October 29, 2008
It's "Official," One Rincon Hill's Tower Two Is Indefinitely On Hold
It’s now "official" and in the open. The construction of One Rincon Hill's second tower has been indefinitely put on hold. And roughly 30% of tower one inventory has yet to close.
The plugged-in word on the street: talk of potential class action lawsuits with regard to the loss of tower two amenities and the handling of closings/deposits in tower one.
And with regard to a reader’s comment: “So how come CBS has the story of One Rincon cancelling/delaying the second tower before SocketSite??” Good question. There's no excuse. And perhaps that's the price we pay for delaying our latest Complete Inventory Index (Cii).
UPDATE: Keep in mind there's a
big difference between “cancelled” and “on hold.” And while we’re done holding our breath for the actual groundbreaking of tower two, we do believe it will eventually come (and that we'll be the first to report it when it does).
UPDATE: Or in the words of developer Mike Kriozere, “We own the land, we have the financing and our construction [plans and] contracts are in place...Like others, our team is watching the economy for the proper time to re-commence construction.”
First Published: October 29, 2008 12:01 AM
Comments from "Plugged In" Readers
I don't think anyone who is really tuned in to what is going on is surprised by this.
You know Infinity wishes they hadn't built Tower 2!
Anxious to see about this talk of class action lawsuits...
Posted by: dg at October 29, 2008 1:33 AM
as dg said it isn't surprising in the least. I know that I've stated the tower would likely not get built since I started posting on Socketsite. Still, it is a sad thing IMO. Tower 1 looks so odd over there all by itself.
there will be winners and losers
-those people in ORH 1 that now won't have their views blocked
-people in surrounding housing who won't have their views blocked and/or who won't find themselves in shadow from ORH2
-people who own near there as this will reduce future housing supply which may support their home values.
-ORH owners with cars. Now the garage will be 1/2 empty.
-the neighborhood in general, as this will reduce some of the critical mass hoped for to make Rincon a great neighborhood
-ORH1 owners. First because the nice gym was to go into the second tower (the gym in ORH1 is really a tiny room with a few treadmills.) Second because I'm not sure what will happen to HOA fees. (they may need to go higher since only one tower will support the pool, etc.)
overall I find this to be a negative.
It is likely other surrounding projects will also go on hold indefinitely, barring govt intervention or a completely unforeseen double bubble in housing.
Posted by: ex SF-er at October 29, 2008 4:02 AM
remember all the talk about how rich bay aryans would want a "second" home for weekend jaunts into the city?
Posted by: pied-a-terre at October 29, 2008 6:00 AM
In the past year there have been several auctions with East Bay condo developments. Could this happen in SF? In the 80s a developer had to auction the La Playa condos by Ocean Beach.
Posted by: wishful at October 29, 2008 7:13 AM
I knew it!! That sales staff is really lame for not disclosing that the tower may not get built. I almost bought a unit there but I was worried that t2 would not come up and they sales office wouldn't directly answer me.
All BS aside, I think it devaules tower I because aesthetically tower I sticks out like a sore thumb. t2 would balance it out and people wouldn't mock the development so much.
I think it adds value to tower I to have tower II. Also the temporary gym in tower I is horrible. Are they gonna give out gym passes to some office place? you've got to be kdiding me. I don't know what other amenities they lose without t2 but that's a little problematic.
How is the builder supposed to compensate people for lack of amenities and the architecture, community impact. Or--what if some other builder builds there and the new tower ends up being much larger or blocks the view of t1?
Posted by: cooper at October 29, 2008 7:25 AM
I was one of the "haters" who have been predicting this for over a year. (Even though I would prefer Rincon Hill with both towers)
I know some people will call me a "hater" again, but tell me why Transbay Tower, the "tallest building on the West Coast", will not be put on "indefinite" hold as well? (BTW, being doubtful of a future tower does NOT mean you hate the design, or towers.)
Posted by: Morgan at October 29, 2008 7:45 AM
Morgan I also have doubts about the Transbay Tower. j.k. Deenan from Business Times, when answering the CBS reporter's questions, said that all office projects in SF will be on hold for at LEAST 3- 4 years. I don't see how they will be able to start construction next year, as planned. This depresses me, the skyline looks so unfinished and poorly planned.
Posted by: sf at October 29, 2008 7:52 AM
I think another big negative is all the housing that will not be built. Maybe the city is overbuilt, but for how long? Lots of additional housing was going to keep prices down, now what? Prices are coming down, but for how long?
All the while big profits were being projected so the Supes were upping the fees and inclusionary housing on everything in the future to ridiculous levels. Now builders can't get money, and are looking at less profit if future places do sell, so this is it. This is the skyline, this is the housing.
Posted by: sparky-the-bear at October 29, 2008 8:30 AM
True--I would like to see all these buildings go up.
Posted by: coop at October 29, 2008 8:31 AM
The fact that these developments are getting cancelled speaks volumes about the weakness of the San Francisco market. Lenders would lend and developers would build if they thought there was demand and they could make a buck.
Maybe the city is overbuilt? They couldn't sell 30% of the units in tower one and that was before it slipped that tower two had been cancelled.
Spin it however you want but this is not a good thing for buyers in tower one, the neighborhood or San Francisco real estate in general.
Posted by: Michael at October 29, 2008 8:57 AM
Considering the fact that tower one has already ruined views of the Bay Bridge and beyond from most SF vantage points, I doubt anyone will cry a river if tower two is just a number two in our collective memories.
Posted by: One Rincon POS at October 29, 2008 8:58 AM
I know some people will call me a "hater" again, but tell me why Transbay Tower, the "tallest building on the West Coast", will not be put on "indefinite" hold as well?
I think it depends on how good a job Hines and Pelli have done in wrapping up their funding. How much of that is coming from bond issues?
This is probably a good time to breaking ground on a new project, just in time to catch the next business cycle, but that is never how it works out.
