Plans to develop 36 townhomes and 18 duplexes upon the 2-acre Portola District parcel at 495 Cambridge Street having been approved by the City. And the permit to start demolishing the four former Fellowship Academy Day Care buildings on the site has been requested.

But rather than preparing to break ground for the 54-unit project (of which 7 units are to be offered at below market rates and for which 66 parking spaces, including 12 for “visitors” have been approved), the entitling team has just put the 495 Cambridge Street parcel and plans on the market with a $10.75 million price tag.

The approved units, the majority of which are three-bedrooms, average around 1,780 square feet apiece.

And as touted in the marketing materials, there is “No Union Hiring Requirement” for the development as approved.

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Comments from “Plugged-In” Readers

  1. Posted by Dave

    This brings the total number of entitled units not going forward and being built to around 865 per my estimate. Of note here is that these are mostly townhomes (akin to SFRs) and not condos – indicating a possible broadening of the weakness in the SF project pipeline to include “single family” units. The no union hiring requirement is interesting as presumably these units would cost less to build than normally would be the case and, as such, be more profitable to the builder.

  2. Posted by aerel

    It’s ridiculous that so many developers are putting entitled projects back on the market. The entitlement should be automatically voided when they do this. The time and resources of the city’s planning department, paid for by our taxes, are there so developers can build things. They’re not meant to serve as an investment instrument for someone looking to make a quick buck.

    • Posted by You sure about that?

      Not sure about this but when a developer pays planning the “plan check” fee, does it not pay for their time and resources?

    • Posted by around1905

      The fees for these permits are a profit center for the city. In fact it is the transferability of the permits that encourages builders to pay the high fees, since they directly add to the capital value of the property, and then some.

      Planning is actually understaffed. If you want to find waste look to other parts of the city’s payroll….

    • Posted by Anon123

      Some people specialize in finding a piece of underutilized land and repurpose it with all the time and red tape involved in that process – others are geared towards taking on a project that is ready to break ground… not necessary to master both processes.

    • Posted by Dave

      The entitlement is transferable on sale. The new purchaser has to start construction within the original, usually, 3 year window. Entitlements can be lucrative. I’ve been involved in several in the Bay Area. In a flat RE market such as SF seems to be entering, entitlements sought over the past few years where the developer may have paid too much for the land (the Tenderloin entitlements recently put up for sale) may now not be viable. In the case of the Tenderloin projects it’s a good bet the developer will have to lower the price to sell the entitlement. Not that the developer will lose money, but they may have to settle for less and eat some or most of the entitlement costs

  3. Posted by Pero

    Before everyone comes with the story that the developer is bailing because of the turning real estate cycle, let’s look into the pricing of this lot for a second:

    1) $10.75M divided by 54 houses boils down to $200k per building. Given that SFH empty lots in the 94134 postal code have been selling for $200k-$300k.

    2) SFHs in Portola have been selling for a median price of $950k for the first 6months of 2017. Assuming the $200k land cost per building, this should leave $750k per building for construction and developer profits.

    Conclusion: The pricing for this parcel sounds quite low, especially when accounting for the fact that permits have already been assured and no union labor is required. It looks to me like the project has been priced to sell. The developer might be forced to sell for whatever reason, rather than trying to sell at the top of a hot market.

    PS. I would love to hear more from someone knowing the motivation of the seller.

    • Posted by Dave

      Good information to have. As I noted putting up SFH entitlements is rare in SF. The only other I can think of is the Mt. Sutro “luxury” townhome entitlement put on the market several years ago.

      • Posted by Pero

        This does not appear to be a difficult site, such as Mt Sutro. Even if the market falls by 10-15% over the construction period, the developer of this project should be able to pencil out.

        • Posted by Dave

          True. While many of the condo entitlements being put on the market look very risky now, this case is different. Based on your numbers. To whit – there are developers who choose to strictly entitle rather than build. Especially in California because of the tax situation and the way unsold homes are treated as inventory and taxed. The developer I’ve been involved with built many a project in NorCal in the past decades but a number of years ago switched strictly to residential entitlements in NorCal. This Portal District developer could be in the same category.

      • Posted by Es Beacy

        Just the other day the same entitlement strategy for the property on Market St. off Church St was put into play in almost the exact same way as this one.

  4. Posted by Jim

    What rule is there that says the person who entitles the project has to be the person who builds the project? None, nor should there be. They are different businesses. Some firms are in both businesses; some do just one of the two. Sometimes their business model varies depending on what else they have on their plate or a million other reasons. Would you require the farmer who grows the vegetable to sell it to you? Of course not.

  5. Posted by Mutal Kudi

    I hope this gets built. The city could use more townhomes and larger units, keeping families in the city. Portola is an underappreciated area of the city.

  6. Posted by Laura

    Most residents in Portola are opposed to the size of this proposed development.

    The amount of parking proposed for the project is lacking and will put a definite strain on the already limited street parking for the area. The proposed project has one entrance/exit from a small dead end street that funnels out onto a busy main street with a bus route. All that additional traffic will be a definite problem for that section of the Portola.

    While the additional housing generated may be helpful to a limited few with the means, most families will still be priced out of this development as housing in this neighborhood is easily going for $1 million +.

    This project has been around for more than 10 years with no results as of yet.

    • Posted by PRE

      So it’s too big of a project AND too small of one at the same time? Oh, and parking! Got it.

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