October 5, 2007
The Californian On Rincon Hill: No Longer Coming Soon (If At All)
The Chicago-based developer has put its condo tower site at 375-399 Fremont St. on the block, a parcel entitled for 393 units. Industry sources say the project, the Californian, had been in contract for an astounding $62 million, which translates to $160,000 per buildable unit, but that the deal fell out. Fifield spokesman Cheryl Bame said Fifield is in negotiations with several builders but that the property has not been sold. “They have had some unbelievable offers on the San Francisco project and believe it¹s a great market,” she said.
Our question for those in the know: is it the financing or the market that’s led to the change of heart?
∙ Fifield puts Rincon Hill condo parcel on the block [Business Times]
∙ The Californian On Rincon Hill Construction/Sales Pushed Back [SocketSite]
∙ The Californian on Rincon Hill (375 Fremont): Website And Renderings [SocketSite]
First Published: October 5, 2007 12:01 AM
Comments from "Plugged In" Readers
"Our question for those in the know: is it the financing or the market that’s led to the change of heart?"
I don't claim to be "in the know," but I would venture to say it's probably a little of both.
Posted by: S&S at October 5, 2007 12:52 AM
I knew the end was near when S.F. Magazine printed a large image of the "new" San Francisco skyline in 10 years. Someone forgot to tell all of the high-rise boosters that this is not Dubai! Too bad in that "The Californian" was going to be one of the first true luxury towers and give real competition to all of the projects that slap luxury on their descriptions and yet are really only over-priced apartments. If anything San Francisco is behind the curve. This cycle has already completed itself in Miami, San Diego, Las Vegas, etc. where scores of towers that were to go up have now vanished along with some "buyers" deposits.
Posted by: Anonlurker at October 5, 2007 1:53 AM
"Our question for those in the know: is it the financing or the market that’s led to the change of heart?"
I'm also not in the know... but these are two sides of the same coin. like yin and yang.
it is unsurprising that the California failed. Many more will also fail. this is the danger in projecting forward what a neighborhood "will" look like in the future and buying based on that.
If a neighborhood does transform, you win big time (as I have in my neighborhood). If it doesn't come to pass, you can lose big time.
Look for more failures.
Posted by: ex SF-er at October 5, 2007 7:02 AM
This bad, bad, bad for OneRincon and it's immediate neighborhood. I wonder if the Turnberry tower on 45 Lansing is next to go. I wonder if the 2nd Rincon tower will ever be built.
Folks always talk about being patient with Rincon Hill, the neighborhood "will develop", the new restaurants, cafes, and shops "will come" and the new towers will change the landscape.
Well, that may be wishful thinking for now. So much for being one of the early birds at OneRincon and buying into the potential of a new neighborhood...
I wonder how this affects Infinity? I'm still bullish on this complex, and the bayfront neighborhood is well established. And I'm glad it will be built (and completed) by Tishman and not some fly by night company that decides to leave town leaving Rincon Hill in limbo...
Posted by: missionbayres at October 5, 2007 7:32 AM
As an area resident, I am disspointed with these turn of events. On the other hand, I don't think the situation is as dire as others claim. All one needs to look at is the Signature Properties development at Mission Bay, that was recently sold to Avalon. It is about to break ground. With the sub-par condo market, many developers are shifting immediate construction to apartments. I'd look for more of the same. All of the apartments currently being constructed are condo quality, so the owners can switch back to condos once the market heats up again. Although this may delay the project for a little while longer, I don't expect this lot to stay vacant for perpetuity.
Posted by: SFhighrise at October 5, 2007 7:36 AM
I think this illustrates why prices won't fall much if at all in S.F. Projects will simply get cancelled if the market won't support enough profit to justify the risk and a lot of this projected supply will fall out.
Posted by: anono at October 5, 2007 8:53 AM
My guess would be that the credit crunch only impacted Fifield slightly. Most likely, it was construction costs continuing to rise without prices moving along with them. Unfortunate turn of events, especially because they would have knocked down a decrepit former homeless shelter. This development would have been great for Fremont Street and it will be whenever someone can actually get around to do something here.
