its to sale Peninsula residential builder SummerHill Homes fell through. SummerHill had planned to do a $47 million, 195-unit proposed mixed-use development across from Villas ParkMerced.

SOURCE: SOCKETSITE

Who's buying in this market?

While working in managment of new construction sales offices, my mantra for buying demographics was always "first-timers" and "empty-nesters". Well, buried in an article on shrinking house sizes (and the impending death of McMansions) was a quote from Toll Brothers:

It's also hard to know whether the trend is a the result of a change in attitudes or a change in buyers, according to Kira McCarron, the chief marketing officer for Toll Brothers, an upscale homebuilder...

"The active adult product is taking a bigger share of the market right now," said McCarron, leading to more small homes and dragging the average new home-size data down.

Which is part of the reason I left Toll Brothers in 2005, selling McMansions in San Ramon, to work for condo developers. I knew the coming economic downturn would be weathered better by young professionals who rent, and empty nesters who have 30 years worth of equity built up. They can more easily survive a 25% equity drop, selling their homes which in many cases are already paid off, and moving to urban centers. Looking at sales around the city, a majority of new home buyers are empty nesters and first timers. Add in move-up buyers leaving high-rises for single family homes, and we have a good mix of supply and demand in San Francisco. Our market should continue to be strong as long as this keeps up.

SOURCE: CNN MONEY

Q2 analysis

A quick breakdown of Q2 activity, nationwide. Visit the pdf via link below for raw numbers by MSA

The Altos Research 10-City Composite Index was up by 1.3% in June and 3.9% during the most recent three-month period.

 Prices increased in 22 of 26 markets with 21 markets currently showing three months of sequential price increases. Through the first half of 2009, listing prices for single family home rose materially in most of the country. There is some recent evidence, not yet reflected in the data in this report that the home price rebound peaked in early June, and prices may resume a decline for the near-term future.

 The Altos 10-City Composite Index continues to highlight a shift in properties available on the market. The market has experienced some turnover at the low-end (two years after the first sub-prime collapse) while new properties on the market are shifting to the higher-end.

 The California markets of Los Angeles and San Diego showed the largest monthly listing price increase with rises of 6.6% and 6.0% respectively. The largest monthly drop in asking prices occurred in Las Vegas with prices falling 2.1% but that was a markedly slower rate of decline than the 3.7% rate last month.

 Listed property inventory increased in 16 of 26 markets and was down in 10markets. Although inventory grew in most markets during June, growth remained restrained with all markets showing increases of less than 4%.

 All markets except Boston and San Francisco had a median days-on-market of 100 or more in May. By far, the market with the slowest rate of inventory turnover was Miami with a median of 262 days-on-market or more than eight months. The Altos 10-City

For San Francisco real estate, specifically:

Price Index:
$697,376 - April
$720,060 - May
$742,596 - June
3.1% - % change May to June
6.5% - 3 mo. % change

Listing Inventory:
10,283 - April
9,302 - May
9,014 - June
-3.1% - % change May to June
-12.3% - 3 mo. % change

Average Days on Market:
96 - April
96 - May
94 - June
-1.4% - % change May to June
-1.9% - 3 mo. % change

SOURCE: ALTOS RESEARCH

New details on SWL 337

The estimated $2.2-billion development proposal is for the creation of a new neighborhood, the Mission Rock District, which includes SWL 337, China Basin Park, Pier 48 and portions of Terry Francois Boulevard. The design shows SWL 337 broken into 10 city blocks built up with one million square feet office space, 240,000 square feet of retail space, 875 apartment units and open space. The plan for Pier 48 calls for 181,000 square feet of event space.

The developer team is asking for 75- and 66-year leases for SWL337 and Pier 48, the maximums allowed by state law. The Port is projected to receive base rent totaling $208 million between 2013 and 2053. Though the submittal has no specific proposal for base rent increases, the pro forma shows $254 million in “performance rent” between 2013 and 2053 roughly equal to base rent escalations every five years at the rate of inflation.

