Lenders have taken back a newly constructed condo project in Mission Bay by a prominent local architect that has sat vacant since its completion, an apparent victim of sluggish city processes and San Francisco’s challenging real estate market.
Avid Bank has assumed control of the building at 603 Tennessee St. from developer Sol Properties, according to property records, which listed the amount of unpaid debt on the property at $15.4 million.
Arcon Construction Group, the building’s general contractor, had previously filed a lien on the property claiming around $1.07 million in unpaid construction fees.
The 24,000-square-foot property was designed by noted San Francisco architect Stanley Saitowitz and is located a block from the Chase Center. The individual condos were initially meant for sale to residents, but that strategy was abandoned to sell the property as a whole to a new investor.
Saitowitz and Sol Properties did not respond to requests for comment by publication time.
A website advertising the entire property for sale notes that the 24 residential units, which are split up between nine one-bedroom units, 14 two-bedroom units and one three-bedroom unit, “can be leased immediately or re-designate as condominiums.”
The entire property was put up for sale earlier this year at an initial listing price just shy of $19 million. Since then, the property has seen a series of price cuts, to $18 million, then $16.5 million, to its most recently listed price of $16.2 million.
Alexander Kolovyansky, a director at Vanguard Properties who worked as a listing agent for the property, said the project was subject to a number of different headwinds, including a delayed permitting process that left the property vulnerable to challenges in the condo market and rising interest rates.
One of the major challenges faced by the property, according to Kolovyansky, was receiving a certificate of final completion and occupancy, which was delayed by issues with PG&E and permitting from city departments.
Initially, the developers expected the final signoff for occupancy in 2021 but didn’t actually receive the certificate until 2023. By that time, Kolovyansky said, the condo market had shifted dramatically due to the pandemic, and they had run out of financing options from their lender.
According to data from real estate brokerage Compass, median condo prices in San Francisco peaked in 2021 and have fallen annually since then. Median prices have still not recovered to pre-pandemic levels. Additionally, federal interest rates have dramatically increased over the last year, making financing prohibitively expensive for many.
“It’s a very unfortunate state of affairs, and they’re far from the only developer that’s having problems due to San Francisco policies mixed with federal policies impacting the market,” Kolovyansky said.
Kolovyansky, who has worked on investment sales in San Francisco for more than a decade, said many of the largest apartment owners in the city have hit the pause on purchasing new properties.
“Now I’m working with the bank, and we’ll see what happens,” Kolovyansky said. “They’re asking themselves, 'How much of a loss are we willing to take on how much is owed on it?'”