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Politics & Policy

San Francisco mystery property: How a $13.5 million dirt lot explains the city’s housing crisis

A $13.5 million plot of land in Nob Hill is seen from the street on Sunday. | Source: Justin Katigbak/The Standard

San Francisco’s most expensive mound of dirt has been sitting on the market for more than 500 days, but an argument could be made that the mysterious property near the heart of Nob Hill has been left to languish for more than a century.

The lot at 941 Powell St.—a fenced-off plot of weeds currently priced at $13.5 million—sits just around the corner from the iconic Fairmont Hotel, Huntington Park and Grace Cathedral. Walk a few steps in the other direction, and Chinatown’s bustling markets, salons and restaurants come into view.

But here, between these two very different worlds, is a small cottage and 9,500 square feet of nothing.

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How could such a well-situated property in one of the most densely populated cities in the country remain untouched for decades? The answer is as tortured and full of promise as San Francisco itself.

The story of 941 Powell is about a man achieving the American dream and his son inheriting a nightmare. It’s a tale of risk and opportunity, and a stark reminder that San Francisco’s current housing crisis, in many ways, is a monster of its own making.

George Mardikian, center, poses for a photo with former U.S. presidents Richard Nixon and Herbert Hoover. Shortly after World War II, Mardikian purchased 941 Powell St. in San Francisco. | Source: Courtesy Haig Mardikian

From Tragedy to Triumph

George Mardikian was a household name in San Francisco by the time he purchased his first plot of land on Powell Street in 1947.

His restaurant, Omar Khayyam’s, located just down the street on the corner of Powell and O’Farrell, had been profiled by the legendary San Francisco Chronicle columnist Herb Caen, and recipes for some of Mardikian’s dishes, such as chicken tchakhokbelli, had been published in Sunset Magazine. He went on to host a radio show and write two books.

The adulation for the Armenian immigrant’s cuisine, his charming smile and an omnipresent white chef’s hat made Mardikian the kind of cooking celebrity we might now associate with Guy Fieri, a frosted-tip mensch and the undisputed king of Flavortown.

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In 1945, Mardikian took on the monumental task of catering tens of thousands of meals for the United Nations meetings in San Francisco. The event remains the largest international gathering of world leaders in the city’s history ahead of this month’s Asia-Pacific Economic Cooperation summit.

In 1951, President Harry Truman awarded Mardikian the Medal of Freedom for his work as a consultant to the U.S. Army’s quartermaster general, who oversaw all supplies for the military branch, including chow.

Over the course of four decades, famous guests flocked to Omar Khayyam’s, including First Lady Eleanor Roosevelt and former President Herbert Hoover, the latter of whom became a close personal friend of Mardikian’s. The restaurateur’s son, Haig, recalled them once coming back from a trip to the exclusive Bohemian Grove men’s retreat in the 1950s, and Hoover realized he’d never signed the chef’s guest book. The former president asked for permission to leave an entry.

“Whenever I lose faith in America,” Hoover wrote, “I just remember it made you.”

Mardikian’s path to success was far from certain.

Born in 1903, he was raised in what is now Istanbul. In 1915, his father was arrested in what would later be known as Red Sunday, and Mardikian would see other loved ones beaten and killed in the Armenian genocide, which claimed the lives of 1.5 million people.

Mardikian twice went to war as a teenager—first joining his uncle’s volunteer regiment in World War I, and then again in a war among Armenia, Turkey and Russia. He was quickly captured in the second conflict and was forced into hard labor by Turkish guards, spending his days chopping ice. Of all things, Mardikian’s ties to the Boy Scouts of America would be his saving grace. 

In the summer of 1920, before leaving home to go to war a second time, Mardikian helped form the Armenian Boy Scouts under the direction of two Americans. By chance, a man in charge of the Near East Relief organization, an American outreach effort to help Middle East refugees, saw Mardikian while he was a prisoner and convinced a Turkish soldier that Mardikian was an American. 

The lie worked, and Mardikian was granted release. He would soon be placed on a boat set for Ellis Island and arrived on July 24, 1922—a date he would designate as his new birthday.

“As I dried myself with the thick, heavy towel, and saw my clean skin and felt my blood tingle, it was as though I had been reborn,” Mardikian wrote after washing himself after the long voyage, “as though I were a completely new human being, a taller, a stronger, prouder man—an American.”