Its development proposal outlines an approximately four year period to conduct due diligence and obtain all required entitlements followed by a four-phase, 17 year site build-out commencing in 2013. The historic rehabilitation of Pier 48 is proposed to take place between 2022 and 2026.

However, the deal is not ready yet

Stern tells GlobeSt.com the exclusive negotiating agreement between the Port and the development team should be hammered out sometime this fall. The Port was not very impressed with the developer team’s initial proposal for Pier 48, which could be cut out of the agreement if a better proposal isn’t received, according to the latest staff report.

“The proposal’s treatment of Pier 48 seems to be incomplete, offering rents below current interim lease rates with major improvements at Pier 48 delayed until 2026,” states the report. “Based on the current proposal, Port staff does not believe a long-term lease is warranted at Pier 48. If the Port Commission chooses to proceed, Port staff would seek revisions to the proposal regarding Pier 48 or evaluate whether Pier 48 should be included in the scope of a long-term development agreement.”

SOURCE: GLOBE ST

San Francisco moving forward with major development projects

Despite the economy, many infrastructure and housing projects are moving forward, according to Mayor Gavin Newsom. Speaking at a breakfast last week, sponsored by the SF Business Times, the news was cautious but still ambitions

The city will start construction later this year to rebuild San Francisco General, environmental review for the second phase of construction at Hunters Point is nearly complete and the city is close to reaching an agreement with the federal government to transfer Treasure Island, Newsom said.

The mayor’s comments come as the city is struggling with rising unemployment and falling revenue. Unemployment reached 9.1 percent in May, up from 4.3 percent a year ago. The city had to close a $438 million deficit — caused in part by declining revenue — by cutting services.

Still the mayor sought to contrast San Francisco’s woes with troubles elsewhere.

“Our unemployment rate is high,” Newsom said, “but it’s among the lowest of any of the counties of California. Our bond rating is low, but it’s the highest of all these counties in California. Our vacancy rates may be high but for class A I’m glad I’m not in South San Francisco. I’m glad I’m not in San Mateo. I’m glad I’m not in Redwood City. And I’ sure as heck glad I’m not in Palo Alto or San Jose. We’re doing much better on relative terms.”

SOURCE: BIZ JOURNALS

Pacific Union sold to smaller, Marin-based firm

Pacific Union, part of GMAC, is being sold to Morgan Lane Marin, a smaller company:

Boutique real estate firm Morgan Lane Marin Inc. is swallowing its larger competitor, Pacific Union GMAC Real Estate, in an acquisition that promises to create a local brokerage powerhouse, but could also entail serious challenges in this sluggish housing climate.

The deal, for an undisclosed sum, will bring together 17 Bay Area offices and more than 430 real estate professionals, with combined sales volume projected to reach $2.2 billion this year. As recently as 2000, Pacific Union alone was boasting sales of $3.2 billion, a difference that highlights the recent fallout in the brokerage industry and strongly hints that Morgan Lane picked up its rival at a discount.

Mark McLaughlin, chief executive officer of the Marin real estate company, said he pursued the deal because it offered a chance to inject the entrepreneurial attitude of his high-end-focused firm into a dominant local brokerage. Pacific Union is among the top five regional real estate companies and also focuses on the luxury end.

SOURCE: SF CHRON

On the plus side...

The W Hotel is being sold:

Starwood Hotels & Resorts Worldwide Inc. is under contract to sell the 404-room W San Francisco hotel for $90 million or $220,000 per key, far below what luxury hotels in San Francisco were selling for in 2006. The agreement with Keck Seng Investments Ltd., which owns three other Starwood hotels and is listed on the Hong Kong stock market, calls for Starwood to retain the long-term management agreement and to continue operating the hotel under the W flag. The sale is expected to close on July 30, 2009.
Starwood, which opened the hotel amid a strong economy in 1999, says the sale price is 14 times the property’s anticipated 2009 EBITDA. Atlas Hospitality Group president Alan Reay tells GlobeSt.com that translates to a 7.1% cap rate at a time when most hotel investors are seeking a double-digit cap rate.

