November 3, 2008
Some Scary Numbers Behind The Bankruptcy Of "La Casa Verde"
It was three months ago we noted a Notice of Default (NOD) had been filed for “La Casa Verde" (a.k.a. Sunset’s San Francisco Idea House). And now as a plugged-in tipster notes, the developer has declared bankruptcy. Let's focus on the property (not the personal).
A couple of things from the filing that stuck out: A claimed value of $1,400,000 for the duplex with secured claims of $3,070,880 (and unsecured of $353,970); a gross rent from the smaller unit of $3,000 per month (with operating expenses of $1,389); and an "electricity and heating fuel expense" of $1,200 per month.
UPDATE: And if a reader is correct, "The reason the power bills are so high is because she never paid the consultant their final payment to have all the green technology hooked up. The windmill is spinning away, making electricity that goes nowhere. The new owner will be able to hook up all the energy saving features that are filling up the utility room that are currently doing nothing."
∙ It's Not That Easy Being Green For “La Casa Verde” (3027-3029 25th) [SocketSite]
∙ Sunset’s 2007 San Francisco Idea House: 3027 25th Street [SocketSite]
∙ The SocketSite Scoop: Half Of The Sunset Idea House Hits The Market [SocketSite]
First Published: November 3, 2008 1:00 PM
Comments from "Plugged In" Readers
If I'm not mistaken, that rent is less than a 1% cap rate on the originally projected "value" (no reason to take on $3M of debt + sink whatever equity was in it unless you expected the units to sell for at least $2M apiece).
1%!! I guess that's why he's bankrupt. It's a wonderful system that flushes out fools like this developer and his lenders.
Posted by: Finance Guy at November 3, 2008 1:13 PM
What's so green about a place that has $1,200 a month in heating and electricity costs? It looks like it's not very energy efficient.
Posted by: Jack M at November 3, 2008 1:14 PM
how is cap rate calculated? what is a good bench mark number?
Posted by: upper at November 3, 2008 1:15 PM
Beautiful house, WRONG LOCATION. Police crime logs show that assaults, violent robberies, vehicle thefts, etc. within a 2 mile radius are soaring and continues unabated. I don't mind patronizing the restaurants in this area, but I would never live here.
Posted by: Daniel at November 3, 2008 1:17 PM
Isn't sustainable and green energy supposed to provide NATURAL (i. e. FREE) heating and air conditioning via the architectural elements? Solar energy and wind energy should support your lifestyle and your home should be taken off the grid completely if it were really a green miracle. I give them a B- for effort though.
Posted by: sf at November 3, 2008 1:18 PM
CAP = Net Operating Income/Price.
NOI= Income after expenses (taxes, insurance, vacancy factor, etc... not including loan payments)
Good Benchmark: 5%
Posted by: McBravio at November 3, 2008 1:47 PM
they tried to do too many things with this complex and spent way too much money in the process. the worst part is the fact that the power bill is over a thousand a month! I live in a good sized house with a large yard and my power bill never exceeds 400$ a month and I have single pane glass windows from the 50's.
What was the point of any of it with a power bill that it that high?
Posted by: sf_housedude at November 3, 2008 1:55 PM
5% and under is soooo last year. I think think 6.5% is the fashion forward choice for cap rates in 2009.
Posted by: Boo at November 3, 2008 2:25 PM
The reason the power bills are so high is because she never paid the consultant their final payment to have all the green technology hooked up. The windmill is spinning away, making electricity that goes nowhere. The new owner will be able to hook up all the energy saving features that are filling up the utility room that are currently doing nothing.
Posted by: foolsgold at November 3, 2008 2:31 PM
Innovation comes from trial and error and/or boom and bust. Some money gets burnt into the process but there's often something positive in return.
Think Broadband bubble, railroads, paved roads, auto manufacturing and so on...
Posted by: San FronziScheme at November 3, 2008 3:03 PM
The reason the power bills are so high is because this house consumes an extraordinary amount of power.
Looking at the PG&E rate tables, this house uses between 5-12 times the PG&E baseline rate. We're talking 115-130 kWh per day. That's like 50 100-watt light bulbs left on every hour every day.
It's only green if it produces what it consumes; if the wind/solar (once hooked up) only covers 50% of the consumption, this beast would still consume 2.5-6x more than baseline. Perhaps some reengineering on the consumption side would help out a bit.
Posted by: PostDoc at November 3, 2008 3:31 PM
Does this house have air conditioning? This doesn't really make sense if it does. Air conditioning and power savings don't mix well.
Posted by: San FronziScheme at November 3, 2008 3:39 PM
"The reason the power bills are so high is because she never paid the consultant their final payment to have all the green technology hooked up."
You *know* we're going to find out that the reason the electricity bills are so high is that the wind generator is actually just a motor that causes it to spin to make it *look* like a wind generator, when in fact there isn't enough wind in that area to generate anything, and the solar cells have lights inside to cause them to generate electricity because, most days, it's too cloudy there.
Posted by: tipster at November 3, 2008 3:54 PM
She was appointed by the mayor to his wind task force (which apparently meets in secret since there is nothing about it on sfgov). She has her own wind turbine business so I don't understand why she can't hook up the blasted thing herself. There are so many people who would like to "go green" but don't/can't because of the cost. I thought one of the points of this project was to show that it isn't so expensive. Do the money issues stem from the the green aspects or just poor money/project handling skills?