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He came to San Francisco and got a job as a dishwasher, attending vaudeville shows to improve his English. He would later travel the world, working as a cook on a cruise ship, before coming back to California and settling in Fresno, where he met his wife, Naz. The two opened a lunch counter called Omar Khayyam’s and brought the concept to San Francisco.

Mardikian first purchased land on Powell Street in 1947. The property was undeveloped, but it was a desirable location with the cable car running right in front. In the years to come, Mardikian would scoop up adjoining properties, adding two lots in 1959 and four more in 1961, according to records with the city’s Assessor-Recorder’s Office.

An empty lot at 941 Powell St. has been on the market for more than 500 days. | Source: Justin Katigbak/The Standard

“I’m going to guess he thought maybe there was an opportunity to build something there with a restaurant and an avenue location for his restaurant,” Haig Mardikian said.

Whatever plans the elder Mardikian might have had for the property never came to pass. In 1977, he died of a heart attack at the age of 73. The property went to his wife, who died a few months later, before being passed down to their two children. The brother and sister split up the assets, and Haig Mardikian inherited 941 Powell.

“I figured, 'OK, we can build something here,'” he said.

A City Where Housing Goes To Die

Real estate records in San Francisco are well documented, going back more than 100 years, but there is little record of anyone living at 941 Powell for much of the 20th century.

Jay Costello, a Compass real estate broker who is selling the property, told The Standard that there had once been structures on the land, but they burned down as a result of the 1906 earthquake.

Temporary housing appears to have been constructed, as there are concrete foundations for up to three homes, said Haig Mardikian. All that remains today is a simple cottage in the rear of the property, backing up to Wetmore Street.

In 1987, Haig Mardikian submitted a proposal to develop the land. He hoped to erect a 14-story apartment building on Powell Street and a five-story building along the alleyway of Wetmore Street. In total, the project would include 93 units, some of which would have an excellent view of the Transamerica Pyramid.

San Francisco skyscrapers.
An aerial photo shows the view from above the empty lot at 941 Powell St. | Source: Justin Katigbak/The Standard

Late in the evening of Dec. 3, 1987, the Planning Commission signed off on the project’s negative declaration—basically, a less formal version of an environmental impact report—as well as a conditional-use permit. Just hours earlier, the Fairmont Hotel had withdrawn its appeal of the environmental report, and it seemed everything was set.

As is the case with all things housing in San Francisco, opposition was coming.

Complaints were quickly lodged that the Planning Commission voted too late in the evening and concerned residents had gone home expecting the vote to be postponed. Mistakes were also identified. Residents of two properties on Miller Place—an alley a block and a half away from the proposed project—were not properly alerted before the commission’s vote.

Regardless, a request for a rehearing by the Planning Commission was denied, and it seemed the project would move forward. But almost a year passed until Mardikian picked up the project’s building permits. By that time, the opposition was ready. 

A coalition of Chinatown tenants groups and a powerful contingent of attorneys that would include Sue Hestor and Ed Lee—the latter of whom would go on to become mayor of San Francisco—took up the fight. The biggest concern from these “slow-growth” advocates, who would be labeled NIMBYs today, was the fate of 12 tenants of a three-story, low-income apartment at 959 Powell that was also owned by Mardikian and would be demolished as part of the redevelopment.

Ed Lee, who opposed the 941 Powell St. project in the 1980s on behalf of tenants of a neighboring apartment building, went on to become San Francisco's mayor. | Source: Michael Macor/San Francisco Chronicle/Getty Images

“Ed was representing the tenants who were going to be displaced,” said Gen Fujioka, a former attorney for the Asian Law Caucus who inherited the case from Lee. 

No major concerns were raised about the project in the negative declaration report by the city, but the inspector noted that the 12 tenants of 959 Powell would need to be offered first right of refusal on replacement units after construction was completed. Mardikian agreed with those demands, but there was uncertainty about what would happen in the interim to the tenants, some of whom were paying as little as $318 a month in rent.

“It is anticipated that during construction these tenants would be unable to find interim housing in the rental range they are currently paying,” a city report said.

In 1989, the Board of Permit Appeals invalidated the site permits and ordered a new environmental review that would document shadow, wind and noise impacts, among other concerns. Mardikian’s attorneys claimed the city was violating its own procedures in overturning the original decision, and a duplicative environmental report would cost the developer at least $87,000 and delay construction by at least a year.

After a decade of legal battles, Mardikian gave up.

