Kevin Truong

The hits keep on coming for the beleaguered San Francisco Centre mall with the scheduled closure of the two-story Adidas store at 865 Market St. later this month.

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<p>The hits keep on coming for the beleaguered San Francisco Centre mall with the scheduled closure of the two-story Adidas store at 865 Market St. later this month.</p>

A customer service representative confirmed that the Downtown San Francisco store will be closing on Jan. 13 and the vast majority of merchandise will be subject to a 50% discount. Notably, Adidas&#8217; popular Samba and Gazelle shoe lines are exempt from the sale.

<p>A customer service representative confirmed that the Downtown San Francisco store will be closing on Jan. 13 and the vast majority of merchandise will be subject to a 50% discount. Notably, Adidas' popular Samba and Gazelle shoe lines are exempt from the sale.</p>

<p>A customer service representative confirmed that the Downtown San Francisco store will be closing on Jan. 13 and the vast majority of merchandise will be subject to a 50% discount. Notably, Adidas&#8217; popular Samba and Gazelle shoe lines are exempt from the sale.</p>

The shuttering of the only Adidas store in San Francisco means that the closest retail location for the brand is at the San Francisco Premium Outlets in Livermore.

<p>The shuttering of the only Adidas store in San Francisco means that the closest retail location for the brand is at the San Francisco Premium Outlets in Livermore.</p>

Last June, mall owners Westfield and its partner Brookfield <a href="https://sfstandard.com/2023/06/12/westfield-gives-up-downtown-san-francisco-mall/">decided to cease loan payments</a> on the mall and cede the property to its lenders, citing declines in foot traffic and issues with street conditions.

Westfield gives up downtown San Francisco mall

<p>Last June, mall owners Westfield and its partner Brookfield <a href="https://sfstandard.com/2023/06/12/westfield-gives-up-downtown-san-francisco-mall/">decided to cease loan payments</a> on the mall and cede the property to its lenders, citing declines in foot traffic and issues with street conditions.</p>

That decision followed the announcement that the mall&#8217;s anchor tenant, <a href="https://sfstandard.com/business/nordstroms-exit-from-san-francisco-calls-downtown-malls-future-into-question/">Nordstrom</a>,&nbsp;would not renew its lease, leaving a huge hole across five floors of the property.

<p>That decision followed the announcement that the mall's anchor tenant, <a href="https://sfstandard.com/business/nordstroms-exit-from-san-francisco-calls-downtown-malls-future-into-question/">Nordstrom</a>,&nbsp;would not renew its lease, leaving a huge hole across five floors of the property.</p>

<p>That decision followed the announcement that the mall&#8217;s anchor tenant, <a href="https://sfstandard.com/business/nordstroms-exit-from-san-francisco-calls-downtown-malls-future-into-question/">Nordstrom</a>,&nbsp;would not renew its lease, leaving a huge hole across five floors of the property.</p>

Since then, several businesses have closed their locations in the mall, including the Lego Store and the <a href="https://sfstandard.com/2023/06/14/san-francisco-centre-westfield-cinemark-closure-union-square/">Cinemark movie theater</a>. Additionally, the Westfield branding has been stripped from the property after the company&#8217;s mortgage default.

Westfield&#8217;s San Francisco Centre losing movie theaters as owner abandons mall

<p>Since then, several businesses have closed their locations in the mall, including the Lego Store and the <a href="https://sfstandard.com/2023/06/14/san-francisco-centre-westfield-cinemark-closure-union-square/">Cinemark movie theater</a>. Additionally, the Westfield branding has been stripped from the property after the company's mortgage default.</p>

<p>Since then, several businesses have closed their locations in the mall, including the Lego Store and the <a href="https://sfstandard.com/2023/06/14/san-francisco-centre-westfield-cinemark-closure-union-square/">Cinemark movie theater</a>. Additionally, the Westfield branding has been stripped from the property after the company&#8217;s mortgage default.</p>

A <a href="https://sfstandard.com/2023/10/10/downtown-san-francisco-centre-receiver/">receiver has been appointed</a> to manage the property, which opens up the potential for a sale. City leaders have pitched several ideas for the transformation of the property, including turning it into <a href="https://sfstandard.com/2023/06/13/san-francisco-mayors-answer-to-downtown-malls-woes-lab-space/">lab space</a>, <a href="https://sfstandard.com/2023/08/23/downtown-san-francisco-soccer-stadium-plans-for-former-westfield-mall-revealed/">a soccer stadium</a> or a new educational center for <a href="https://sfstandard.com/search/?query=university%20of%20california">the University of California</a>.

New development could lead to sale of struggling downtown San Francisco mall

San Francisco mayor’s answer to downtown mall’s woes: Lab space

Downtown San Francisco soccer stadium plans for former Westfield mall revealed

<p>A <a href="https://sfstandard.com/2023/10/10/downtown-san-francisco-centre-receiver/">receiver has been appointed</a> to manage the property, which opens up the potential for a sale. City leaders have pitched several ideas for the transformation of the property, including turning it into <a href="https://sfstandard.com/2023/06/13/san-francisco-mayors-answer-to-downtown-malls-woes-lab-space/">lab space</a>, <a href="https://sfstandard.com/2023/08/23/downtown-san-francisco-soccer-stadium-plans-for-former-westfield-mall-revealed/">a soccer stadium</a> or a new educational center for <a href="https://sfstandard.com/search/?query=university%20of%20california">the University of California</a>.</p>

One architect also put forward a <a href="https://sfstandard.com/2023/09/19/legoland-to-downtown-san-franciscos-rescue-architect-has-bold-plan-to-fill-vacant-mall/">tongue-in-cheek proposal</a> to turn the mall into a Legoland theme park.

