December 19, 2008
And Now We Do, It Wasn’t (Have An Answer And Possible)
As we wrote 14 months ago:
What most people already know about Frank Norris Place (81 Frank Norris): it’s a new development of 32 one bedroom “luxury condos” on Polk; it’s been selling for about six months; and it was originally designated “City Living For City People 55 and Over” (i.e., at least one occupant per unit had to be 55+).
What plugged-in people know: it’s roughly 50% “sold”; prices have been reduced by as much as $50,000 (11%) since their initial “pre-release pricing”; the website is advertising 2 years of paid HOA dues (which range from $330 to $430 per month); and perhaps most interestingly, we’ve been told that the building’s CC&R’s are in the process of being amended to allow residents under 55 to occupy up to 20% of the development.
And while we don’t have an answer as to how that amendment was even possible (as far as we know the developer was able to double the density of the development based on the original age restrictions), we do know that it might make it worth taking another look if you liked the design, location, and pricing of the condos (but simply weren’t old enough to occupy at the time).
As the San Francisco Business Times writes today: “A developer in San Francisco is under fire from city officials for an unusual offense: selling condominiums to young people.”
The developer has filed for bankruptcy, the Planning Department has issued a notice of violation for not keeping the building 100% senior/handicap occupied, and at least one buyer has sued (both the developer and Vanguard).
∙ The SocketSite Scoop On Frank Norris Place (81 Frank Norris) [SocketSite]
∙ San Francisco condo developer built for old, sold to young [Business Times]
First Published: December 19, 2008 8:55 AM
Comments from "Plugged In" Readers
It's the over-55 buyers that should be suing, especially as they're now renting units to Academy of Art students! Of course, suing a bankrupt developer isn't going to get anyone very far...
Posted by: Amen Corner at December 19, 2008 9:09 AM
perfect - by the time i can afford to buy in sf, i'd be 55 already. only 20 more yrs to go...
Posted by: cw at December 19, 2008 9:15 AM
"In an interview, Vanguard Principal James Nunemacher said the disclosures on the property were based on the legal opinion of the developer’s attorney, Reuben & Junius LLP. He said Vanguard eventually walked away from Frank Norris Place “because they stopped paying the marketing bills.”"
Not because they were doing anything wrong but because they stopped paying their marketing bills. Nice. Shouldn't a SF brokergage know the local rules?
Posted by: toni at December 19, 2008 9:17 AM
Not doing anything wrong? Since when is stiffing a professional nothing wrong?
Posted by: Mystery Realtor at December 19, 2008 9:27 AM
MR, I think you misunderstood what toni is trying to get at. Vanguard should have walked away much sooner. In fact they should have declined to market this development to under 55 people based on the legal restriction. Instead they were willing to skirt that for a quick buck. I frankly agree with her. This is what I've come to expect to real estate agents/brokers. Do whatever for a quick buck. Ok I'm sure not all agents/brokers all like that, but I personally have yet to meet one with integrity. I have also personally met James Nunemacher and have worked with him in trying to buy a property. He is arrogant and ignorant at the same time. Would never work with him and would never trust him to meet the interest of whomever he is representing. He is just in it for himself. Of course all of this is just my opinion.
Posted by: Scott at December 19, 2008 9:41 AM
I checked the case filings. Quite a few lawsuits on this development! Looks like the developers stiffed a number of builders and professionals. The lawsuit against Vanguard claims breach of fiduciary duty because Vanguard sold the under-55 owners a unit they cannot legally live in while representing (allegedly falsely) that they could do so. Perhaps realtors' fiduciary duties extend beyond trying to get a buyer to pay the highest possible price?
Posted by: Trip at December 19, 2008 10:03 AM
Before calling someone ignorant and arrogant in a public forum I'd suggest in future you turn the tables hypothetically and question what potential impact it might have on you and your livelihood. James is an established, successful guy but if he were not you could be doing a lot of damage to someone who may not be able to 'afford' it; especially given the current crisis. Happy Holidays, schmuck.
Posted by: killbotkondo at December 19, 2008 10:08 AM
looks like the buyers of this place will suffer, then suffer some more.
-First they were sold a lie.
-Now that lie is collapsing
-now there are lawsuits galore, further weakening any consumer interest there might have been in this project, which will further depress their values.