Posted by: NoeValleyJim at October 29, 2008 9:10 AM
Wow, One Rincon and Infinity went from "Smackdown" to "ShutDown" in under two years.
"This is probably a good time to breaking ground on a new project, just in time to catch the next business cycle, but that is never how it works out."
Ahh, NVJ, you forget about the ADDITIONAL vacancies that will occur in the next few years as jobs disappear. There will be plenty of available office space if things come back 4-5 years from now, without any new space being built.
Posted by: tipster at October 29, 2008 9:18 AM
is it possible that in order to collect any large judgment from the developer (much of which will be used to pay me fee), any group of 1RH purchasers certified as a class would force either bankruptcy of the project or at least pressure a fire sale of the remaining 30%(!) of the inventory?
what would that do to the property values of the plaintiffs?
wouldn't it be better to just leave it alone and hope (pray) that the developer doesn't just blow out the remaining inventory now that this bad news is out?
ah, choices, choices....
Posted by: class action lawyer at October 29, 2008 9:28 AM
The second tower was permitted, so it will probably get built eventually. No one should have expected the sales people to know what the future of the planned second tower would turn out to be. Those are just droids, and developments are always susceptible to whims of the market.
It was obvious there were going to be problems when so many of the first units were bought by speculators as soon as they were made available. At least one of the penthouse buyers should have been serious, but every single one turned out to be either just a game player or simply in over their heads. That level of failure among the buyers makes things difficult for the developers. It is market craziness more than anything else that is causing this mess and the lawsuits.
Posted by: Mole Man at October 29, 2008 9:31 AM
NVJ, I agree now would be a good time to start planning for more square footage in the city for the next cycle. And I agree too it's not gonna happen.
New projects only make sense when you can sell over a certain $/sf threshold. Once this dollar amount is in sight, developers will start planning and purchasing land for construction.
They'll get financing based on solid profit projections. The whole process takes time and there's always a chance the market will reverse before you're finished. But nobody expected the market to tank 5 years ago. In addition, everyone joined the bandwagon and mechanically pushed the building costs higher by bidding over limited land/resources/labor.
Now that the market is tanking, land might become cheaper, construction costs might also go down: cheaper materials due to lower demand, more available heavy equipment, less salary and benefits demand from unions and workers in times of higher unemployment.
It would be a great time to build. Except financing dried up or became too expensive. Banks will be skittish for a while at the sound of "condo tower". Someone with deep pockets would make the next killing as is often the case in downturns.
Posted by: San FronziScheme at October 29, 2008 9:38 AM
Now that the developer has no second tower to protect, when all of the buyers have closed, price cuts on the remaining inventory are a certainty.
Posted by: tipster at October 29, 2008 9:40 AM
No surprise here but I am stunned that One Rincon Hill still has 30% of their inventory for sale. Considering they "sold" 90% of the building on the opening day. This is not good news for the building or the neighborhood but good news for buyers at The Millennium Tower and The Infinity.
Like it or not, people want to live near the waterfront. With the cancelation of all these big developments, there's nothing that's going to be built in the near future, so no competition.
Recent ORH Buyer, can you inform us on the lawsuit and what buyers at ORH are thinking about the news. You mentioned you spoke to the developer a few months back and they said they'll build ORH2 once more units closed.
Posted by: j at October 29, 2008 9:56 AM
It sucks that these buildings are not going up (right now), but think about how excited the owners in tower one should be that their view, which they thought would be obstructed and their unit priced accordingly, will no longer have a tower in the way.
Regarding amenities, yes, that sucks too.
Posted by: alex at October 29, 2008 9:59 AM
Utter vindication. That feels nice. And a big F U to those that called me a liar almost a year ago when I commented on this.
Hope the sales party tomorrow night results in some seriously motivated buyer's agents; even in good times, it's hard to sell the 'left over' units. Suspect Tipster is right; "pre-release" pricing (or lower) will likely be revisited.
Posted by: tony at October 29, 2008 10:00 AM
So I've seen several recent comments on various threads about how the worst is behind us (again), or the bottom is in sight, etc.
I think a good leading indicator that we've actually bounced off the bottom is when construction starts on this tower and the other sidelined Soma projects.
Would now be a good time to build? If you could get it to market for under $600/square foot, maybe. I honestly think that's where garden variety Soma condo prices are heading in the next year or two (the unique stuff notwithstanding).
Posted by: Dude at October 29, 2008 10:00 AM
Considering the fact that tower one has already ruined views of the Bay Bridge and beyond from most SF vantage points, I doubt anyone will cry a river if tower two is just a number two in our collective memories.
That's debatable. You could also say that the Market perspective has been ruined by the FD and that TH unique layout has been ruined by the Transamerica tower. SF is ever changing and evolving. I agree a few months ago I thought ORH looked like a Miami tower in the shape of a vertical fan, but I got used to it already after a bit of moaning. I'd love to get a top floor condo with bridges view if they do a real fire sale one day.
Posted by: San FronziScheme at October 29, 2008 10:09 AM
I thought permits lapsed after 2 years or something like that. Got this idea from looking through the planning dept. site a while ago. Anybody got a definitive answer?
Posted by: irreverent at October 29, 2008 10:13 AM
This has been said several times:
The earliest the Transit Tower would break ground even if the economy was booming is 2011, not next year. Not only was it not going to break ground next year, it wasn't even going to be entitled until the very end of 09, but more likely early '10. The economy could very well be very different in 2011, or at least the credit and lending atmosphere at little looser with things starting up again. Developers of major projects such as these don't take such a short range, naive view of the market to not factor in the liklihood of market cycles over the course of the time they conceive a project and it finishes construction -- which can be 4-5 years, for much simpler and smaller projects.
Posted by: realist at October 29, 2008 10:17 AM
Well the other thing is this sales strategy is the height of stupidity bordering on irresponsibility. When they got all these units back becuase the buyers walked they sales office MARKED UP the units by 10% or more. Not only did nobody buy--more buyers walked.