Legoland to downtown San Francisco’s rescue? Architect has bold plan to fill vacant mall

<p>One architect also put forward a <a href="https://sfstandard.com/2023/09/19/legoland-to-downtown-san-franciscos-rescue-architect-has-bold-plan-to-fill-vacant-mall/">tongue-in-cheek proposal</a> to turn the mall into a Legoland theme park.</p>

Downtown San Francisco Adidas store set to close

In a sign of growing distress in San Francisco real estate, the city’s largest apartment landlord, Veritas, defaulted on a $448 million loan according to <a href="https://www.fitchratings.com/research/structured-finance/large-multifamily-maturity-default-drives-increase-in-us-cmbs-delinquencies-in-december-06-01-2023">a report</a> from Fitch Ratings.

<p>In a sign of growing distress in San Francisco real estate, the city’s largest apartment landlord, Veritas, defaulted on a $448 million loan according to <a href="https://www.fitchratings.com/research/structured-finance/large-multifamily-maturity-default-drives-increase-in-us-cmbs-delinquencies-in-december-06-01-2023">a report</a> from Fitch Ratings.</p>

The loan was transferred to special servicing on Nov. 3, a stage meant to allow for negotiation, and was not paid off by its Nov. 15 maturity date. News of the default was <a href="https://therealdeal.com/sanfrancisco/2023/01/11/veritas-in-default-on-450m-commercial-loan/">initially reported</a> by The Real Deal.

<p>The loan was transferred to special servicing on Nov. 3, a stage meant to allow for negotiation, and was not paid off by its Nov. 15 maturity date. News of the default was <a href="https://therealdeal.com/sanfrancisco/2023/01/11/veritas-in-default-on-450m-commercial-loan/">initially reported</a> by The Real Deal.</p>

According to Fitch, the loan sponsor, a joint venture between Veritas and hedge fund Baupost Group, indicated it was not going to exercise its one-year extension option or be able to pay off the loan at its maturity date. The parties said they were hoping to find a partner to help refinance the properties.&nbsp;

<p>According to Fitch, the loan sponsor, a joint venture between Veritas and hedge fund Baupost Group, indicated it was not going to exercise its one-year extension option or be able to pay off the loan at its maturity date. The parties said they were hoping to find a partner to help refinance the properties.&nbsp;</p>

In a statement, a Veritas spokesperson pointed to spiraling debt costs, layoffs and other challenges and said the company remains committed to San Francisco.

<p>In a statement, a Veritas spokesperson pointed to spiraling debt costs, layoffs and other challenges and said the company remains committed to San Francisco. </p>

&#8220;While we’ve all seen the stories about office usage going down in the wake of hybrid work, multifamily operators in San Francisco have to contend with even more challenges, including increased city regulation, increased taxes, more pandemic impacts and the rising cost of doing business here,&#8221; said the spokesperson.&nbsp;

<p>"While we’ve all seen the stories about office usage going down in the wake of hybrid work, multifamily operators in San Francisco have to contend with even more challenges, including increased city regulation, increased taxes, more pandemic impacts and the rising cost of doing business here," said the spokesperson.&nbsp;</p>

<p>&#8220;While we’ve all seen the stories about office usage going down in the wake of hybrid work, multifamily operators in San Francisco have to contend with even more challenges, including increased city regulation, increased taxes, more pandemic impacts and the rising cost of doing business here,&#8221; said the spokesperson.&nbsp;</p>

Research from financial services company Moody’s said maturity defaults like the one Veritas is experiencing and eventual delinquencies are likely to increase in line with rising interest rates and largely stalled capital markets.

<p>Research from financial services company Moody’s said maturity defaults like the one Veritas is experiencing and eventual delinquencies are likely to increase in line with rising interest rates and largely stalled capital markets.</p>

Rising interest rates have made it more difficult for real estate players like Veritas to refinance their loans as lenders are seeking higher rates of return. That can be an especially difficult prospect in a market like San Francisco, which is still reeling from the impacts of the pandemic.

<p>Rising interest rates have made it more difficult for real estate players like Veritas to refinance their loans as lenders are seeking higher rates of return. That can be an especially difficult prospect in a market like San Francisco, which is still reeling from the impacts of the pandemic.</p>

Veritas’ loan is backed by a portfolio of 62 multifamily properties with a total of 1,734 rent-controlled units located across San Francisco.

<p>Veritas’ loan is backed by a portfolio of 62 multifamily properties with a total of 1,734 rent-controlled units located across San Francisco.</p>

Fitch reported at the loan&#8217;s offering date that 12% of the total units were vacant to allow for renovations with the eventual idea they would be rented out for market rate rents.

<p>Fitch reported at the loan's offering date that 12% of the total units were vacant to allow for renovations with the eventual idea they would be rented out for market rate rents.</p>

<p>Fitch reported at the loan&#8217;s offering date that 12% of the total units were vacant to allow for renovations with the eventual idea they would be rented out for market rate rents.</p>

But during the pandemic, demand for small apartments cratered and triggered an <a href="https://sfstandard.com/community/san-francisco-pandemic-population-decline-census/">exodus from San Francisco</a> from which the city has not yet recovered. It remains one of the only metro areas with rents that have failed to recover to pre-pandemic levels.&nbsp;

<p>But during the pandemic, demand for small apartments cratered and triggered an <a href="https://sfstandard.com/community/san-francisco-pandemic-population-decline-census/">exodus from San Francisco</a> from which the city has not yet recovered. It remains one of the only metro areas with rents that have failed to recover to pre-pandemic levels.&nbsp;</p>

Veritas’ situation mirrors that of Shorenstein Partners, which <a href="https://sfstandard.com/business/twitter-landlord-in-negotiations-with-lenders-as-musk-reportedly-stiffs-owners/">defaulted on a $400 million loan</a> on the Twitter headquarters building at 1355 Market St.