“That is a microcosm of why we have a broken housing system,” said Cyrus Sanandaji, managing principal of Presidio Bay Ventures, a local real estate development firm. “We have politicized and created these turf wars, and the reality is that has happened more times than you’ll be able to find.”

The plot of land in question and surrounding properties are seen from the sky. | Justin Katigbak/The Standard | Source: Justin Katigbak/The Standard

Almost two decades later, all that remains is a mound of dirt and weeds, a cottage and the three-story apartment building at 959 Powell, which currently sits empty after it was gutted by a fire in March. The fire department has yet to determine the cause of the blaze.

“I have been told by various land-use attorneys that the change in how the city allowed projects to be reviewed and re-reviewed, my project happened to be the poster child,” Haig Mardikian told The Standard. “From a personal standpoint, when I read articles lamenting the housing crisis in San Francisco, I think, ‘Well, you did it to yourself. You made the process so impossible.’”

Aerial photos show the empty lot at 941 Powell St. | Source: Justin Katigbak/The Standard

A New Era in Housing

San Francisco isn’t just seen as a bad actor in the broader landscape of housing—the city has the worst record of any major city in the state, and it was recently subjected to an unprecedented review to learn why it is more costly and time-consuming to build here than anywhere else in California.

The city’s Housing Element requires San Francisco to accommodate 82,000 new housing units by 2031, and a state investigation found that the city approved just 179 new housing units through the first six months of this year. Just a couple recent examples of housing developments getting the ax for questionable reasons include 469 Stevenson and 1151 Washington.

But over the last six years, California has been undergoing a seismic shift in how cities can review and approve new housing, and it appears momentum has shifted to the side of YIMBYs, a group known for saying “yes” to almost any and all projects in their backyards. And it appears the streamlining of projects—especially if the actions required in the state audit are implemented—could help expedite the development of a property like 941 Powell, despite an assortment of hoops to jump through.

Dan Sider, chief of staff of the Planning Department, admitted to “a level of flabbergast” when he was first alerted to the vacant $13.5 million property in Nob Hill. The listing for the property notes that it could be developed into 56 units of housing, but that scope could be increased if 959 Powell were to be lumped into the package and a larger percentage of homes were designated for low-income tenants.

“I think it’s off the scale on the uniqueness chart,” Sider told The Standard. “I can’t think of another property of this nature that is quite as ripe for development in this part of the city.”

He added, “The idea that this project—or any project—faced opposition doesn’t surprise me in the least.”

Planning rules in San Francisco have changed over the years—Haig Mardikian’s proposal on Powell Street would now be appealed to the Board of Supervisors—but planning officials have an appetite to help new projects.

“We’d love to see a project here,” Sider said. “Please, file it, and we’ll handle the environmental review. If that’s what you want to do, we’ll tell you how to do it.”

Jane Natoli, the organizing director of YIMBY Action, a pro-development group in the city, expressed exasperation over the way the past proposal was stymied, but also a sense of optimism in light of new legislation.

Last month, Gov. Gavin Newsom signed into law a bill authored by state Sen. Scott Wiener that would reinforce SB 35, rubber-stamping the permitting of qualifying housing projects if they meet basic requirements and the city is found to be falling short of its housing goals. In San Francisco, that failure is all but certain to be the case. 

“I feel bad for this individual, having gone through all these fights, but he’s not wrong that we brought the housing crisis on ourselves,” Natoli said. ‘We’re not allowing that anymore, and we’re starting to see this potential. We’re going to see this place developed. Because the city can’t keep saying ‘no.’”

Developer fatigue in San Francisco is real, and the stress of dealing with the Board of Supervisors—combined with high interest rates—could scare off potential buyers of 941 Powell, despite a potentially huge return on investment.

An aerial photo shows empty lot at 941 Powell St. in San Francisco on Sunday. This plot of land in Nob Hill has been listed on the market for over 500 days with an asking price of $13.5 million. | Source: Justin Katigbak/The Standard

“We have to do more to demonstrate to the market that we’re open for business and serious about meeting our housing obligations,” Sanandaji said. “Until that happens, you’re going to see a lot more of these instances of sites or buildings that are ripe for development that just won't have any takers.”

Haig Mardikian is aware of the changes in the law, and he considered trying to develop the property again. But at 76 years old, he decided it is time to pass the baton to someone else. To entice buyers, he recently lowered the price by $1 million.

“It takes two things to do this,” he said. “You have to have the vigor, and you have to have the stamina to go through this. And I have the vigor, but I’m not sure I have the stamina.”