James is an established, successful guy but if he were not you could be doing a lot of damage to someone who may not be able to 'afford' it; especially given the current crisis. Happy Holidays, schmuck.
if this story is true, perhaps his success is unwarranted?
what, exactly, was he doing marketing this to the under 55 set?
either he didn't understand RE (in which case he's bad at what he does) or he did understand and was trying to make a quick buck (which takes a hit to his reputation, no?)
that said, I couldn't read the whole article, and I'm sure there is more to this story than meets the eye.
But it doesn't look good, that is for sure.
Posted by: ex SF-er at December 19, 2008 10:18 AM
I don't know what the actual restriction says, but you could market to people younger than 55, saying that they would not be able to occupy it until they are 55. They could rent it out until then (to someone over 55) and have a place for when they are older.
There is a condo in cow hollow that has an age restriction and per the listing that is an option - whether or not that's the case, I have no idea.
If they were telling people this with a wink to get them to buy, then there may be some serious issues.
Posted by: n at December 19, 2008 10:31 AM
killbot, I just expressed an opinion in a forum. What he did was far far worse. He sold a lie and the negative impact he has had on people is much greater than what little impact I might have had on him in this little forum. The fact is the damage he will do to himself will be much more than I can do. But killbot, instead of telling me to "turn the tables hypothetically", maybe you should have told him to turn the tables on himself hypothetically before he screwed these people. I'm sure they are not able to "afford" all the potential grief, aggravation and loss he got them into.
Posted by: Scott at December 19, 2008 10:35 AM
I think that if Scott has personally met and worked with James Nunemacher, and has been unhappy with the results, he has every right to describe the realtor in question "ignorant and arrogant".
many of us here believe as Scott does, that some realtor/brokers will, in fact do anything for a quick buck.
maybe 2009 will bring a new set of ethics and accountability to the real estate industry.
Posted by: noearch at December 19, 2008 10:38 AM
Just the facts, ma'am, and it is very simple:
Every time a Vanguard agent sat down and wrote a contact to sell an age-restricted property to an unqualifed buyer, they broke the law. Knowingly.
That they thought they could get away with it is what is shocking, and just plain stupid.
Shame on the buyers for not doing their due diligence, but shameful are the Vanguard agents, and their broker (JN) for engaging in deceptive practice.
We are all losers in this.
Posted by: MBPioneer at December 19, 2008 10:54 AM
He is arrogant and ignorant at the same time.
if this story is true, perhaps his success is unwarranted?
- ex SF-er
With ignorance and arrogance, sucess is assured.
- Mark Twain
Posted by: LMRiM at December 19, 2008 11:00 AM
For some reason I saw this coming...
Posted by: Ryan at December 19, 2008 11:27 AM
This is yet more proof (how much more do we need) that the entire brokerage and realtor industry is moldy to the core and offers little of value (certainly not trustworthy information). Don't ever believe what a realtor tells you: "Sure, you can easily merge those units." "Sure, you can legalize that un-permitted deck." "Unwarranted, that doesn't mean illegal, it just means, um, unwarranted." "Sure, you can buy this subsidized senior housing and flip it to your friend's mother's barber's son." "Don't worry, nothing will ever block your view." Blah, blah, blah. About the only thing I would trust a realtor to tell me accurately are the address of the property and the time of the open house. Everything else -- research yourself.
Posted by: intheknow at December 19, 2008 12:37 PM
C'mon, you guys, only one "occupant" needs to be over 55. This is about as difficult to circumvent as the live/work "restrictions".
Just adopt an 8 year old dog, and Viola!
Posted by: tipster at December 19, 2008 12:45 PM
Here is more of the BT article. Great Mark Twain quote, LMRiM.
San Francisco condo developer built for old, sold to young
A developer in San Francisco is under fire from city officials for an unusual offense: selling condominiums to young people.
Opened 18 months ago, Frank Norris Place on Lower Nob Hill was hailed as a model of innovative urban planning: a market-rate senior condo complex that took advantage of an obscure planning code allowing developers to double densities for projects restricted to residents 55 years or older.
Now the developer, 1314 Polk St. Associates LLC, has filed for Chapter 7 bankruptcy protection, and the city Planning Department says the developer violated planning codes by marketing, selling and leasing condos to people who do not meet the age restrictions.
Specifically, the city says the developer sold six units to people under 55, according to a notice of violation. Other unsold units have been rented out to students from the Academy of Art University, among others. People under 55 live in at least 13 of the units, more than half of the occupied units, according to homeowners association board members.