Posted by: will_h at October 5, 2007 9:00 AM
Interesting how the article also mentions that Turnberry will begin digging at the site of 45 Lansing soon. Perhaps it isn't as dire for the area as others are assuming.
Posted by: SFhighrise at October 5, 2007 9:33 AM
A couple months ago, this is exactly what I predicted - that one or more big projects would be cancelled, and some people said that was crazy.
Those lots will be developed sooner or later, who knows when. It can only be good news that less inventory will be coming on line at the same time. I wonder what other projects will be delayed or cancelled. And anono is right, this just goes to show how the market self-adjusts to maintain price equilibrium.
Posted by: anon at October 5, 2007 9:50 AM
This is good news for the Infinity and bad news for One Rincon. With all these buildings not being built, Infinity will be the king of Rincon Hill for a long time. There will be no competition for years!
Sucks for One Rincon, as I don't see the area improving any time soon. Views are nioe but I can't imagine people enjoying the area. Plus, has anyone seen the building lately? Not pretty at all with those ugly white strips going through the building.
Posted by: um at October 5, 2007 9:51 AM
Not really in the know, but I'll be talking with some people in the next few weeks who might be - I'll get back on here if there's anything more to add. Personally, I'd venture it's a bit of both, with the financing potentially playing a bigger role in the decision. Big investment real estate money now generally comes directly from the equity markets, rather than banks, and there has been a complete re-pricing of risk in these markets over the last 90 days. Kind of related to why residential mortgage rates didn't budge after the 50 basis point fed drop and why jumbo mortgages jumped in their cost. Big investment money is a lot tighter and more expensive now and that plays into the profitability of these multi-year high rise developments significantly. A lot of developments underway have already got their financing commitments nailed down, but if not, the rules have changed significantly.
Posted by: Miles at October 5, 2007 9:57 AM
Bad news for people still counting on that "flood" of luxury condos.
Posted by: blahhh at October 5, 2007 9:58 AM
The developers want to make their money now, rather than put more money in now. Likely Fifield's other projects and the changing market have made them more risk averse.
Chances are that some other developer will find it worth the risk, especially since the property is already entitled for a high rise. It's a big stretch to say that because Fifield got cold feet, that nothing else will ever get built on Rincon Hill.
Posted by: Dan at October 5, 2007 10:07 AM
Bad news for the skyline as well. I still am not comfortable with how the city looks now that One Rincon sits all alone smack next to the bridge. If the other towers were to fill in around it the city skyline would not look as strange as it does at the present.
Posted by: anon at October 5, 2007 10:09 AM
Here's some evidence that Fifield is in some trouble in Florida:
Posted by: Dan at October 5, 2007 10:14 AM
I heard that the county of SF might be interested in buying the lot, razing the homeless shelter, and building a hi-rise homeless shelter in its place to house all of the homeless from miles around. OK, so I made it up, but it would be funny if that's what happened.
The reality is that, like the thousand of unprofitable companies at the end of the dot com boom, who served no real purpose other than to feed the boomtime demand and found the plug pulled when the party was over, I suspect that Rincon hill developers understood what their market was, namely flippers, speculators and second home "investors", and have decided to pull the plug.
The fact that there was no development in this area for so long should be a tip off that it just wasn't that desirable of an area. Developers are like pirate ships: when there is no more booty in one area, they pack up and sail to another.
As for the cancellation of condo projects preventing prices from falling, maybe you can call the people who bought all those underwater condos in Florida and ask them how their canceled neighbor projects worked out for them. I don't think you'll find their answers to your liking.
Installing a bunch of rental apartments in a neighborhood has never caused a neighborhood to improve. It usually begins a neighborhood's decline. Like unprofitable dot com companies, all that area had going for it was a hope that things might somehow get better. Keeping a homeless shelter and losing a luxury development isn't going to help that cause.