I got an idea, how about you LOWER YOUR 2007 prices to 2000 and actually move some units? Then you can sell out this tower, build the new tower on lower commodity costs and avoid a class action lawsuit.
Posted by: cooper at October 29, 2008 10:20 AM
I think ex-SFer [once again] has a pretty accurate assessment of winners and losers. I would say that I don't believe the HOA fees will jump, as they were apparently building specific, as indicated in the documentation that we signed, when purchasing. If this situation remains staus quo, as an owner I'll be clamoring for a deeded parking spot for existing owners. If this does occur, it could lower HOA fees, as one doesn't have to pay for the valet parking anymore.
This status of ORH II is a change from the developer's comments from about two weeks ago. He did say that ground would not break on Tower II unless there were around just 30 units left in Tower I. With "about 100" units left, he conceded that this may take a while in the current enviroment, perhaps multiple months, even a year. He also mentioned that CBRE had about $30m already sunk into Tower II, when one considers the cost of land, permits and design fees. Accordingly, one would think that as long as CBRE thinks they will lose LESS than $30m, the second tower may make sense. However, with large private equity deals having issues with financing, I suppose the fact that the same is occuring for ORH II isn't much of a stretch.
The gym definitely needs a better solution going forward. The conference room that borders on the pool area hasn't provided great utility, so perhaps walling off that area off and making it a cardio type facility [with all weights/machines being in the existing room] is an option. The confernce room could be relocated to an essentially unused room within the business office. Time to rally some support for this ...
Posted by: Recent ORH buyer at October 29, 2008 10:27 AM
irreverant: I can confirm, building permits do expire, but I think it's actually 18 months not 2 years. I know for a fact an office project loses it's Prop M allocation after 18 months and is deemed "expired" by the Planning Department.
Also, to all those fretting about the uncompleted skyline, canceled developments etc., don't worry it'll come, it will just take longer.
Posted by: Jake at October 29, 2008 10:28 AM
I haven't done any digging into this, but part of the issue with ORH tower 2 is likely financing.
They relied heavily on Ullico (insurance company) and CB Richard Ellis Investor group. i'm not sure what Bank is doing their loan.
I would guess that both of those firms are feeling some hurt right now... especially given ORH tower 1's sluggish sales.
Insurance companies have been taking it on the chin (Ullico is private though so I have no stats on it).
CB Richard Ellis (parent of CBRE Investors) has been slaughtered the last year. They announce 3rd quarter results next week.
RE, specifically condos, are not where one wants to be right now.
anyway, I'd follow the money and look specifically at Ullico, CBRE Investors, and the bank funding this
Posted by: ex SF-er at October 29, 2008 10:30 AM
Well, well, well. I guess all of us that said this was going to be the case were right. I think everyone on SS gets credit for being the one that said "I told you so..." It's a bad thing that T2 isn't going up in way more ways than one.
I just cant wait to hear about these lawsuits! This will be very interesting to watch unfold.
Posted by: Ryan at October 29, 2008 10:30 AM
I think the lawsuit speculation may be overblown, as the second tower was listed as a planned portion of the development, but by no means a condition of sale. I imagine some may try to sue, but I wonder if they will get any traction. I wouldn't discount the second tower ever being built, but it will clearly be a while if it does.
Posted by: Recent ORH buyer at October 29, 2008 10:38 AM
I disagree that calling off T2 (for now) creates extra value in T1 units that (for now) keep their views.
Sure, it helps short-term, and perhaps it inflates short-term rental value, but a long-term buyer will discount the unit since T2 still looms for the future.
Posted by: Foolio at October 29, 2008 10:39 AM
"I think the lawsuit speculation may be overblown, as the second tower was listed as a planned portion of the development, but by no means a condition of sale."
A question for the lawyers: would the developer's advertising campaign late last year announcing a tower two ground breaking in January create a reasonable expectation that tower two was moving forward on schedule? Could that be grounds for challenging the purchase agreement?
Posted by: Hmmm at October 29, 2008 10:55 AM
MoleMan says, At least one of the penthouse buyers should have been serious, but every single one turned out to be either just a game player or simply in over their heads. Well, not every single one. I'm still here!
I don't see the postponement of Tower 2 as an indication that SF is "overbuilt," which would suggest that there's a long-term, insufficient demand for the available housing. I think that this is merely another result of the recent financial crisis, where people who really wanted to live in this area, and had made plans to do so, are now either reluctant to spend the money or unable to find the necessary funds. I think that's an important difference. I moved in during Meltdown Week (and nearly had a meltdown myself :-), but I wonder whether my lender would have backed out had I closed a week later.
A couple of years in the life of a large building (e.g., a 2-year delay) is not a big deal. Large scale = long-term.
Ex SF-er and others note that the fitness center is "a tiny room with a few treadmills". It's not gigantic, but it has an ample supply of machines in addition to treadmills, it's never crowded, and it has a nice view, which is improving with the removal of part of I-80 and the subsequent installation of additional landscaping. I don't know about you, but I use only one bench press at a time :-) If there were 40 more of them lined up in a row, as there are at palaces like L.A. Sports, my workout wouldn't change, although I understand that some people like the high-energy vibe of a big workout room.
Posted by: SkyGuy at October 29, 2008 10:57 AM
with those facts, very unlikely
Posted by: skeeter at October 29, 2008 11:08 AM
The problem is not that the market is slowing. The problem is that so few properties are for sale at any one given time (thanks regulations and prop 13) that land prices are ridiculous. The building itself (ORH) isn't worth more than $200 a square foot, but the land is still "worth" $500 a square foot, since the opportunity to build a 60 story tower is so rare here. The landowners can simply hold and wait until the next boom. The places that already have been built can simply rent until the next boom. Unless the owner is having severe liquidity issues, there's no impetus to throw the fire sale. That's why we'll never have affordable housing in SF again simply by "building more"
Posted by: anon at October 29, 2008 11:12 AM
We're not going to have affordable housing by building less.