<p>Veritas’ situation mirrors that of Shorenstein Partners, which <a href="https://sfstandard.com/business/twitter-landlord-in-negotiations-with-lenders-as-musk-reportedly-stiffs-owners/">defaulted on a $400 million loan</a> on the Twitter headquarters building at 1355 Market St.</p>

Somewhat ironically, Veritas itself was formed from the ashes of the Lembi family, the city’s top apartment landlord prior to the Great Recession. After Lembi lost dozens of buildings to creditors during the financial crisis, Veritas swooped in and purchased a portfolio of more than 2,000 units for $500 million.

<p>Somewhat ironically, Veritas itself was formed from the ashes of the Lembi family, the city’s top apartment landlord prior to the Great Recession. After Lembi lost dozens of buildings to creditors during the financial crisis, Veritas swooped in and purchased a portfolio of more than 2,000 units for $500 million.</p>

Since then, Veritas has continued to amass properties in the city, including a $33 million purchase of a 42-unit at 2242 Polk St. in November. Meanwhile, it has garnered a controversial reputation over its <a href="https://sfstandard.com/housing-development/low-income-senior-faces-eviction-by-sfs-largest-landlord-i-will-be-on-the-street/">eviction policies</a>.

<p>Since then, Veritas has continued to amass properties in the city, including a $33 million purchase of a 42-unit at 2242 Polk St. in November. Meanwhile, it has garnered a controversial reputation over its <a href="https://sfstandard.com/housing-development/low-income-senior-faces-eviction-by-sfs-largest-landlord-i-will-be-on-the-street/">eviction policies</a>.</p>

All told, Veritas owns more than 320 buildings and 7,500 apartments across the Bay Area and Los Angeles.

<p>All told, Veritas owns more than 320 buildings and 7,500 apartments across the Bay Area and Los Angeles.</p>

San Francisco’s biggest landlord defaulted on a massive loan

Kevin V. Nguyen

Parkmerced, a 3,200-home neighborhood in southwestern San Francisco, faces decaying infrastructure and declining financial prospects due to a <a href="https://www.sfchronicle.com/sf/article/s-f-apartment-complex-default-19406353.php">looming $1.8 billion loan default</a>, but it&#8217;s still one of the best answers to the city’s housing shortage: It’s dense, it’s tall, and it’s available.

<p>Parkmerced, a 3,200-home neighborhood in southwestern San Francisco, faces decaying infrastructure and declining financial prospects due to a <a href="https://www.sfchronicle.com/sf/article/s-f-apartment-complex-default-19406353.php">looming $1.8 billion loan default</a>, but it's still one of the best answers to the city’s housing shortage: It’s dense, it’s tall, and it’s available.</p>

<p>Parkmerced, a 3,200-home neighborhood in southwestern San Francisco, faces decaying infrastructure and declining financial prospects due to a <a href="https://www.sfchronicle.com/sf/article/s-f-apartment-complex-default-19406353.php">looming $1.8 billion loan default</a>, but it&#8217;s still one of the best answers to the city’s housing shortage: It’s dense, it’s tall, and it’s available.</p>

In 2011, the Board of Supervisors approved a sweeping plan to transform the 152-acre site over three decades from a rushed World War II-era housing project into a “vibrant, pedestrian-focused” neighborhood of homes linked by public parks and retail.&nbsp;

<p>In 2011, the Board of Supervisors approved a sweeping plan to transform the 152-acre site over three decades from a rushed World War II-era housing project into a “vibrant, pedestrian-focused” neighborhood of homes linked by public parks and retail.&nbsp;</p>

This plan will account for 2,200 of the 82,000 new homes San Francisco <a href="https://sfstandard.com/2023/01/24/sf-housing-plan-passes-but-faces-tight-timeline-and-tough-road-to-implementation/">must permit before 2031</a>, with nearly 7,000 additional units still to come in future phases. But 13 years after approval by the city, the project by property owner Maximus Real Estate Partners has yet to break ground.&nbsp;

SF housing plan passes, but faces tight timeline and tough road to implementation

<p>This plan will account for 2,200 of the 82,000 new homes San Francisco <a href="https://sfstandard.com/2023/01/24/sf-housing-plan-passes-but-faces-tight-timeline-and-tough-road-to-implementation/">must permit before 2031</a>, with nearly 7,000 additional units still to come in future phases. But 13 years after approval by the city, the project by property owner Maximus Real Estate Partners has yet to break ground.&nbsp;</p>

An entire <a href="https://sfstandard.com/2024/08/26/navigating-the-bottom-of-san-franciscos-office-market/">boom-and-bust real estate cycle</a> has transpired since the project got the green light.&nbsp;

How low can they go? Here&#8217;s who’s buying San Francisco buildings at fire-sale prices

<p>An entire <a href="https://sfstandard.com/2024/08/26/navigating-the-bottom-of-san-franciscos-office-market/">boom-and-bust real estate cycle</a> has transpired since the project got the green light.&nbsp;</p>

Residential units rest at Parkmerced near San Francisco State University on Friday, Sept. 6, 2024.