Posted by: tipster at October 5, 2007 10:29 AM
Installing a bunch of rental apartments in a neighborhood has never caused a neighborhood to improve
Is it your contention that Mission Bay and South Beach "declined" with the addition of rental apartments?
Posted by: tipster checker at October 5, 2007 10:55 AM
In terms on the skyline, I think it's sad that we may get stuck with OneRincon and nothing else in the neighbohood. Who knows about Turnberry, I'm sure they're getting cold feet right now.
I remember other posters saying a while back that OneRincon will become an isolated, odd-ball building next to the freeway that no one wants to live in.
We may be seeing that come to reality if Turnberry decides to postpone...
Posted by: missionbayres at October 5, 2007 11:00 AM
All this means is that this particular developer is not going to be able to build this particular development at this time. Someone else will eventually build here.
I love it. As soon as I saw the headline to this blog topic and before I even clicked on the comments, I was already making up in my mind what I thought the comments would be like. And what surprise, I was spot on.
Posted by: RinconHill_Res at October 5, 2007 11:06 AM
One additional thought. Did it ever occur to anyone that this developer might be having problems generally and that its unwillingness to go forward with this project is only a reflection of that fact and nothing more?
I realize that if most of the naysayers had to acknowledge that potential truth, it would make their "end of the world is coming" comments above somewhat muted, but nevertheless it is completely valid consideration.
Personally, I think it's a good thing that this developer backed out now rather than getting the construction started and then running into problem halfway through.
Posted by: RinconHill_Res at October 5, 2007 11:19 AM
"Bad news for the skyline as well. I'm still not comfortable with how the city looks now that One Rincon sits all alone smack next to the bridge."
This was my thought exactly and it isn't just funding issues alone that could cause this. Unlikely, but there could be a populist uprising against more high rises, excessive litigation and the cahnging market or a combo of everything that causes excessive delays and more cancelations. Who knows.
An upcoming SPUR forum is from the builder at 10th and Market
"How a Planning Dept.-recommended, code conforming, Housing coalition endorsed, market rate and affordable housing gets mixed up with environmental, parking and high rise politics" and of course how this huge impacts costs"
Until they are built in this town you can never count on anything. You might even do everything right but end up playing ball with the wrong activist groups
One Rincon alone is a serious blight on our skyline without a doubt
Posted by: zig at October 5, 2007 11:23 AM
"I was already making up in my mind what I thought the comments would be like."
Actually, I was expecting even more extreme doom and gloom.
How about this for a prediction:
Dateline October 5, 2017 (Tipster Wire Service)
Environmentalist are praising Mayor Chris Daly's foresight in converting Rincon Hill to a nature preserve, thus allowing free migration of endangered rodents between Rincon and the Mission Bay Wetlands. By November, 2007, it was clear that no one would ever want to live on Rincon Hill. By 2009, the City was able to purchase the vacant 1Rincon through eminent domain for the current market value of $400/unit. San Francisco took advantage of the building's isolation, which made it the only building in the City that was not within 1/2 mile of a school, day care center, or playground. 1Rincon became the perfect place to house San Francisco's registered sex offenders.
Posted by: Dan at October 5, 2007 11:32 AM
This situation happened in Downtown Los Angeles in the 70's. I was reading a planning article recently about the Occidental Tower which was built about 11 blocks from the rest of high rise towers and action of downtown Los Angeles, and after a general slump, the forecast growth of the skyline towards the south to the Occidental Tower instead went West and North. That tower only now (30 years later) is getting in-fill high rise projects being built around it. For many years it was isolated and surrounded by empty lots and homeless.
Posted by: anon at October 5, 2007 11:37 AM
Maybe Newson should hold an emergency meeting with city planners on the fate of Rincon Hill ;-)
Leaving OneRincon isolated out there by itself is a travesty to our skyline. Maybe at least he can demand they change the ugly curtain wall to make it more visually pleasant.
Seriously, I was really looking forward to the other towers hiding OneRincon, but I guess that's not gonna happen for a long, long time. Sad day for SF....