“Starwood is getting a very, very good cap rate based on other deals,” Reay says. “What we see is most buyers are underwriting to a 10% cap or above, so must be someone from Hong Kong that sees this as a real opportunity relative to ’06-’07 pricing.”

The value of hotels in San Francisco has fallen between 50% and 80% from their peak values in 2006 and 2007, when new or newly renovated full-service upscale properties were trading for between $360,000 and $520,000 per key.

It's good to see transactions happening.

SOURCE: GLOBE ST

Four Seasons in default

Millennium Partners this week acknowledged purposely defaulting on its two-year-old, $90-million CMBS loan for the 277-room Four Seasons San Francisco with hope of renegotiating the debt with the special servicer, LNR Property Corp., because the hotel, once valued at $135 million, is now worth less than is owed. The strategic move appears to be working for Millennium and others in California, which has industry experts expecting a lot more of it.

"What we are finding now is that--because on CMBS loans the companies cannot get any response from the master servicer--the only way of trying to renegotiate is to default because only a special servicer can modify the loan," Alan Reay, president of Irvine, CA-based Atlas Hospitality Group tells GlobeSt.com. "My prediction is you are going to see vast majority of CMBS loans in California--probably throughout country--defaulting." ...

"In order to commence discussions with the debt holders of the Four Seasons Hotel in San Francisco, Millennium Partners has strategically withheld payment of debt service," Millennium Partners said in a statement. "Conversations on restructuring the debt have begun, and Millennium Partners is hopeful that they will result in a positive outcome."

No word on whether they plan on defaulting on their latest project, the Millennium Tower at Mission and Fremont Streets

SOURCE: GLOBE ST

New projects slated for Upper Market

Not much meat to the article, but a good read to bring you up to speed on the history behind the path of development.

Approximately 10 developments are in the city's planning pipeline, proposing - among other things - to convert former gas stations into condominiums with coffee shops, stores and high-end grocery stores on the first floor.

And while most of the new construction might be slowed by the tight credit market, developers and community groups are actively negotiating the details of new buildings and the businesses they might house...

Two projects planned for the short block of Market Street between Buchanan and Dolores streets presage what the future might hold.

At Buchanan, developer Brian Spiers has received city permission to replace a closed Union 76 station with 115 glassy, modern condominiums in a nine-story building whose corner entrance will be set back several feet from the street for outdoor seating.

Just kitty-corner, the Prado development firm has proposed 80 condominiums in three interconnected structures and a ground floor Whole Foods market. The project will replace the S&C Ford dealership that closed in 2006.

SOURCE: SF CHRON

No new highrises on the horizon for 5 years?

San Francisco's latest Catch-22: falling land prices may lead to some great deals, but little availability of capital markets means there's no money to invest:

Plummeting land values and the deep recession have taken a toll on one of San Francisco’s central business models for urban redevelopment: public-private development deals.

With many developers predicting that highrise development of any sort won’t work economically for another five years, public agencies are struggling with a development model in which private builders pay for the right to develop valuable land and, in the process, bankroll public benefits like parks, roads and affordable housing.

Until the capital markets are willing to invest in the next generation of highrise condos, hotels or office buildings, public entities like the Port of San Francisco and the city Redevelopment Agency are stuck with prime land that has little or no current value.

The plus side, if you can call it one, is that supply will be limited in the next few years, eventually leading to higher prices if demand picks up.

SOURCE: BIZ JOURNAL

April S&P/Case Shiller numbers improve from March; pace of decline slows

April numbers from the S&P/Case Shiller home price index are in, dropping 0.6% from April to March, moderating previous months' declines:

Prices of U.S. single-family homes fell in April from March but the pace of the decline moderated, suggesting stability is emerging in some regions, according to Standard & Poor's/Case Shiller home price indexes released on Tuesday.