<figure class="wp-block-image size-full"><img src="https://content.sfstandard.com/wp-content/uploads/2024/09/202240910-southwestsftaleof2cities_0401_7a2586.jpg" alt="The image shows modern townhouses with green and teal facades in front of a large beige apartment building. Cars are parked along the street." class="wp-image-310123"/><figcaption class="wp-element-caption">The 80-year-old Parkmerced remains San Francisco&#8217;s largest apartment complex.</figcaption></figure>


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<figure class="wp-block-image size-full"><img src="https://content.sfstandard.com/wp-content/uploads/2024/09/202240910-southwestsftaleof2cities_0401_7a2586.jpg" alt="The image shows modern townhouses with green and teal facades in front of a large beige apartment building. Cars are parked along the street." class="wp-image-310123"/><figcaption class="wp-element-caption">The 80-year-old Parkmerced remains San Francisco's largest apartment complex.</figcaption></figure>

<figure class="wp-block-image size-full"><img src="https://content.sfstandard.com/wp-content/uploads/2024/09/202240910-southwestsftaleof2cities_0401_7a2586.jpg" alt="The image shows modern townhouses with green and teal facades in front of a large beige apartment building. Cars are parked along the street." class="wp-image-310123"/><figcaption class="wp-element-caption">The 80-year-old Parkmerced remains San Francisco&#8217;s largest apartment complex.</figcaption></figure>

Pedestrians walk near a parking lot which is planned to become a residential development at Stonestown near San Francisco State University on Friday, Sept. 6, 2024.


<figure class="wp-block-image size-large"><img src="https://content.sfstandard.com/wp-content/uploads/2024/09/202240910-southwestsftaleof2cities_0137_b2340e.jpg?w=2001" alt="A woman with a backpack steps over a ledge next to a graffitied panel, while another person nearby holds a blue phone. Cars and a building are in the background." class="wp-image-310117"/><figcaption class="wp-element-caption">The parking lots that surround the Stonestown Galleria are slated to be transformed into a mix of housing, parks, and retail.</figcaption></figure>


Meanwhile, next to this neighborhood of stalled ambitions, two other key developments involving motivated, well-funded players have taken shape: Stonestown Galleria and San Francisco State University.&nbsp;

<p>Meanwhile, next to this neighborhood of stalled ambitions, two other key developments involving motivated, well-funded players have taken shape: Stonestown Galleria and San Francisco State University.&nbsp;</p>

Both institutions are linchpins in that part of the city. The former promises to <a href="https://sfstandard.com/2023/12/14/san-franciscos-stonestown-mall-redevelopment-new-housing/">transform the mall’s surrounding parking lots</a> into 3,500 homes, while the latter is taking housing into its own hands in an effort to attract and retain first-year students amid rising living costs.&nbsp;

San Francisco&#8217;s Stonestown mall could get 3,500 new homes under revised redevelopment plan

<p>Both institutions are linchpins in that part of the city. The former promises to <a href="https://sfstandard.com/2023/12/14/san-franciscos-stonestown-mall-redevelopment-new-housing/">transform the mall’s surrounding parking lots</a> into 3,500 homes, while the latter is taking housing into its own hands in an effort to attract and retain first-year students amid rising living costs.&nbsp;</p>

Both projects leveraged creativity and compromise to work around unfavorable economic conditions, rather than stalling entirely. In comparison, the frozen <a href="https://default.sfplanning.org/publications_reports/parkmerced/Parkmerced_Development_Agreement_As_Recorded.pdf">Parkmerced redevelopment plan</a> reads like a pipe dream.&nbsp;

<p>Both projects leveraged creativity and compromise to work around unfavorable economic conditions, rather than stalling entirely. In comparison, the frozen <a href="https://default.sfplanning.org/publications_reports/parkmerced/Parkmerced_Development_Agreement_As_Recorded.pdf">Parkmerced redevelopment plan</a> reads like a pipe dream.&nbsp;</p>

“That area is like a tale of two cities,” said one San Francisco developer who requested anonymity to protect working relationships. “One proposal [Parkmerced], is overly complicated and is led by a group that has never executed on anything of that scale. The others [Stonestown and SFSU] involve institutional players with a track record. Their political timing is also much better, and it’ll help that they’re adding density where the neighbors won’t necessarily mind.”&nbsp;

<p>“That area is like a tale of two cities,” said one San Francisco developer who requested anonymity to protect working relationships. “One proposal [Parkmerced], is overly complicated and is led by a group that has never executed on anything of that scale. The others [Stonestown and SFSU] involve institutional players with a track record. Their political timing is also much better, and it’ll help that they’re adding density where the neighbors won’t necessarily mind.”&nbsp;</p>

<strong>On time and under budget</strong>


<h2 class="wp-block-heading" id="h-on-time-and-under-budget"><strong>On time and under budget</strong></h2>


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<h2 class="wp-block-heading" id="h-on-time-and-under-budget"><strong>On time and under budget</strong></h2>

One key advantage enjoyed by public-sector projects like SFSU, <a href="https://sfstandard.com/2024/02/26/university-california-law-sf-campus-housing-tenderloin/">UC Law SF</a>, and even <a href="https://sfstandard.com/2024/02/16/presidio-redevelopment-gains-traction-leasing/">the Presidio</a> is that project approvals largely fall outside of the purview of the city government, which can be <a href="https://sfstandard.com/2024/03/14/san-francisco-breed-peskin-housing-waterfront-density/">susceptible to charged politics</a> and <a href="https://sfstandard.com/2024/06/07/san-francisco-zoning-housing-element-united-neighborhoods/">contentious neighborhood disputes</a>.&nbsp;