Posted by: sparky-the-bear at October 29, 2008 11:17 AM
^^^True, but unless we do something drastic like upzone every portion of the city at the same exact time, we won't have affordable housing anyway, so we might as well not build anything according to some people (not my view, but I can see their point)
Posted by: anon at October 29, 2008 11:27 AM
I was also at the recent Home Owners meeting a couple fo weeks ago. This information is consistent with the report the developer gave us. Given the current SF market and economic environment, their decision to "Hold" on T2 is a very sound one. He emphasized the sizeable investment they have (>$30 million) in ownership of the land, plans and permits as well as there continued intention to move forward with T2...when conditions make sense. He felt the first priorty was to take care of T1 owners, maintining values by not creating new inventory with T2.
Also, he commented that there were currently 100 "unclosed" units of the 376...this does not mean unsold. He mentioned that the recent "Lost Wealth" resulting from the significant declines in investment portfolios has adeversly affected the rate of closings. For example, instead of 2 per week its may only be one per week. I still see people moving in each week.
A common feeling of those at the meeting was "Thank God T2 was not started, or we would be in a difficult situation like the Infinity with 25% unsold AND another building set to begin sales in early 2009.
Aside from the significant supply of available units in the market, the most problematic issue right now is the significant "Lost Wealth" that has occured in recent weeks. Regardless of the property, the most well intentioned buyer is probably having diffculty closing on a RE transaction right now.
Posted by: Jimyleo at October 29, 2008 11:28 AM
insufficient demand for the available housing. I think that this is merely another result of the recent financial crisis, where people who really wanted to live in this area, and had made plans to do so, are now either reluctant to spend the money or unable to find the necessary funds.
IHB notes that there is a difference between desire and demand. Many people may want to live in 1RH, but that desire does not translate into demand unless those folks have money to purchase. If there are fewer people willing to part with the necessary funds to purchase, then demand has gone down.
SF may not be overbuilt, but it is over priced. Median household income in SF is $70k, while median prices are around $700k. Fundimenatals suggest that home prices should be around 3x median income. Through on a 66% SF premium, and we are still at 5x income. So, either incomes or prices need to move to get to that 3 - 5x range.
SF is not that special. Prices in LA were at 10x income and they are now dropping hard -- akready 50% off peak -- to get to 3x. Adjusting for inflation, median home price in SF will be at $210k - $350k at the bottom.
Posted by: BRCGranny at October 29, 2008 11:30 AM
I've never been a fan of ORH, but this does kind of suck. For the sake of residents I hope they don't go the law suit route but try to resolve the issues quietly. Nothing will kill resales or new closings like a lawsuit.
Posted by: another-anon at October 29, 2008 11:35 AM
Aside from the significant supply of available units in the market, the most problematic issue right now is the significant "Lost Wealth" that has occured in recent weeks.
Yeah, that and the fact that this giant RE bubble is popping. The past 6 years of growth were built on hot air and ORH troubles are just a side effect of that.
The Feds lowered interest rates on the overnight loans to 1%. Will we go to 0%? Welcome to Japan Redux. Nothing much can revive the market at this point apart from lower prices.
Posted by: San FronziScheme at October 29, 2008 11:41 AM
SF isn't overbuilt as a whole, it's just overbuilt with these luxury units...if dvelopers built units with regular prices for regular incomes then there wouldn't be such a problem selling units.
Posted by: Michael at October 29, 2008 11:47 AM
one last thing:
to all the ORH owners/residents:
just a heart felt "crossing my fingers wishing you luck" post.
good luck, no matter what the outcome!
Regardless of anything else, ORH views are close to if not the best in the city! (IMO)
Posted by: ex SF-er at October 29, 2008 12:52 PM
Keep in mind there's a difference between "cancelled" and "on hold." And while we’re done holding our breath for the actual groundbreaking of tower two, we do believe it will eventually come (and that we'll be the first to report it when it does).
Or in the words of developer Mike Kriozere, "We own the land, we have the financing and our construction [plans and] contracts are in place...Like others, our team is watching the economy for the proper time to re-commence construction."
Posted by: SocketSite at October 29, 2008 1:30 PM
"...ORH views are close to if not the best in the city! (IMO)"
Clearly this is a matter of personal preference. I prefer "foreground/background" type views. The foreground usually being the rooftops of the immediate neighborhood and the background being downtown, the bay, and the surrounding hills. At 1RH and many other waterside highrises, all you get is background.
Putting a hold on 2RH is certainly a prudent move by the developer. I think that they should have been a bit more forthcoming about their decision process though.
It will get built along with the other projects placed on hold. I can't imagine that the permits expiring will be an issue. Aren't there strategies to keep the permits "alive" ? I've done this before on a residential project just by making as slow as possible progress. Each milestone inspection resets the expiry date. Even without such a "go slow" strategy, why would it be in the city's interest to force the developer to go back to square 1 ?
Posted by: The Milkshake of Despair at October 29, 2008 1:58 PM
I'll agree there's a difference between cancelled and on hold. I won't agree there's a big difference. at least not in this situation.
I don't care what the developer says... overall they've been less than accurate to date.
for example: when they say that the construction contracts are in place, does this mean that Bovis is or is not the primary contractor? if so then what about the rumors that they were shopping around?
and when they say their financing is in place- from who and how much? and are they saying they have the cash in hand? or a promise of the cash? what are terms if the lender/financer renegs on the deal? what are secondary options?
anyway, I'll buy the idea that this project is "on hold" (as it's been for over a year now) and not canceled. But otherwise it's a bunch of hooey IMO. and it the difference hardly matters to most people if this is "on hold" for 5-10 years.
sorry to be so negative, but that's what you get when the developer/sales team been less than forthright up to now.
[Editor’s Note: The word “big” was regretted from the moment it was typed. Since stricken in the post and redacted from the comment (unfortunately comments do not support strikethroughs). And as far as we're concerned, it's not being negative but rather critical. And rightfully so.]