Posted by: missionbayres at October 5, 2007 11:49 AM
A good portion of the development associated with the Transbay Transit Center area - what used to be highway overpasses pre-1989's earthquake - will be rental units (practically all of the 34% BMR stuff).
Posted by: Jamie at October 5, 2007 12:04 PM
In other Rincon Hill news, my understanding is that Google opened their office at the Hills Brothers building this week.
Posted by: Jamie at October 5, 2007 12:09 PM
Google moved their headquarters to San Francisco?
Posted by: anon at October 5, 2007 12:17 PM
No, Google is growing so fast they needed more office space. They decided to open a San Francisco office so that some of their SF employees can work closer to home.
Posted by: Dan at October 5, 2007 12:48 PM
They have room for about 800 folks ... not quite enough for all 1,200 San Francisco-residing Google employees, but a good chunk.
Posted by: Jamie at October 5, 2007 12:56 PM
If you read the posts here, Google employees are going to buy every residence in sight for a 50 mile radius of every office they inhabit.
Yet the very same week they move in, the Californian, only a few blocks away from the new Google office, gets canceled.
Based on the posts here, you'd expect the Californian to announce that they were adding an extra 100 stories to meet the crushing demand.
Instead, they cancel the entire project the same week the Google employees move in.
Posted by: tipster at October 5, 2007 3:43 PM
Thanks Tipster. I was at a loss to understand how GOOGLE had anything to do with Rincon Hill and the Californian. Why can't we get back to basics in this city? Let's stop worrying about which city has the most luxury high rises being constructed, and instead fix our infrastrucuture (MUNI, ROADS, Etc.) and create a desirable city for working people and their employers (Safe streets, clean streets, good schools, a city government responsive to the needs of the majority). You could build 100 Californian towers and the city will still be stuck with the same problems it has today. We are now stuck with a a true symbol of the credit excess of the last six years, and that is 1ORH.
Posted by: anonona at October 5, 2007 3:56 PM
If you read the posts here, Google employees are going to buy every residence in sight for a 50 mile radius of every office they inhabit.
Are you serious, tipster? If you read the posts here (the MAJORITY of the posts, not the last couple), the assumption would be that we're seeing 10% population declines as everyone abandons San Francisco. A couple more years and this place will look like Detroit.
Posted by: tipster checker at October 5, 2007 6:28 PM
Y'all need to take your medicine cuz you're losing your minds if you think San Francisco is going to look anything like Detroit. As someone who spent 31 years growing up near Detroit, I can assure you that the 1967 fires and race riots scars are still very evident. I don't see anything comparable here.
Tipster, I don't know why you go ape crazy every time I mention Google, but I'm happy to have Google fill the space in Rincon Hill. I'm not so optimistic about Gap Inc.
Posted by: Jamie at October 6, 2007 12:17 AM
Tipster did not mention Detroit, it was "Tipster Checker". I am hoping "Checker" was trying to be sarcastic. The Hills Brothers buiding is in the Rincon Hill neighborhood? I need to look up my boundries again for the hoods of S.F. (Or is Rincon Hill like Pacific Heights, in that it depends who you ask?)
The news about the Californian is not good at all. There are some other projects I would have thought the plug would have been pulled on before this. I am still doubtful about the Transbay Tower myself. What is the latest on 45 Lansing? I have heard some gloomy gossip about that project as well. In Chicago there are two luxury projects that have completely shut down (most suprisingly the 93 story Shangri-La tower) and that had Asian money behind it as well as a major luxury hotel tenant on the lower floors. I think we are going to see things get "interesting" here as well.
Posted by: anonarch at October 6, 2007 12:45 AM
Why it's too bad for OneRincon? I rather less high-rises in this neighborhood, which less buildings will block my view,less units competes with mine if I want to sell it. I even wish they would stop building the Tower 2 which I will be more enjoying the pool :)
Posted by: SouthBeachKid at October 6, 2007 2:34 PM
Fifield has recently sold a few of their projects. A couple being on Wilshire in LA. Other developers purchased them and are completing the projects. From the quote above, it seems like this could also be the case for the Californian. Too early too tell at this point though.