The case has sown confusion and anger throughout the building. Some older residents are upset because they thought they were buying into a quiet retirement complex, only to find boisterous college students cranking dance music on weekend nights. Younger buyers, on the other hand, pumped their life savings into a condo and then learned the city says they are violating planning codes simply by living there.
San Francisco Planning Administrator Larry Badiner said the building was approved as a 100 percent senior housing development and must become one.
“Look, we are willing to work with people. We are not going to go down there with a sheriff and grab youthful owners who bought them improperly and say ‘you need to vacate,’” said Badiner. “We want to find a way we can transition (the units) to senior housing.”
The decision to make Frank Norris Place a senior project grew out of simple economics. When Parker Sorg, the original property owner, bought the site in 1999, it was zoned for a maximum of 16 units.
Sorg, who has not been involved with the development for some time and could not be located, decided the modern glassy structure would not pencil without more units, according to an article about the project published in April 29, 2007, in the San Francisco Chronicle. Sorg discovered that under 207.4(b) of the city Planning Code, known as the density bonus, he could build 32 one-bedroom condos, if he agreed to sell them to buyers over 55.
At first, the advertisements for the project all stated that the “homes are designated for occupancy by at least one person over 55,” according to the Planning Department’s complaint. But by fall of 2007, as San Francisco’s condo market started to cool off, the city says the developer had stopped emphasizing the senior restriction of the development and was selling to a broader audience. The Frank Norris web site “clearly fails to mention that the dwelling units are to be occupied by senior or handicapped persons,” stated the complaint.
On Feb 27, 2008, the Planning Department served 1314 Polk St. Associates with a notice of violation and required that the developer provide proof that all 32 units would be occupied by seniors or handicapped persons. The Board of Appeals upheld that decision on a 3-1 vote. The case has been referred to City Attorney Dennis Herrera.
In its appeal, the developer argued that state and federal laws only require 80 percent of senior housing to be occupied by persons 55 or older. The developer said the state Department of Real Estate approved a project CCR — a declaration of covenants, conditions and restrictions — that spells out that 20 percent of the units could be occupied by non-seniors. One of the principals of 1314 Polk St. Associates, Stokes Fennimore Burtis, told the Business Times that “everything was fully disclosed to buyers in the CCR.”
He declined further comment. “We are involved in talks with the city — that is about all I have to say,” Burtis said.
Badiner said it’s irrelevant that federal and state definitions of senior housing requires just 80 percent to be over 55.
“That is not what our planning code says,” said Badiner. “If you want double density, you have to comply with our planning codes.”
In a March 18, 2008 letter, Department of Real Estate Assistant Commissioner Chris Neri stated his agency was never informed that Frank Norris was approved under San Francisco’s density bonus code. “No evidence was found to indicate that this agency was informed that the project was subject to 100 percent senior occupancy requirement as opposed to the 80 percent the state requires,” stated Neri.
Just 25 years old, Paul Ratner, a sales manager for the Golden State Warriors, and his wife, Jessica Nosanchuk, a producer with KGO-7, scrounged together an $80,000 down payment to buy a condo and a parking spot in the building, a $559,000 investment. They liked the open layout, the fact that there was a spacious outdoor patio for their dog. They thought the Polk Village neighborhood, still gritty and troubled by prostitution, was on the upswing with new bistros and boutiques. Ratner says he was clearly told that 20 percent of the units were for non-seniors and that he would be able to sell the unit to anyone he wanted.
Ratner has filed a lawsuit in San Francisco Superior court against 1314 Polk St. Associates, as well as against Vanguard Properties, which was the exclusive listing agent. In the lawsuit the couple asks the developer to rescind the sale and refund their money, in addition to damages, according to their attorney, Paul Windust of Berding and Weil.
“It is our position that the contract is illegal because it violates the conditions under which the project was approved,” said Windust.
Ratner said he and his wife are “pretty distraught.”
“We have worked really hard to be able to buy a home at 25 years old. We felt like we were making a good decision to buy, but we got hosed basically by greed,” he said. “I want them to own up to it and do the right thing.”
Neither 1314 Polk St. Associates nor Vanguard have filed a response to the lawsuit. In an interview, Vanguard Principal James Nunemacher said the disclosures on the property were based on the legal opinion of the developer’s attorney, Reuben & Junius LLP. He said Vanguard eventually walked away from Frank Norris Place “because they stopped paying the marketing bills.” Several phone calls to Reuben & Junius were not returned.