Posted by: ex SF-er at October 29, 2008 2:04 PM
JimmyLeo said, "A common feeling of those at the meeting was Thank God T2 was not started, or we would be in a difficult situation like the Infinity with 25% unsold AND another building set to begin sales in early 2009."
While I do feel for the ORH residents, I disagree completely with the sentiment expressed by JimmyLeo. I'm an Infinity resident who is extremely happy that the builder is finishing the second tower.
If I were a flipper, I would admittedly be unhappy with the completion of the second tower because there would be a lot of new inventory that would be competing for potential buyers. It would be difficult, if not impossible, to sell at a profit in the short-term due to extremely negative economic environment.
But I'm not a flipper. Rather, my wife and I are planning on living at the Infinity for a while. As a long-term resident, I am really happy that the builder is finishing the entire complex because it makes the quality of life much better! I'd much rather live in a nice, finished complex than in a contruction zone with an ugly hole in the ground indefinitely. Also, we don't have to worry about if/when we'll be able to use the amenities that we were expecting such as the gym.
By the time my wife and I are ready to sell at least 5-7 years from now, I expect that the market will have recovered to some extent. I'm not sure how much money we might make. But I do know that we'll have enjoyed our life a lot more living in a finished complex than a construction zone.
Posted by: Happy Infinity Resident at October 29, 2008 2:32 PM
Attn. "Happy Infinity Resident" WTF? You live in a construction zone NOW with tower 2 coming up. And across from future construction for the temporary bus terminal, and then the bus terminal, itself. And then, whatever comes up across the street. And so on and so on. People in glass condos....
Posted by: grr at October 29, 2008 3:04 PM
Speaking as a ORH buyer yet to close, there will either be numerous individual lawsuits or a sizable class action suit regarding closings in tower 1. The ORH sales staff has consistently lied regarding inspections, closing dates, and completion of amenities. Combined with the final product nowhere close to quality expectations, it is going to get dramatically uglier before it gets better. Unless Mr. Kriozere wants yet another one of his developments mired in years of litigation (think 88 King St), the sales staff should negotiate reasonable closings with purchasers who are capable and willing.
Posted by: rgentry at October 29, 2008 3:33 PM
So rgenty, are you thinking of walking away?
Posted by: phatty at October 29, 2008 3:50 PM
Attn. Grr. Have you actually walked around/through either Infinity or ORH recently? Even with the construction that is happening on Infinity Tower II, the experience of walking around Infinity is much more pleasant than walking around ORH. Also, they're going to be done soon at the Infinity. So we won't be living with a big hole in the ground in our complex and wondering when/if our amenities will be delivered.
On another note, yes. I am completely aware of the fact that construction on various buildings will happen around us for a while. But it's a totally different experience to live next to a construction zone vs. to live in one.
So I guess that people who live in glass condos shouldn't throw rocks unless they have double-paned thick windows...
Posted by: Happy Infinity Resident at October 29, 2008 4:09 PM
Wow, finally a comment from someone who actually lives at the Infinity (Happy Infinity Resident) and not another speculative hater and they are attacked by someone (grr) who clearly only knows what he/she/it reads in the paper and on the blogs. The Infinity is far from a construction zone and the completion of Tower II is actually good timing with virtually no competition on the horizon (save 301 Mission)for the foreseeable future. As far as Transbay is concerned, no real impact in the short run, but another long-term benefit for the neighborhood that will increase property values. I'm an Infinity resident as well and can say for a fact that the current and anticipated construction at or near the Inifinity is of no consequence from a live-ability standpoint. And sales activity has been tremendously brisk in the past two weeks with potential buyers coming in and out of the building on a regular basis every weekend. All the flippers and haters probably probably live oustide of the City, know nothing first-hand of the neighborhood, or are jealous renters.
Posted by: JohnK at October 29, 2008 4:11 PM
So the 30% not closed, how many are actually still in contract or the 30% is available for sale? Any info?
If I was a resident of ORH, i'd want the Tower 2 built. I wouldn't care if it took 2 years to sell the tower, or if they developer decided to rent them out. Potential buyers and current owners who bought ORH was sold on the fact that the entire project was going to be completed. Imagine going to the preparty sales and seeing the model they have on display with only 1 tower and an empty lot next to it.
The way the first tower sits there alone will be a difficult sale for anyone who will consider buying. I hope they build tower2 sooner than later or never.
Posted by: j at October 29, 2008 4:19 PM
"And sales activity has been tremendously brisk in the past two weeks"
We heard that one a year ago... your post sounds way too chearleaderish for my tastes - and I smell something foul... I'm guessing when you say 'I'm an Infinity resident', you really mean 'I work in the Infinity sales office'....
Next time you post, come up with a better lie. Residents wouldn't notice an increase in potential buyers going in and out of the building... unless they spent their weekends hanging out in their hallways or the lobby. And I'd hope residents of luxury building spend their weekends doing more luxurious things.
uh... and 'no competition on the horizon'? Hell... Tower II is about to start competing with Tower I at this point. :)
But I will agree with you about the cleanliness of the site - I walk by it all the time and it doesn't feel like a construction zone. You guys have done a good job. Unfortunately, I'm not going to buy there based on that. Please tell your boss he needs to lower his prices. By a lot.
Posted by: smarty at October 29, 2008 4:27 PM
No, "smarty" -- not a sales office person, an actual resident. My facts are from actual observation and bumping into the sales people with their clients who are now constantly occupying the elevators on Sat/Sun. If I was connected, probably would have gotten a better deal. But I understand your perspective -- all the misinformed and the "haters" on this board make it hard to see the facts. If you don't believe me, just call the sales office and ask for John.
[Editor’s Note: And with that we’ll curse “tipster” for jinxing us with a reference to The Great One Rincon Hill/Infinity Smackdown. And if you’re looking for facts and comments from those who actually live in Infinity, we might suggest you start here: An A+ For Ingenuity (And Openness): Infinity Closings Update. And now back to One Rincon Hill...]