An index of 20 metropolitan areas dipped 0.6 percent in April from March, after a 2.2 percent decline the month before, for an 18.1 percent downturn from a year earlier.

The month's slide was smaller than the 1.8 percent drop forecast in a Reuters poll.

S&P's index of 10 metropolitan areas declined 0.7 percent in April for an 18 percent year-over-year drop, after falling 2.1 percent month on month in March.

The good news is that the San Francisco MSA increased 0.6% from March to April, up from a 2.2% decrease from February to March. The MSA is down 28% YOY.

Of course, these numbers are from April. May data will most likely continue the trend (since that represents closings on contracts initiated 30-60 days earlier), but with the rate increases experienced during May, we could very well see a decrease again once June numbers come in (around August). Will it have a negative effect on the psychology of the market? Anything is possible at this point. If nothing else, it will give print journalists a reason to doubt a bottom (and hence, the cycle of real estate continues).

SOURCE: CNBC and STANDARD AND POORS

Foreign investors eye 2010 recovery for San Francisco real estate

Foreign real estate investors say they expect to see a recovery in the U.S. real estate market by the end of the second quarter of 2010, according to the results of a new survey released today by the Association of Foreign Investors in Real Estate (AFIRE).

Respondents projected their investments for the remainder of 2009 will substantially out-strip investments completed year-to-date. On the debt side, survey respondents say they expect to invest three times more than current investment levels year-to-date; equity investors expect they will place seven times more than current year-to-date investments. Overall, three quarters of the survey respondents had not yet invested in 2009; however, more than two-thirds of them plan to invest some debt or equity in U.S. real estate before the end of the year.

Survey respondents continue to be optimistic in their investment projections. Thirty-one percent said they were more optimistic than at the beginning of the year; 16 percent said they were more pessimistic; and 53 percent said they felt about the same as at the beginning of the year.

In the 17th Annual Survey, released in January, respondents named Washington, D.C., New York, and San Francisco respectively as the top three cities for their investment dollars.

SOURCE: MARKET WATCH

Transbay terminal parcel coming off the market

Yet another project put on hold due to economic and market conditions:

The San Francisco Redevelopment Agency has suspended efforts to develop housing on a key Transbay District parcel after bids for the property came in “well below the potential value of the site in a healthier real estate market,” according to a memo from Executive Director Fred Blackwell.

Blackwell said the agency decided to suspend the request for proposals process for Block 8, a 42,600-square-foot parcel on Folsom Street between First and Fremont streets. The agency is looking for a developer to build two market-rate structures: a 550-foot residential tower and an adjacent 50-foot residential townhouse development. In addition, the RFP called for a 100 percent affordable building 65 to 85 feet.

“Staff believes that waiting a year and issuing a new RFP could potentially result in more interest from developers and higher purchase offers,” said Blackwell.

Blackwell said the agency will issue a new RFP in 2010.

SOURCE: BIZ JOURNALS

As predicted, mortgage demand plummets ... home sale numbers to follow

Followers of HighRiseSF know this was coming:

Spiking U.S. mortgage rates drove down total home loan applications last week as demand for refinancing shriveled to the lowest level since November, the Mortgage Bankers Association said on Wednesday.

The swift rate rise crimps affordability, likely cutting offer prices on home sales and prolonging a housing turnaround.

Borrowing costs have soared as bond yields have risen, even as the Federal Reserve has sopped up hundreds of billions of dollars in bonds to keep rates low and stimulate the housing market.

The average 30-year fixed mortgage rate jumped 0.32 percentage point in the June 5 week to 5.57 percent. That was nearly a full point, about 100 basis points, above the record low rate of 4.61 percent in March, the trade group said.

This could very possibly put an end to our recent months of good news, with a new bottom looming on the frontier. If rates stayed low long enough to absorb the inventory on the market (already heading in the right direction), we'd be in better shape. Now, I'm afraid we'll see a period of increased supply (especially "shadow inventory" being held by banks) and higher interest rates. Let's hope they fall again, soon.

SOURCE: REUTERS via YAHOO NEWS