Some seniors who bought into the idea of an over-55 condo development in the middle of the city are similarly upset. A. Moy, a 59-year-old retired law enforcement investigator, said she was drawn to the building’s modern design and location near no fewer than 10 bus lines, as well as the movie theaters, opera and symphony.
Moy bought the most expensive unit in the building for $629,000 and thought of it as a “place I could live out the rest of my life.” Now she is not so sure. Moy said some of the young renters have held loud parties and left heaps of booze bottles outside their unit — exactly the sort of thing she was trying to avoid by buying in a senior building.
“I’m stuck now. I’m retired. I live on a fixed income,” she said.
Another senior buyer, 66-year-old retired Chico State art history professor Manual Lucero, said he thought it would be advantageous to buy in a development “where everybody is in the same boat.”
“I know they say ‘buyer beware’ and all that,” he said. “We live with the consequences of greed every day and we’re going to be living with it for the next few years.”
Filing Chapter 7
Meanwhile, 1314 Polk St. Associates LLP filed for Chapter 7 bankruptcy on Dec. 1, claiming $8.5 million of debt and assets of $5,249. Ian Birchall, an architect and an investor in 1314 Polk St. Associates, is listed in the filing as having responsibilities for duties and obligations of the debtor. He declined to comment. Another development partner in 1314 Polk St. Associates, Dean Littlewood, did not return multiple phone calls.
The two largest creditors listed in the filing are Bella Vista Capital, which is owed just under $5.2 million, and East West Bank, which is owed $2.5 million. Bella Vista’s assets are managed by Cupertino Capital, according to Doug Shaw of Union Pacific, who has been hired to market and sell the remaining units. Cupertino now controls the project’s remaining 14 unsold units. Shaw said he recently started marketing the project — but only to buyers over 55.
“It’s pretty clear you have to be 55 years or older,” said Shaw. “From my perspective it’s a good niche and my attitude is let’s work with it. Let’s embrace it. So far, it seems to be fine.”
Badiner said the City Attorney’s office is investigating the case. Possible options include forcing the developer to pay a fee to create senior housing elsewhere — not likely given the bankruptcy filing — or combining units to reduce the total to 16.
“There are some innocent parties here and definitely some not-so-innocent parties,” said Badiner. “The reality is there is not an easy way to make this non-senior housing. They are stuck with senior housing.”
Posted by: FSBO at December 19, 2008 1:07 PM
I have some experience with Vanguard and I won't deal with them at all. Part of the problem is that Sf buyers can get to see some of these agents as celebrities. I was at an open house once that James was holding and several potential buyers were all over him as if he was some real estate GOD while he sat there eating it up. I almost gagged. He could have sold them anything.
Posted by: viewlover at December 19, 2008 1:18 PM
it's pretty easy to slide down the slipper slope and tar the whole company because of actions (or inactions) taken by a few of its realtors. to be fair, i know this kind of b-s goes in the real estate industry but i can say for certain that the vanguard agent who represented me in my deal this past year was incredibly ethical. perhaps her abilities and service were the aberration in the context of vanguard but i'm inclined to think the frank norris place agent behavior is the aberration--maybe i'd make sure to avoid them in the future but i can say with certainty i'll gladly work with my agent again.
Posted by: mk at December 19, 2008 1:19 PM
A bunch of my neighbors sued Nuenamacher and Vanguard for breach of duties at another property and Vanguard was forced to settle and pay them off. These guys are crooks who will say anything to sell a property. Interestingly, Rueben & Junius drafted the CC&Rs in that case too.
Posted by: anonno at December 19, 2008 2:07 PM
"and at least one buyer has sued (both the developer and Vanguard)."
That buyer better be over 55. Then again, why would any resident sue anyone ? Very foolish, since, like someone else has suggested, pending lawsuits only serve to decrease ppty values even more.
God Bless our Country and Residents, for being so overzealously "Law Suit"ty
Posted by: Chad at December 19, 2008 3:38 PM
"C'mon, you guys, only one "occupant" needs to be over 55. This is about as difficult to circumvent as the live/work "restrictions"."