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<p>One key advantage enjoyed by public-sector projects like SFSU, <a href="https://sfstandard.com/2024/02/26/university-california-law-sf-campus-housing-tenderloin/">UC Law SF</a>, and even <a href="https://sfstandard.com/2024/02/16/presidio-redevelopment-gains-traction-leasing/">the Presidio</a> is that project approvals largely fall outside of the purview of the city government, which can be <a href="https://sfstandard.com/2024/03/14/san-francisco-breed-peskin-housing-waterfront-density/">susceptible to charged politics</a> and <a href="https://sfstandard.com/2024/06/07/san-francisco-zoning-housing-element-united-neighborhoods/">contentious neighborhood disputes</a>.&nbsp;</p>

But the time saved by avoiding bureaucracy doesn’t mean these projects are slam dunks. For starters, schools have to figure out how to pay for new construction, with funding generally cobbled together from <a href="https://sfstandard.com/2024/08/20/berkeley-dorm-donors/">wealthy donors</a>, private debt financing, and government bonds or grants.&nbsp;

Behind the largest gift in Berkeley&#8217;s history, an elusive leader and a controversial family

<p>But the time saved by avoiding bureaucracy doesn’t mean these projects are slam dunks. For starters, schools have to figure out how to pay for new construction, with funding generally cobbled together from <a href="https://sfstandard.com/2024/08/20/berkeley-dorm-donors/">wealthy donors</a>, private debt financing, and government bonds or grants.&nbsp;</p>

Ron Kirkpatrick, left, Lynne Riesselman, center, and Keith Morehouse pose for a portrait at West Grove Commons, a recently developed building used for student housing at San Francisco State University on Friday, Sept. 6, 2024.


<figure class="wp-block-image size-full"><img src="https://content.sfstandard.com/wp-content/uploads/2024/09/202240910-southwestsftaleof2cities_0222_c79eaa.jpg" alt="Three people stand on a pathway outside a modern, angular building with large windows and trees lining the walkway." class="wp-image-310119"/><figcaption class="wp-element-caption">From left, Ron Kirkpatrick of SFSU, Lynne Riesselman of EHDD Architecture, and Keith Morehouse of McCarthy Building Cos. teamed up to build the West Grove Commons in less than two years.</figcaption></figure>


In 2022, SFSU administrators secured a lifeline in the form of&nbsp; $116 million from the Higher Education Student Housing Grant Program in the state budget. The certainty in financing allowed SFSU to construct its first-ever housing project using state dollars, said Ron Kirkpatrick, the university’s director of capital planning and special projects. The six-floor, 265-room building, known as the West Grove Commons, opened this month in time for the fall semester.&nbsp;

<p>In 2022, SFSU administrators secured a lifeline in the form of&nbsp; $116 million from the Higher Education Student Housing Grant Program in the state budget. The certainty in financing allowed SFSU to construct its first-ever housing project using state dollars, said Ron Kirkpatrick, the university’s director of capital planning and special projects. The six-floor, 265-room building, known as the West Grove Commons, opened this month in time for the fall semester.&nbsp;</p>

Of the 728 freshmen who will occupy the dorms, more than 400 are eligible for reduced rent.&nbsp;

<p>Of the 728 freshmen who will occupy the dorms, more than 400 are eligible for reduced rent.&nbsp;</p>

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“If we didn’t get this project right, no other [student housing] projects like this would get funded,” Kirkpatrick said. “We had one shot with this money.”&nbsp;

<p>“If we didn’t get this project right, no other [student housing] projects like this would get funded,” Kirkpatrick said. “We had one shot with this money.”&nbsp;</p>

The period between SFSU winning the state grant and students moving in was less than two years.&nbsp;

<p>The period between SFSU winning the state grant and students moving in was less than two years.&nbsp;</p>

“We treated all of the pre-approval work like actual client meetings,” said Lynne Riesselman, principal of EHDD Architecture, which won the bid but started collaborating with the general contractor, McCarthy Building Companies, months prior.&nbsp;

<p>“We treated all of the pre-approval work like actual client meetings,” said Lynne Riesselman, principal of EHDD Architecture, which won the bid but started collaborating with the general contractor, McCarthy Building Companies, months prior.&nbsp;</p>

A group gathers at a kitchen and dining area at West Grove Commons, a recently developed building used for student housing at San Francisco State University on Friday, Sept. 6, 2024.


<figure class="wp-block-image size-full"><img src="https://content.sfstandard.com/wp-content/uploads/2024/09/202240910-southwestsftaleof2cities_0267_d1cd58.jpg" alt="A bright room with orange walls, white tables, and modern pendant lights features one person alone in the foreground and four people conversing in the background kitchen area." class="wp-image-310122"/><figcaption class="wp-element-caption">Hundreds of freshmen students have already moved into the West Grove Commons, a new dorm at SFSU.</figcaption></figure>


In previous years, it was common for a developer to wait to get the sign-off from planners on all aspects of a proposal before beginning construction, but the SFSU group opted for a phased approach, building what it could as it went.&nbsp;

<p>In previous years, it was common for a developer to wait to get the sign-off from planners on all aspects of a proposal before beginning construction, but the SFSU group opted for a phased approach, building what it could as it went.&nbsp;</p>

The group had to make compromises to the design along the way in order to keep the project moving forward, Riesselman said. For example, mass timber construction was preferred for its sustainability but was swapped out in favor of concrete, since the Office of the State Fire Marshal had never approved such a project on campus.&nbsp;

<p>The group had to make compromises to the design along the way in order to keep the project moving forward, Riesselman said. For example, mass timber construction was preferred for its sustainability but was swapped out in favor of concrete, since the Office of the State Fire Marshal had never approved such a project on campus.&nbsp;</p>

“Delaying a project by six weeks to hash out some disagreement or confusion would have been life or death for this project,” Kirkpatrick added.&nbsp;

<p>“Delaying a project by six weeks to hash out some disagreement or confusion would have been life or death for this project,” Kirkpatrick added.&nbsp;</p>


<h2 class="wp-block-heading" id="h-making-up-for-lost-time"><strong>Making up for lost time</strong></h2>


Just north of Parkmerced and SFSU, Brookfield Properties won unanimous approvals in July for its proposed redevelopment of Stonestown Galleria. 