Posted by: anon at October 6, 2007 11:16 PM
The next big one to hit SF should take care of the skyline. What's the probability, 80-90% in the next 5-10 years?
Posted by: LettucePicker at October 7, 2007 1:35 AM
The probability that an earthquake will "alter the skyline" is probably around 3% over the next millenium. It would take something like an 8.5 to have even a DECENT chance at knocking down any of the modern skyscrapers.
Now - if you mean that an earthquake will knock down loads of other buildings, which would be replaced by tall buildings which would alter the skyline - that's another case entirely.
Posted by: LettucePicker checker at October 7, 2007 11:29 AM
"Now - if you mean that an earthquake will knock down loads of other buildings, which would be replaced by tall buildings which would alter the skyline - that's another case entirely."
EXACTLY! For all of the preservation advocates out there, the USGS predicts that if a quake similar to what hit the city in 1906 were to happen again, about 1/4 of the structures would be damaged beyond repair. The wood Victorians will survive, except if there is another fire. Nature may end up solving the housing crisis, or we could go the way of New Orleans with many people leaving for the South Bay, Portland-Seattle, or other locations. Does anyone think this city government would be quick to organize and be able to rebuild in a quick and efficient way?
Posted by: anonon at October 7, 2007 4:00 PM
actually it's much worse. an 8.0 is more likely than an 8.5 and most of our newer buildings (post 99) would stand to minimize loss of life but just about all of them would be inhabitable afterwords.
Posted by: james at October 8, 2007 7:23 AM
As someone who grew up in Detroit and now lives in Rincon Hill..it could never ever possibly get to that stage! Someday Rincon Hill will be a solid mixed-use neighborhood. All in time.
Posted by: Josh at October 8, 2007 8:24 AM
"As someone who grew up in Detroit and now lives in Rincon Hill..it could never ever possibly get to that stage! Someday Rincon Hill will be a solid mixed-use neighborhood. All in time."
This statement doesn't have much merit. Over the past 2 decades, we've seen Baycrest, Bridgeview, Avalon Towers, The Met, Lansing go up in Rincon Hill. Thousands of residents, yet no neighborly feel or the accompanying businesses. Just a drive in/drive out neighborhood and heavy freeway traffic.
On a side note, I walked by OneRincon today and noticed the drive-up courtyard and lobby area is high enough to see the upper deck freeway traffic. It could be a little disconcerting to drive up to the valet and see 50mph traffic a few feet away.
I'm wondering if the developer has plans to block the views of the traffic. If not, the cars whizzing by will be a constant noise and visual nuisance.
Posted by: missionbayres at October 8, 2007 10:59 AM
anonarch - let us know what you uncover about the boundaries of Rincon Hill, because, as I've responded to Jamie before, he seems to think that Rincon Hill includes half of downtown, most of SOMA and the whole Embarcadero! Sorry sweetie, but Rincon Hill is only a few blocks by historical standards (even the Rincon Towers is not truly on the hill)
Tipster brings up a great point - for ages no one has wanted to live in this neighborhood. It's always just been an edgy industrial neighborhood with some cool lofts, but unfortunately, in the shadow of the bridge's ramps. And not even in the cool shadow like South Beach is, just the dirty one. Why do we think that there are SO many people who want to live there now? I surely wouldn't. Yes, buildings have gone up there in the last decade, but most were just simple and none improved the feel of the place. Rincon Hill just isn't luxurious no matter what you build there.
Posted by: rg at October 8, 2007 1:01 PM
There is no way the Hills Brothers building is in Rincon Hill! That is like saying Alamo Square is in Pacific Heights.
Posted by: anonlol at October 8, 2007 1:41 PM
"As for the cancellation of condo projects preventing prices from falling, maybe you can call the people who bought all those underwater condos in Florida and ask them how their canceled neighbor projects worked out for them. I don't think you'll find their answers to your liking."