This is very different. This is a model followed throughout the country to provide housing for hundreds of thousands of lower-fixed-income seniors (ever hear of Leisure Village?). This isn't some wacko L/W "only in San Francisco" sort of deal. Although there will always be abuses, this sounds particularly aggregious in that they not only broke the law, they got upzoned and other planning goodies because of it. Cases like these do nothing but give the NIMBY's ammunition at the next Planning Commission hearing and expands their numbers as area residents (rightfully) question whether new development A, B, or C will really deliver the goods promised by the developer.
Posted by: Jake at December 19, 2008 3:46 PM
Agree with Scott on JN from Vanguard. My (albeit limited) experience with him has been very much the same...Big thumbs down!
Posted by: Willow at December 19, 2008 4:07 PM
Chad, that is exactly the problem. I wanted to sue but was advised against doing it because of the impact on property values. Developers and VANGAURD count on residents not taking legal action to get away with the crap that they get away with. They lie with no problem whatesoever and you better record any conversation you have with them because they will deny things that were clearly stated to make a sale. And don't give me the crap about get it in writing, it does not work that way. You ask a question, you expect an honest answer. Good luck getting it from VG.
I eventually moved away from the property in question but the problems still exist today.
I hope VG gets their licensed revoked.
Posted by: viewlover at December 19, 2008 4:28 PM
"They lie with no problem whatesoever and you better record any conversation you have with them because they will deny things that were clearly stated to make a sale."
I learnt long ago to make sure that everything significant about buying and selling property, be it involving realtors, mortgage brokers, or anyone else with a vested interest, is put down in writing. And if someone declines to do so, that's a big red flag to me.
Posted by: Amen Corner at December 19, 2008 4:55 PM
I saw a listing on Craig's List a month or so back for rental units at this place. They didn't call it Frank Norris, but I knew from the pics that it was as I had looked at these units a year or so ago. I am over 55 so would be legal. The rental ad also said it was for 55+. Although probably not interested in buying a unit, I would like to rent one.
Posted by: dkzody at December 19, 2008 5:44 PM
Is it possible to get financing on this building with everything that is swirling around?
Posted by: Paul Hwang at December 19, 2008 9:14 PM
I wish all you folks who don't think there are any ethical Realtors would keep interviewing/meeting ones until you found one. As an agent I'm surprised myself at who buyers and sellers seem to trust.
As for Vanguard and this building... a buyer of mine and I were sufficiently confused by their explanation that we moved on. Now reading the article it all makes sense... the developer got an attorney to say they were only truly beholden to the State law that said 80% senior occupied was sufficient, but the City planners gave higher density approval only if it was 100% seniors. We were definitely not given that full story.
In addition, every time I was there it was either a licensed assistant and/or a mortgage broker who were doing the showings and answering questions. Nothing about the experience felt good, and what I thought was a value when I showed up disappeared when we were informed you had to pay extra for parking, and we found the floor plans pretty lame.
This one was always a disaster in the making.
Finally - I hate law suits, but I commend the 25 year old for suing giving their predicament.
Posted by: sfrob at December 20, 2008 1:09 AM
I do not know the facts of this case I have not read the approvals. Here is what I do know. The double density is not a bonus it is a matter of right no cu is required. If you do Senior housing it is important that you include the language senior housing as defined in California civil code 53.1 in your approval motion.
This legislation was adopted because age restrictions were found unconstitutional under the fair housing act. the legislature amended the act to allow "senior housing"
The city has no uniform definition.The city is all over the map in terms of its definition and each approval is different depending on your approval language. They have put restrictions as high as 62 and as low as 55.
The state legislation ranges from very restrictive to less restrictive the minimum standard contemplates that not all units will be occupied by a seniors and reads as follows.
That limitation may be less
exclusive, but shall at least require that the persons commencing any
occupancy of a dwelling unit include a senior citizen who intends to
reside in the unit as his or her primary residence on a permanent
basis. The application of the rules set forth in this subdivision
regarding limitations on occupancy may result in less than all of the
dwellings being actually occupied by a senior citizen.
Posted by: jimmythekid at December 20, 2008 2:22 PM
I visited the property when they first sold and there was both a mortgage person and the listing agent on site. I could have heard things wrong, but I believe that same listing agent was also one of the developers? And I believe the agent still works for Vanguard? So kind of interesting reading all of this especially about the part about Vanguard walking away.
Posted by: doubledog at December 21, 2008 3:15 PM
ian birchall and parker sorg are listed as the manager's of the LLC...
Posted by: adam at December 22, 2008 12:26 PM