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August 22, 2017
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Innovative San Francisco Multifamily Developers Discuss the Market at RENTV's July 20 Conference

8/07/17

On July 20th, RENTV held its Downtown San Francisco State of the Market Conference, in conjunction with CoStar, and one of the hot topics of the day was multifamily development. The event, held at CoStar's spectacular auditorium conference room on the 43rd floor of 101 California Street, was a half-day affair featuring high-level panels covering office, retail and finance, which was followed by the discussion about multifamily.

Panelists (L-R): Noravian, Braver, Nadhiri, Shore
Panelists (L-R): Noravian, Braver, Nadhiri, Shore
The event was led off by an energized and inspirational keynote presentation by Yat-Pang Au, Chief Executive Officer of Veritas Investments, the largest private apartment owner in the City of San Francisco. We will cover his discussion in detail in an upcoming article and we’ll also post video of the presentation shortly on RENTV.

The multifamily segment provided a fast-paced, informative discussion on the market by executives from some of the most innovative apartment developers in the Bay Area. These included: Muhammad Nadhiri, Managing Partner, Axis Development Group; Zac Shore, Director of Development, Panoramic Interests; and Jaqui Braver, Vice President of Development, DM Development. The panel was led by David Noravian, Principal of Beckett Capital, a successful boutique brokerage firm that has sold many apartment, condo and hotel development sites in the City by the Bay.

The conversation started off with a brief overview of how land pricing for both entitled and unentitled sites in San Francisco peaked in 2015, with entitled sites trading in the mid-$200K per unit range. A sharp shift occurred in 2016 with land transactions dropping off considerably, largely because of the uncertainty regarding affordability requirements. In 2017, land prices have largely stabilized in the $150K per unit range for well-located, entitled product.

The panelists then discussed some of the major upzoning efforts currently taking place in the City, such as the Central SOMA plan, the upzoning in The Hub at Market & Van Ness, as well as the newly-approved HOME-SF legislation, San Francisco’s version of the density bonus law. These upzoning efforts were largely lauded by the panelists as an attempt to spur new development and create sorely needed higher density projects.

The panel ended with a lively lightning round during which the panelists were asked to provide very short answers to questions regarding:

• Future land pricing - consensus answer: generally stable.
• Key milestones for major upzoning projects - answer: months, if not years behind schedule.
• The always contentious topic of CEQA reform - answer: low probability, but possibly in the next decade.
• Whether the participants viewed themselves as buyers or sellers - all the panelists considered themselves net buyers.
• Upcoming hotel versus multifamily development - in a bit of a surprise, the panelists all predicted that there would be more new hotel rooms delivered in San Francisco than multifamily units in the next five years.

During the panel, the speakers highlighted some of their new and planned projects, including:

• Axis: 399 Geary Street; 777 Tennessee Street and 2675 Folsom Street.
• DM Development: 8 Octavia; 400 Grove and 2290 Third
• Panoramic Interests: 333 12th Street and 500 Kirkham in Oakland.

During the course of the segment, the panelists touched on a number of unique challenges in the Bay Area for affordable housing, and working within the current government regulations. These include Proposition C, which temporarily raised the on-site affordability requirement to 25% (recently lowered to 18% for apartments, 20% for condos). Also mentioned was Proposition X, which required the protection or replacement of Production Distribution & Repair (PDR) space in new developments in parts of SOMA, as well as the divisive ground floor retail requirement which often creates onerous burdens on developers and sometimes results not in vibrant retail, but rather vacant storefronts.




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