Posted by: JohnK at October 29, 2008 4:33 PM
Like many have said above, I think the real people that are suffering are the people who actually live at ORH and The Infinity. I have over a dozen friends, relitives, etc. that live at both and as many know I backed out of my contract at ORH.
They are suffering due to the economy and housing market just like everyone else. The construction zone is just a side effect of that. It sucks but it is a reality, and if I were living there I would not stand for it. I personally don't know why more people arn't making more of a fuss.
I don't think the Infinity had a choice whether they were going to build T2 or not since ground broke before T1 was even move in ready. ORH on the other hand totally finished T1 before they even thought about starting T2. May have been a smart idea in the long run, and also speaks about the "true" level of closed units they had... while we were all hearing 90% clearly they knew better! We all know things will be getting worse before they get better. The Infinity on the other hand may not be so lucky, and might be facing real issues with the whole T2 tower opening very soon.
What does suck, and this is the reason I personally backed out of my contract at ORH, is because I knew about 6 months before my close that T2 was looking doom and gloom everyday that passed by. I knew without T2 that:
A. Ammenities would be heavily effected.
B. HOA's could be raised significantly.
C. The sales staff and managment constantly pushing blame on something or someone else would't stop once I moved in.
Speaking of the sales office, like everyone has, when I would ask about T2 (almost weekly before my close) I would get anything from "We have already broke ground" to "The city still hasen't approved the final plans" to "Were not sure if construction is going to start this year (07) or next (08)" OBVIOUSLY neither.
It's all very sad, and I think there is a lot of passing the blame, but the reality is that we're a long way from seeing T2 being built at ORH if ever. My guess is even though its "on hold" and not "cancelled" I am sure the developer is hoping that in 3-5 years from now people's memories will "fade" and they'll forget all this has ever happen. Look at the experts interviewed in that CBS clip. They all say at "least 5 years" I think thats a realistic expectation for everyone.
Good luck everyone!
Posted by: Ryan at October 29, 2008 4:36 PM
"Aren't there strategies to keep the permits "alive""? Hold on, but the new thing in many planning departments is to have permits that have expirations dates. With so [few] buildings going up now, they need revenue and hope to get it by making you pay twice. I just had this happen on a delayed project in Newport Beach.
Posted by: anonarch at October 29, 2008 4:37 PM
So does anyone have a sense of current price levels at ORH and/or Infinity? We visited both sales offices roughly a year ago (before tower 1 was finished at either project).
At that time we were told that ORH 2/2 units were going for ~$900K. Meanwhile Infinity told us there were no 2/2s for under a million in tower 1, and that tower 2 would be even more expensive. Anyone know where the quotes are today?
I'm also curious about the status of Turnberry, which was supposed to go in across the street from Infinity. On hold as well?
Posted by: Dude at October 29, 2008 4:48 PM
Having you pay twice for the permits is just ludicrous. Do they have a good reason for doing this apart from the extra money?
Posted by: San FronziScheme at October 29, 2008 4:53 PM
By way of a plugged-in reader and One Rincon Hill resident, the developer's letter to all residents regarding the CBS report:
You may be aware that local CBS affiliate KPIX-TV, Channel 5 aired a segment last night about the current real estate market. While they contacted me with questions regarding One Rincon Hill, they not only misquoted me, but provided incorrect facts.
They referred to my having said that Tower 2 has been cancelled or on hold; however, that is inaccurate. Urban West Associates and our investors own the land for Tower 2 just as we do for Tower 1. We have the financing for the new tower, and our construction plans and contracts are in place. We have not cancelled our plans. Like others, our team is watching today’s challenging economy and as the first positive signs appear, we will re-commence construction.
As a result of the Channel 5 piece, other news outlets have also reported it is on hold. We are currently working to clarify this expansion of the error by contacting all news sources. We apologize for any misunderstanding this may have caused.
URBAN WEST ASSOCIATES
Posted by: SocketSite at October 29, 2008 4:56 PM
Regarding Turnberry, they just put out a statement yesterday stopping their new 34 story tower in Houston. I should have mentioned earlier regarding keeping permits active, some planning offices now only give you 1 or 2 years to complete the entire project OR pay for the COMPLETE fee AGAIN to continue the project. There were two reasons for this; to stop Mega Mansion projects that went on for years, and because the economy has slowed down many job sites due to a lack of funds.
Posted by: anonarch at October 29, 2008 5:01 PM
Our firm did an a study of economic growth of various regions back in 2004. At that time, the SF Bay Area and Manhattan (where I'm from) were both areas which show indication of overbuilding. We estimated the drop in housing price would be about 10%-15% in both area. Of course, we didn't expect this financial crisis. No doubt SF has overbuilt if you consider the job growth projects since 2004.
Posted by: retireBanker at October 29, 2008 5:10 PM
..so... they are holding off on building Tower 2, but it's not on-hold.
hmmm... they just admitted to performing the precise definition of the word 'on-hold', yet denied putting anything on-hold.
With this kind of thought process, I can see why so many residents are frustrated with ORH's management.
So what is their status now, if it's not on hold? How can we label it? Perhaps they are in a 'pre re-commencement' phase? Yes, that sounds nice. In no way does that imply a 'hold'. I totally want to go dump my life savings on a massively depreciating asset now!
It's sad that they feel their luxury residents are too stupid to see through the doublespeak in that letter.
Posted by: smarty at October 29, 2008 5:29 PM
I guess this confirms everyone is scratching their head right now at where this market is going and how long the slump will last. And nobody wants to make hasty decisions, both on the buyer side and on the developer side.
Posted by: San FronziScheme at October 29, 2008 5:44 PM
Dude, here is your answer to current pricing at Infinity. Just listed today by the developer.
Posted by: Irwin Fletcher at October 29, 2008 7:12 PM
PR spin from the developer...don't buy that crap.
Posted by: bernielomax at October 29, 2008 8:05 PM
Re unit 9E that is now listed just below $1m, that is not good, I looked at that unit almost two years ago and it was just over $1.1m.