<p>Just north of Parkmerced and SFSU, Brookfield Properties won unanimous approvals in July for its proposed redevelopment of Stonestown Galleria. </p>

The project will maintain the popular shopping mall while transforming the area around it into a walkable neighborhood of homes and parks, including a “merchant lane” which will be located on a newly created street 20th Avenue. Brookfield said it intends to start construction within two years.

<p>The project will maintain the popular shopping mall while transforming the area around it into a walkable neighborhood of homes and parks, including a “merchant lane” which will be located on a newly created street 20th Avenue. Brookfield said it intends to start construction within two years.</p>

Cars rest in a parking lot which is planned to become a residential development at Stonestown near San Francisco State University on Friday, Sept. 6, 2024.


<figure class="wp-block-image size-large"><img src="https://content.sfstandard.com/wp-content/uploads/2024/09/202240910-southwestsftaleof2cities_0124.jpg" alt="A crowded parking lot filled with various cars sits in front of a backdrop of trees and multi-story buildings on an overcast day." class="wp-image-310118"/><figcaption class="wp-element-caption">Brookfield Properties aims to transform the area around Stonestown Galleria it into a walkable neighborhood of homes and parks.</figcaption></figure>


A developer's course correction on a housing proposal for one of San Francisco's prominent malls has undergone key changes in the runup to planned implementation starting next year.


<figure class="wp-block-image size-large"><img height="1407" width="2500" src="https://content.sfstandard.com/wp-content/uploads/2023/12/3-stonestown-20th-avenue-proposed-credit-brookfield-properties.jpg?w=2500" alt="A streetscape rendering shows pedestrians at a redeveloped mall, parked bicycles and slowly cruising vehicles." class="wp-image-231109"/><figcaption class="wp-element-caption">A rendering of Brookfield&#8217;s proposed redevelopment around the Stonestown mall includes a pedestrian-friendly “merchant lane.”</figcaption></figure>


<figure class="wp-block-image size-large"><img src="https://content.sfstandard.com/wp-content/uploads/2023/12/3-stonestown-20th-avenue-proposed-credit-brookfield-properties.jpg?w=2500" alt="A streetscape rendering shows pedestrians at a redeveloped mall, parked bicycles and slowly cruising vehicles." class="wp-image-231109"/><figcaption class="wp-element-caption">A rendering of Brookfield's proposed redevelopment around the Stonestown mall includes a pedestrian-friendly “merchant lane.”</figcaption></figure>

<figure class="wp-block-image size-large"><img src="https://content.sfstandard.com/wp-content/uploads/2023/12/3-stonestown-20th-avenue-proposed-credit-brookfield-properties.jpg?w=2500" alt="A streetscape rendering shows pedestrians at a redeveloped mall, parked bicycles and slowly cruising vehicles." class="wp-image-231109"/><figcaption class="wp-element-caption">A rendering of Brookfield&#8217;s proposed redevelopment around the Stonestown mall includes a pedestrian-friendly “merchant lane.”</figcaption></figure>

“This is a very large down payment into the housing we are required to build on the west side of town,” District 7 Supervisor Myrna Melgar said during the vote. “This is an ideal place to build, on top of parking lots, in an existing commercial hub.”&nbsp;

<p>“This is a very large down payment into the housing we are required to build on the west side of town,” District 7 Supervisor Myrna Melgar said during the vote. “This is an ideal place to build, on top of parking lots, in an existing commercial hub.”&nbsp;</p>

Parkmerced’s plan, on the other hand, proposes the demolition of 1,500 rent-controlled units on the project site. Maximus, which did not respond to requests for comment, agreed to replace those homes while maintaining at least one-third of the new units below market rate. Other enhancements include realigning the Muni M line, which connects the area to downtown, through the new neighborhood.

<p>Parkmerced’s plan, on the other hand, proposes the demolition of 1,500 rent-controlled units on the project site. Maximus, which did not respond to requests for comment, agreed to replace those homes while maintaining at least one-third of the new units below market rate. Other enhancements include realigning the Muni M line, which connects the area to downtown, through the new neighborhood.</p>

The first phase of the project, meant to add 1,600 homes plus street improvements, was slated to start in 2016. But lawsuits and a lengthy back and forth with city planners pushed that timeline back. Then came the pandemic, which <a href="https://sfstandard.com/2024/07/02/mosser-family-san-francisco-succession-battle/">upended real estate business models</a> that relied on high occupancies and rent growth.&nbsp;

Real estate made this prominent San Francisco family rich. Now, it’s tearing them apart

<p>The first phase of the project, meant to add 1,600 homes plus street improvements, was slated to start in 2016. But lawsuits and a lengthy back and forth with city planners pushed that timeline back. Then came the pandemic, which <a href="https://sfstandard.com/2024/07/02/mosser-family-san-francisco-succession-battle/">upended real estate business models</a> that relied on high occupancies and rent growth.&nbsp;</p>