Posted by: Jane at November 3, 2008 3:59 PM
classic example of a project run amok!
Posted by: ANON at November 3, 2008 4:28 PM
Ok, I see what this CAP concept is about then: it basically says that one should not pay more than 20 yrs worth of rent.
A long time ago, I was reading somewhere that SF, historically, is at 26 yrs, and national average is 16 yrs. Now (back when I read it, probably 1 yr ago) that SF is at 30+, and national average is 25. With the downturn, i wonder that the new figures are now.
Thanks for providing the formulas.
Posted by: upper at November 3, 2008 5:10 PM
wouldn't they have had to hook up all the energy saving technology upon installation to test it and make sure it was operational? this is just not adding up...kinda like the power bill
Posted by: ANON at November 3, 2008 5:15 PM
Something smells fishy about that $1200/mo power bill. I find it hard to believe even if this house were built from plastered canvas as those old depression era migrant worker shacks were. Its really hard to use that much power even if you're livin large.
Maybe there are grow lights in the basement ? That would benefit the cap ratio :-)
Posted by: The Milkshake of Despair at November 3, 2008 6:19 PM
Daniel, that's the case almost everywhere in SF outside of the "burbs" i.e. sfh districts. Do a query on Pac Heights where I live, you would be surprised.
Posted by: jake at November 3, 2008 10:08 PM
"Maybe there are grow lights in the basement? That would benefit the cap ratio"
I nominate your as the quote of the week. Too funny. Bravo!
Posted by: asiagoSF at November 3, 2008 10:09 PM
that bldg is worth more than 1.4 mil. the main unit is pretty posh, and the 2nd unit, although an afterthought, still has some value that puts both at significantly over $1.4. trust me on this one.
but the > $3.4 apparently owned on it...ouch! yeah, talk about project out of control. funny, i was in israel last month and saw a nice little feature piece on cable tv over there about the house. it featured the glowing owner and her little daughter extolling the features of the home...back in the good old days, like 2006.
reality can be harsh: out of control show-offy project = no more case verde, no more meridian builders. dot com bust all over again.
Posted by: 44yo hipster at November 3, 2008 10:15 PM
Daniel: I'd say everywhere in the city within 2mi of a rising crime rate. Telegraph Hill and Sea Cliff might be the most isolated in radius terms (guessing).
Posted by: EH at November 3, 2008 10:26 PM
How big is the second unit?
Posted by: John at November 3, 2008 10:38 PM
From an insider, here's the deal with the electricity. She does NOT have final sign off on anything in that house including the eletrical since she ran out of money and couldn't pay anyone to finish the work. If you notice in the picture, the main conduit (look far right and up in the photo)is not hooked to the city system. The electricity she is using is coming from the neighbors house which she rented during the construction phase (and with whom she currently has an eviction case pending). She never hooked up temporary service with PGE since she lived next door and could run conduit from her rented apt. directly to her backyard.
Whomever purchases that house will have to complete all the work still open and receive final occupany clearing from the city...my guess, there is still about $50k worth of work that needs to be done.
Posted by: goodgod at November 4, 2008 1:56 AM
Real green design is about providing a comfortable and adequate living space while minimizing the use of resources.
This thing is just "green themed" conspicuous consumption. "Looky, looky, I got a windmill. See how green I am."
Posted by: diemos at November 4, 2008 3:49 AM
Green design is expensive. It adds anywhere from 5-15% on your building costs.
I was considering doing a development of prefab homes until I priced the units out and realized it would be cheaper to build stick homes on my own.
Posted by: anon at November 4, 2008 7:45 AM
Green design, when made a priority and incorporated early in design process, with input from contractors and all consultants, can be done for roughly the same as "non-green," depending how far you want to take it (0%-1% add for basic LEED Certified, even less for GreenPoint). Previous comments ("comfortable and adequate living space while minimizing the use of resources") are right on. The prefab example is not a good comp as it's an unconventional construction type. Good green is about keeping it simple. This project is clearly not that since it was always meant to be a demonstration project for Sunset.
Posted by: anong at November 4, 2008 10:36 AM
green house does not equate with greed house.
Posted by: 44yo hipster at November 4, 2008 10:22 PM
If this house is suppose to be "green" why would it rack up so much for electric and heating cost?
Posted by: Parka at November 5, 2008 4:29 PM
"Green design, when made a priority and incorporated early in design process, with input from contractors and all consultants, can be done for roughly the same as "non-green," depending how far you want to take it"
Hypothetical is nice, but name some examples of green homes or buildings in San Francisco that cost the developer/backer the same amount to build as a non green project. The GAP headquaters building, various residential projects in Noe that I have been a part of, the new Disney museum that is yet to be completed....
Posted by: Nicole at November 6, 2008 7:48 AM
Green insulation: 100% more
Green paint: 20% more
High Efficiency furnace system: 60% more
Just to name a few. It is more expensive.
Posted by: sparky-the-bear at November 6, 2008 8:16 AM
BTW, Newsom (and maybe with input from Ms. Wilson) passed new green building laws/rules in SF as of November 3.
Posted by: newsomcrazy at November 6, 2008 8:46 AM
Newsom's law was needed to complete the Eastern Neighborhood Moratorium.
Posted by: sparky-the-bear at November 6, 2008 9:21 AM