Posted by: Tom at October 29, 2008 9:09 PM
What?! You mean no one wants to live in a glass box next to the freeway?
Posted by: jessep at October 29, 2008 9:30 PM
Wow, those guys are the masters of double speak!
"We are watching the market and will commence construction when it turns around, but the project is not on hold"? WTF? If they are as shifty at construction as they are at sales and marketing, good friggin luck with that project!
Next, they are going to hire the elderly grandmother of the developer and give her one of those patio trowels and have her start digging. When people ask if 2RH is on hold, the developer will say NO, my grandmother is working diligently on the project and therefore construction is continuing FULL SPEED AHEAD!
But can you imagine when the flippers get the right to start selling in a year, what the buyers are going to do? Balk at the fact that THEY will have to live next to a construction zone when construction starts.
What a disaster for the buyers. No wonder there is a lawsuit! Too bad most just closed. What a surprise that the developer is trying to backtrack, when not everyone has closed. I'm sure this isn't helping the last stragglers close any faster!
Posted by: tipster at October 29, 2008 10:08 PM
They're holding off on saying they're on hold?
Posted by: vox at October 29, 2008 10:16 PM
In Aug 06, 10F was $1.1M (over 1320 sq ft unit). 9E is a poor layout and smaller (1180), so it seems at least their *asking* prices haven't changed much from that point in time.
Posted by: TypeA at October 29, 2008 10:40 PM
What's with all this "lawsuit" nonsense? As anyone who's looked at the documents knows, there was never any promise that there would even be a second tower, let alone any dependence on it for maintenance, management, or amenities. I've pointed this out before on SS, but folks keep claiming that owners are outraged, and that "residents are frustrated with ORH's management." I know that these wild claims are fun, like the headlines in the New York Post. I just hope no one is taking them seriously, and I think they do a disservice to SS readers who actually want to understand the real estate situation in SF.
Posted by: SkyGuy at October 30, 2008 12:28 AM
Prevelant throughtout the buying process there are models of the 2nd tower and it's constantly mentioned including the amentities it would provide as well as its impact on overall market development. There will be a lawsuit if it's not built. I highly doubt in the last few months the sales office didn't know about the problems but they didn't disclose the problems to buyers. That's dishonest and that's a problem.
Oh and my prediction--it won't get built by the same builder. Someone else will come along in a few years and build what they want. The financing for real estate has PERMANENTLY changed and go-go builders are going bye bye. Something will get built there but ORH will have zero to do with it.
Posted by: cooper at October 30, 2008 6:48 AM
"Something will get built there but ORH will have zero to do with it."
Ha ha, maybe the city will buy the lot and use it to replace the homeless center.
The reality is that the building was constructed during a brief time when "profits didn't matter" whoops - I got that confused with the dot com fraud, I mean "location didn't matter", not that there is very much difference. That area wasn't desolate for no reason -- there was nothing there because of the location - way out and next to a freeway. The developer took advantage of the fact that A) it has an ocean view and B) buyers were momentarily insane, to put up a building practically in the middle of a freeway and convince people that it was a luxury building.
I don't think people are going to be fooled by a second tower. I think everyone knows it. And so no one is going to construct a second tower next to a freeway any more than someone is going to build an on line pet supplies company that has no chance of profitability. They were both done to take advantage of a momentary lapse in judgment.
Posted by: tipster at October 30, 2008 7:07 AM
"But can you imagine when the flippers get the right to start selling in a year, what the buyers are going to do?:
With only 70% of the units sold and closed, and all the cl ads to rent and sell, the "true" occupancy rate by owners who actually want to live there is probably around 30-40%.
They'll have to discount the remaining inventory a lot to get that perentage up, and flippers will throw in the towel and sell at a loss (or walk away) sooner or later.
30-40% declines in value over the next 2-3 years here are in the bag IMO.
Posted by: Eyesore at October 30, 2008 7:59 AM
It is a bit sad. The single ORH tower will now forever blight our skyline and be little more than an ugly paean to the silly era of free credit and mindless excess. I'm betting this will be ridiculed in guidebooks as SF's sore thumb, like Prague's Zizkov Tower (the "Prague Prick").
Posted by: Trip at October 30, 2008 8:01 AM
meh. everything distinctive is hated when it first goes up and then 20 years later it's an iconic landmark.
see transamerica pyramid and sutro tower
Posted by: diemos at October 30, 2008 8:13 AM
Agreed. Those who hold on have a lot to look forward to. In about 20 years or so, the original purchasers will be able to sell at the price they paid :)
Posted by: Eyesore at October 30, 2008 8:27 AM
I agree with diemos on this one.
I hated ORH when it was proposed. Now that it's built I'm fine with it, especially since it serves a purpose (more sorely needed housing). It's a little out of place but no biggie.
I doubt that it will ever be hated or that it will ever be iconic/loved. I think it will just be.
In Paris the Eiffel Tower was hated when constructed, now possibly the most recognized and one of the most celebrated structures on earth. Montparnasse tower was equally hated when it went up, but remained an eyesore and is considered blight by most of the French. I doubt that ORH will fit either of those two stereotypes.
first, because it's just not that distinctive. Second, because eventually it will be surrounded by other towers (10-30 years from now) which will lessen its impact. whereas Eiffel and Montparnasse are zoned in such a way as to have no visual competition.
Posted by: ex SF-er at October 30, 2008 9:58 AM
I agree with Tipster. I walked around the area a couple of days ago and the best way to describe the general feel of the hood is desolate due to the constant background traffic noise. The general configuration of the streets is not conducive to foot traffic. Unfortunately the Bay Bridge is going nowhere anytime soon. Additionally If you just look at the project without any emotion or vested interest its fairly clear (at least to me) that the location is just ridiculous. I'm with the doubters who think T2 will not be built for a very long time, if at all.