“It’s not rocket science,” said Corey Smith, executive director at the Housing Action Coalition, which advocates for affordable housing for all. “The capital that pays for [a development] needs to see a return that exceeds their investment in order to justify breaking ground.”&nbsp;

<p>“It’s not rocket science,” said Corey Smith, executive director at the Housing Action Coalition, which advocates for affordable housing for all. “The capital that pays for [a development] needs to see a return that exceeds their investment in order to justify breaking ground.”&nbsp;</p>

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Having observed the project from afar, Smith speculates that the budget is no longer balanced due to rising construction costs and diminished revenues.&nbsp;

<p>Having observed the project from afar, Smith speculates that the budget is no longer balanced due to rising construction costs and diminished revenues.&nbsp;</p>

Dan Sider, chief of staff for San Francisco Planning, said that should Maximus come approach the department today, it will find&nbsp; a “constant drum beat” within the staff to move projects such as Parkmerced project along. “We’re pulling every lever we can,” he said, referring to adjusting inclusionary housing levels and deferring fees.&nbsp;

<p>Dan Sider, chief of staff for San Francisco Planning, said that should Maximus come approach the department today, it will find&nbsp; a “constant drum beat” within the staff to move projects such as Parkmerced project along. “We’re pulling every lever we can,” he said, referring to adjusting inclusionary housing levels and deferring fees.&nbsp;</p>

Stonestown’s owner, the multinational real estate firm Brookfield, has more capital at its disposal and a more diverse risk profile than Maximus, which <a href="https://maximusrepartners.com/investments/">has one project in the city</a>.&nbsp;

<p>Stonestown’s owner, the multinational real estate firm Brookfield, has more capital at its disposal and a more diverse risk profile than Maximus, which <a href="https://maximusrepartners.com/investments/">has one project in the city</a>.&nbsp;</p>

The Roa family’s view from the kitchen of their new apartment in Parkmerced on Tuesday, Aug. 20, 2024. After a mayor's office effort to remove an RV community that relocated from a street near Stonestown Mall to one beside a Recreation Center, at least 22 housing vouchers were handed out for housing at Parkmerced, following an overturned local injunction that allowed the city to be more aggressive in its sweeps of encampments as a result of the Supreme Court's ruling in June.


<figure class="wp-block-image size-large"><img height="1667" width="2500" src="https://content.sfstandard.com/wp-content/uploads/2024/08/20240819rvfamilyfolo-part2-9.jpg?w=2500" alt="The image shows a view through a high window of a sunlit building, with a large tree, a small green utility box, and a parking lot with several cars below." class="wp-image-303738"/><figcaption class="wp-element-caption">The view from inside a one-bedroom apartment at the Parkmerced, where a redevelopment project is stalled.</figcaption></figure>


<figure class="wp-block-image size-large"><img src="https://content.sfstandard.com/wp-content/uploads/2024/08/20240819rvfamilyfolo-part2-9.jpg?w=2500" alt="The image shows a view through a high window of a sunlit building, with a large tree, a small green utility box, and a parking lot with several cars below." class="wp-image-303738"/><figcaption class="wp-element-caption">The view from inside a one-bedroom apartment at the Parkmerced, where a redevelopment project is stalled.</figcaption></figure>

Around the same time Brookfield <a href="https://sfstandard.com/2023/06/12/westfield-gives-up-downtown-san-francisco-mall/">defaulted on its loan</a> for the San Francisco Centre Mall in 2023, it was able to <a href="https://sfstandard.com/2024/01/05/brookfield-ballast-residential-landlord-in-sf-apartment-veritas/">purchase a distressed, $1 billion apartment portfolio</a> while continuing to pursue development at Stonestown.&nbsp;

This real estate company dumped its downtown San Francisco mall. Now it&#8217;s gobbling up apartments

<p>Around the same time Brookfield <a href="https://sfstandard.com/2023/06/12/westfield-gives-up-downtown-san-francisco-mall/">defaulted on its loan</a> for the San Francisco Centre Mall in 2023, it was able to <a href="https://sfstandard.com/2024/01/05/brookfield-ballast-residential-landlord-in-sf-apartment-veritas/">purchase a distressed, $1 billion apartment portfolio</a> while continuing to pursue development at Stonestown.&nbsp;</p>

“[Brookfield] actually has experience getting things done in this city,” the anonymous San Francisco developer said. “Even if they’ve stumbled at times, they seem to have a good sense of where the demand is going.”&nbsp;

<p>“[Brookfield] actually has experience getting things done in this city,” the anonymous San Francisco developer said. “Even if they’ve stumbled at times, they seem to have a good sense of where the demand is going.”&nbsp;</p>

The southwest corner of the city, as opposed to downtown, stands to benefit as a result.&nbsp;

<p>The southwest corner of the city, as opposed to downtown, stands to benefit as a result.&nbsp;</p>

“For years, development of any real scale on the west side was the butt of jokes,” Sider said. “But with today’s tranche of approved projects, it could be starting to make up for lost time.&#8221;

<p>“For years, development of any real scale on the west side was the butt of jokes,” Sider said. “But with today’s tranche of approved projects, it could be starting to make up for lost time."</p>

<p>“For years, development of any real scale on the west side was the butt of jokes,” Sider said. “But with today’s tranche of approved projects, it could be starting to make up for lost time.&#8221;</p>

In the city’s southwest corner, real estate is booming and busting at once

It’s no secret that Downtown San Francisco is reeling. Vacancies are up and property owners are shedding leases faster than new ones can be signed.