AMEN Tipster! There is no way to spin this news. It is not good that "neighborhood", and I think the next shoe to drop is 45 Lansing.
Posted by: anon at October 8, 2007 2:51 PM
Before everybody gives their two cent gloom and doom scenarios, did anybody ever stop to think that the reason why Fifield is selling is due to internal reasons or problems?
"The possible sale of the building and the two other assets calls into question Fifield’s status regarding residential development in California."
Fifield has or is planning to sell a few of their projects before completion. This included the new high rise on Wilshire in Los Angeles, which is THE prime location in LA for high rise living.
Is it a negative development for Rincon Hill? Yes.
Is is indicative of the overall condo market? Not necessarily.
Posted by: anonymon at October 8, 2007 3:08 PM
I'm ambivalent regarding Fifield's luxury Californian or a budget apartment building there. In a city that's had a housing shortage for decades, the fact that any project is getting cancelled is bad news for everyone (renter or owner, bear or bull). I can only hope that somebody builds something here....anything is better than the status quo.
Posted by: Dude at October 8, 2007 3:19 PM
A couple of other quotes from that article about Fifield and the sale of thier LA project:
“It is abnormal for a sizeable development – especially such a prominent West Los Angeles development – to be put on the market in the midst of construction. The turn of events, coupled with the recent sale of another Wilshire Corridor condo project also under construction, has led some industry experts to suggest that L.A.’s recent surge of high-end condo construction may be approaching its peak.”
“In addition to concerns about market saturation, some say that future increased interest rates could make financing the purchases of those multi-million dollar units more costly – another possible reason to try to unload a property now.”
Do you really think Fifield is trying to unload the Californian for reasons dissimilar to those above? I can guarantee they’re not questioning their commitment to condo developments in CA because they’re afraid they’re going to make too much money.
Posted by: Michael at October 8, 2007 3:26 PM
Strange. They are not stopping any of their Chicago Projects. Why would anyone want to back out of a "hot" condo market like San Francisco?
Posted by: anonlol at October 8, 2007 3:58 PM
But, but, marc told me there was insatiable demand for high-end condos in SF and prices would forever go up!
Posted by: marc checker at October 8, 2007 3:58 PM
anonlol, what are you smoking? There have been two MAJOR Chicago projects cancelled in the last month - both MUCH larger projects than the measly Californian.
Posted by: anonlol watcher at October 8, 2007 4:07 PM
"Do you really think Fifield is trying to unload the Californian for reasons dissimilar to those above? I can guarantee they’re not questioning their commitment to condo developments in CA because they’re afraid they’re going to make too much money."
No, I think they are unloading them for the same reasons. It just seems more likely that Fifield is having internal trouble and is not willing to take the risk rather than a sign of a crashing market. The developments on Wilshire were bought by another developer. Let's hope the same happens with the Californian.
Posted by: anonymon at October 8, 2007 7:04 PM
"AMEN Tipster! There is no way to spin this news. It is not good that "neighborhood", and I think the next shoe to drop is 45 Lansing."
Turnberry is not going anywhere. Give it a few months. Most of you will be blown away by the project.
Posted by: blahhh at October 8, 2007 9:09 PM
Sorry anonlol but Hills Brothers is indeed in the Rincon Hill neighborhood.
Posted by: Josh at October 9, 2007 7:18 AM
"Sorry anonlol but Hills Brothers is indeed in the Rincon Hill neighborhood."
Guess ananlol can't argue with that.
Posted by: anon at October 9, 2007 3:53 PM
The confusion might be in what was for decades called "Rincon Hill", vs. what the city is now calling a much larger neighborhood. Calling Rincon Hill a "neighborhood" is like calling La Defense, Century City, or Irvine a neighborhood. Sure there will be density, but who would want to stroll down any of these streets? My favorite part of the day is going out for a short walk to streets such as Union, Fillmore and Chestnut, where is the charmant atmosphere in such "neighborhood" streets such as Folsom, Howard, 1st and Fremont?
Posted by: anonwalker at October 9, 2007 4:13 PM