However if I was an owner at ORH I'd view this as a positive development overall. Issues like amenities, HOAs etc. can resolved. Use this as leverage with the developer. Perhaps you could request the first penthouse level gym in SF... It would also be great if the current proposed space for T2 could be turned (at least temporarily) into green space; although I'm sure there are hundreds of reasons why that’s not possible.
The big winners here are The Infinity...
Posted by: Willow at October 30, 2008 12:11 PM
I am sure the sales office knew exactly what has been going on at every point throughout this project. They surely did not have any responsibility to the buyers.
Their answers were always so polished and vague they always made me feel nervous.
I am not surprised that they possibly might be sued, not only for misleading people about tower two but especially the way they handled the inspections and closings of tower one.
Posted by: anonoman at October 30, 2008 2:50 PM
As a result of the Channel 5 piece, other news outlets have also reported it is on hold. We are currently working to clarify this expansion of the error by contacting all news sources. We apologize for any misunderstanding this may have caused.
URBAN WEST ASSOCIATES
Oh....I have been waiting for this day. Remember this is the guy who said...."I'm going to get really rich," said developer Michael Kriozere...to the SJ Business journel back in 2005.
I think I'll have a One Rincon.
Posted by: anonman at October 30, 2008 3:04 PM
"The big winners here are The Infinity..."
This comment is absolutely ridiculous! Right now....there are no winners!
If I were and Infinity owner, I would be terrified! Tower 1 has been 20% unsold for a year and Tower 2 will bring another 300 units on the market in early 2009. The Millenium and other unsold projects only add to the oversupply. This was the situation BEFORE the dramatic decline in the economy.
Prospects of any of these new residential developments with unsold inventory are grim. The adverse economic events of the past couple months will only exacerbate this sad situation. The tightening of credit markets and declines in personal investment portfolios will undoubtedly dramtically reduce the pool of potential buyers.
Posted by: itsknotme at October 31, 2008 9:32 AM
For the sake of the owners of Tower 1, I hope the developer is nice enough to at least landscape the empty lot and put some trees against the huge exposed wall. It would be a nice addition to the area.
Posted by: anon at October 31, 2008 3:44 PM
If I were and Infinity owner, I would be terrified!
Get a grip! Terrified? Why? If you bought to live there and don't need to sell, what difference does it make? There's a lot more to life than obsessing about whether your property has appreciated or not (though it may be hard to tell from reading SS).
Posted by: another-anon at October 31, 2008 4:37 PM
How about both ORH and Infinity lower prices to a max of 600 psf. Instead of whining about how bad the market is, adjust to it instead of having 20% of your units sit their unnoccupied for a year.
Posted by: Cooper at November 1, 2008 8:44 AM
"How about both ORH and Infinity lower prices to a max of 600 psf."
Exactly. So what's their strategy? Why would they not bring prices to what the market will bear?
Outside of the real SF, I am seeing more auctions and more developments going to rentals. Well, we have seen developments convert to rentals in SF too.
I think nothing is trading and the market for these places is frozen up. The market wants to see capitulation, stuff to hit rock bottom. It will have to end with auction. Or rentals.
Posted by: chuckie at November 1, 2008 11:56 AM
I used to be a hater. But today i went up to there, one of the upper floors. freaking amazing. You got to see it to believe it. Today was windy and cloudy too. Call me an idiot, but if i have the $ i will move there.
Posted by: et at November 2, 2008 12:03 AM
I went to the 60th floor penthouse open house on Thursday. I realize they're trying to sell the entire floor as it will open up some of the space - I found the rooms to be very small for someone spending that kind of money. The views are incredible, though.
Posted by: Fishchum at November 2, 2008 10:13 AM
If you want incredible views, check out the either of the two penthouses at 999 Green. Being on top of Russian Hill (a much higher hill than Rincon) and walking into a two story living room with glass walls close to 25 feet high you cannot but feel amazed. 1RH may have a taller height, but this floor plan is just more of the same, with ordinary room sizes, ceiling height, and amenities.
Why is it most of the new towers don't try to create more interesting penthouses such as were created over 50 years ago? Why not have fireplaces, 25 foot living room ceilings, skylights!, and huge balconies? One of my favorite books is "The Penthouses of Chicago", and I still wonder what happened to the imagination that builders and designers used to have when creating such sought after spaces back in the 20's through the 1940's?
Posted by: jeff2 at November 2, 2008 7:26 PM
I have a gorgeous 2br/2ba condo in Russian Hill and I am ready to trade up to a 3 or 4br place. I have zero interest in ORH or Infinity because I want to live in a *neighborhood* not a building. That's the reason why there's still demand in RH, Cole Valley, Noe Valley, while the glass towers downtown are "on hold" and raising commissions. BTW, i looked at 999 Green, and that building is so hideous, i puked up in my mouth a little.
Posted by: ready to buy at November 11, 2008 2:57 AM
ready to buy,
Nice one. The posters on here forget that there will always be folks with similar agendas in the marketplace.
For all the hand wringing and slowness going on, here and there each and every week sales are trickling through in most neighborhoods. Sales that are not far off previous years' heights, if at all. Wholescale price reductions or capitulation or whatever you want to call it cannot occur while that continues. Why? Because most homeowners often don't see their properties rationally or clearly. They think that because the perfect home a block away sold for big bucks, theirs should too. This is the market right now. Frustrating for both buyers and sellers.
That said, if you are indeed very active, these type of sellers will at least come to the table nowadays. They don't own the perfect house, but they might have something that with a bit of work could become very good. Are you that far along yet, where you are writing offers? I think a lot of us would like to hear what you're experiencing.
Posted by: fluj at November 11, 2008 8:43 AM
we would write an offer in a second for the right place.
we looked very closely at 1941 leavenworth, but the rooms were kinda small, and we didn't want a 2-unit.
we also liked the very beautifully redone 1240 Filbert, but it is way overpriced and the stairs would be difficult.
in the meanwhile, we watching what comes on the market, and waiting for the right place. in the meanwhile, we have a fantastic place, and enough room for a couple more years.
Posted by: ready to buy at November 11, 2008 11:59 AM