<p>It’s no secret that Downtown San Francisco is reeling. Vacancies are up and property owners are shedding leases faster than new ones can be signed.</p>

The allure of artificial intelligence, so far, hasn’t been enough to meaningfully fill the void Downtown, which accounted for thousands of jobs and a majority of the city’s economic activity prior to the pandemic.&nbsp;&nbsp;

<p>The allure of artificial intelligence, so far, hasn’t been enough to meaningfully fill the void Downtown, which accounted for thousands of jobs and a majority of the city’s economic activity prior to the pandemic.&nbsp;&nbsp;</p>

Just how bad are things looking? Here are five data points that underscore San Francisco’s potentially long path to recovery.&nbsp;

<p>Just how bad are things looking? Here are five data points that underscore San Francisco’s potentially long path to recovery.&nbsp;</p>


<h2 class="wp-block-heading"><strong>Vacancy Rate: 31.8%</strong></h2>


<h2><strong>Vacancy Rate: 31.8%</strong></h2>

That’s the preliminary office vacancy rate for the second quarter of 2023 in San Francisco, according to real estate company CBRE. Finalized numbers are expected early next month.&nbsp;

<p>That’s the preliminary office vacancy rate for the second quarter of 2023 in San Francisco, according to real estate company CBRE. Finalized numbers are expected early next month.&nbsp;</p>

CBRE’s data shows that net absorption was at negative 1.9 million square feet in the second quarter, meaning far more space was vacated than was newly leased—and implying that the vacancy rate, <a href="https://sfstandard.com/business/downtown-san-francisco-vacancies-hit-record-high-as-city-nears-breaking-point/">already at record highs</a>, could go even higher.&nbsp;

<p>CBRE’s data shows that net absorption was at negative 1.9 million square feet in the second quarter, meaning far more space was vacated than was newly leased—and implying that the vacancy rate, <a href="https://sfstandard.com/business/downtown-san-francisco-vacancies-hit-record-high-as-city-nears-breaking-point/">already at record highs</a>, could go even higher.&nbsp;</p>

core/html

In order to turn the story around, net absorption would need to be positive. By and large, the types of leases being signed at the moment are lease renewals or subleases. New leases only made up around 21% of total leasing activity in the second quarter.&nbsp;

<p>In order to turn the story around, net absorption would need to be positive. By and large, the types of leases being signed at the moment are lease renewals or subleases. New leases only made up around 21% of total leasing activity in the second quarter.&nbsp;</p>

<strong>AI Companies: 700,000+ square feet</strong>


<h2 class="wp-block-heading"><strong>AI Companies: 700,000+ square feet</strong></h2>


<h2><strong>AI Companies: 700,000+ square feet</strong></h2>

Mayor London Breed proclaimed San Francisco the <a href="https://sfstandard.com/business/mayor-breed-declares-sf-the-ai-capital-of-the-world-can-leaders-keep-it-that-way/">AI capital of the world</a>, and it&#8217;s clear that the city is the center of gravity for the nascent industry. Budding companies are snapping up space, too.&nbsp;

<p>Mayor London Breed proclaimed San Francisco the <a href="https://sfstandard.com/business/mayor-breed-declares-sf-the-ai-capital-of-the-world-can-leaders-keep-it-that-way/">AI capital of the world</a>, and it's clear that the city is the center of gravity for the nascent industry. Budding companies are snapping up space, too.&nbsp;</p>

<p>Mayor London Breed proclaimed San Francisco the <a href="https://sfstandard.com/business/mayor-breed-declares-sf-the-ai-capital-of-the-world-can-leaders-keep-it-that-way/">AI capital of the world</a>, and it&#8217;s clear that the city is the center of gravity for the nascent industry. Budding companies are snapping up space, too.&nbsp;</p>

A report from real estate company Avison Young identified top AI companies seeking to massively boost their leasing in San Francisco, including OpenAI, Anthropic and Adept AI. The nine companies are looking for more than 700,000 square feet in San Francisco, which would roughly triple their current space.&nbsp;

<p>A report from real estate company Avison Young identified top AI companies seeking to massively boost their leasing in San Francisco, including OpenAI, Anthropic and Adept AI. The nine companies are looking for more than 700,000 square feet in San Francisco, which would roughly triple their current space.&nbsp;</p>

A view of the Salesforce Tower from the Transamerica Pyramid in San Francisco, on June 14, 2023. The building is undergoing planned improvements spanning through 2023 including and expansion of the ground-floor park, modernizing the Pyramid’s dated interiors, renovating the lobby and entrances and adding amenities like a private top-floor bar for tenants. | Isaac Ceja/The Standard


<figure class="wp-block-image size-large"><img height="1668" width="2500" src="https://content.sfstandard.com/wp-content/uploads/2023/06/TransamericaPyramid06142023_022-2500x1668.jpg" alt="" class="wp-image-172110"/><figcaption class="wp-element-caption">A view of the Salesforce Tower from the Transamerica Pyramid in San Francisco, on June 14, 2023. | Isaac Ceja/The Standard</figcaption></figure>


<figure class="wp-block-image size-large"><img src="https://content.sfstandard.com/wp-content/uploads/2023/06/TransamericaPyramid06142023_022-2500x1668.jpg" alt="" class="wp-image-172110"/><figcaption class="wp-element-caption">A view of the Salesforce Tower from the Transamerica Pyramid in San Francisco, on June 14, 2023. | Isaac Ceja/The Standard</figcaption></figure>

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Downtown San Francisco Adidas store set to close

San Francisco’s biggest landlord defaulted on a massive loan

In the city’s southwest corner, real estate is booming and busting at once

The grim state of downtown San Francisco, by the numbers

WeWork nears bankruptcy, leaving San Francisco landlords exposed