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Check out this building in SOMA, it was finished, sat empty waiting for permits for 2 years because the City sucks, and during that time the condo market crashed and so now the builder had to hand it back to the lender. Full brand new condo building one block from Oracle Park with like 24 luxury condos in it for 16 mil now:

https://sfstandard.com/2023/08/16/brand-new-san-francisco-co...

San Francisco has long struck me as the worst run major city in the US. Not just incompetent but almost malicious.

Lots of right wingers like to make it a right/left thing but no, I just think SF seems to be it’s own special snowflake. There are plenty of cities and towns run by left wing types that are much better run in every way.

The impression I get is of a rent extraction cartel that somehow pretends to be super woke and progressive and plays the local politics like a fiddle. The hordes of homeless are a problem they both caused and benefit from since it offers them an opportunity for theatrical altruism and probably a lot of corruption and graft of funds via dodgy non profits.

On that condo building: so it got built then got rug pulled? Look into who buys this distressed property at auction and then see what happens to it. Wouldn’t surprise me at all if it’s someone with connections.

“Uh oh, someone got something built! We’ll fix that.”

The rental market didn’t cause the homelessness.

Most homeless people weren’t renting in SF before they got homeless. These are the people who just gave up in leave. Has nothing to do with rent prices or housing prices.

Truth is, SF is attractive to homeless people because it has nice weather all year round and the politicians tolerate them.

Unfortunately your “truth” is almost certainly false. Actual research shows the majority of homelessness in CA is a result of unaffordable housing and there is no mass migration of homeless to CA (thst also doesn’t make sense…with not even enough money to afford a house in a city where you may have connections and at least know the lay of the land, why would you move to a significantly more expensive city where you know no one and don’t know anything about it…and even if you think the weather is such a draw, then why are there any homeless in SF? Why haven’t they all moved to LA?).

https://www.ucsf.edu/news/2023/06/425646/california-statewid...

> Contrary to myths of homeless migration, most were Californians: 90% of participants lost their last housing in California and 75% of participants live in the same county as where they were last housed.

> The study found that for most of the participants, the cost of housing had simply become unsustainable. Participants reported a median monthly household income of $960 in the six months prior to their homelessness, and most believed that either rental subsidies or one-time financial help would have prevented their homelessness.

You mean there’s a connection between not enough housing and homelessness? I dunno isn’t that pretty far fetched…?

/s

How do you know that? Research usually suggests that the most important factor in homelessness is unaffordable housing.
The kind of homeless people in SF is not the same as the kind that can't afford housing. The homeless people in SF have given up on life. They're drug addicts. They're violent. They've been homeless for a long time even.

Even if you give them free housing, they'll mess it up somehow. They can't hold down a job. They don't take care of the home. They'll abuse the home until it's unlivable.

If it's truly unaffordable housing, why the hell are they in SF? Go to somewhere that is 1/4th the price. Plenty of places in the US.

Source: Lived in SF for 20+ years.

It's a well known fact homeless people come and stay in California for the mild weather. A lot of homeless are drug addicts and mental health issues. They can't hold down a job being that way. Normal people would just move or leave.
Why are they coming to SF and not all going to LA then?

Of course all the research (admittedly limited, but there is no research showing this “well known fact”) this well know fact is just false.

SF and LA are both in California. There are many factors why they don't ALL go there but LA has a significantly bigger homeless population than Oakland and SF.
Progressive capture of most institutions makes a lot of research questionable in this particular world of ideas.
As far as how the city itself is run and operated, yes.

Separate from that is the experience of living in this city.

My wife and I have walked next to pods of dolphins with our dogs along the Embarcadero, we've listened to countless free concerts under the stars with perfect weather, we've learned what truly good food from around the world is like, we've met so many fascinating people from documentary filmmakers to product designers to dog walkers. It's a magical place not just still today, but especially today.

All this is part of how the city can get away with being so badly run. It can coast on its beautiful location and the network effect of the tech industry.

Detroit in the 80s and 90s is what you get when a city without so much free ballast is badly run. (Though in some respects it doesn’t seem to have been as badly run as SF. At no point did it have anything like the housing affordability nightmare SF has, just bad urban planning and crime.)

They built without permits? And the bank just gets to take it back rather than the govt requiring demolition?
After construction one typically needs to get a certificate of occupancy, a last round of inspections to ensure things were actually built to code before people move in. The article mentions this certificate.
Are you saying that it’s logical, or sane, to demolish a brand new building, built to spec, because the bureaucratic stamps took place out of order?
Source?

Pretty sure thats not what happened in this case

By now I would think most builders can expect 1-2 years for obtaining permits. Not ideal, but it's similar in other large metros.
"San Francisco's process for issuing building permits is notorious for being one of the most cumbersome in the country. The city takes an average of ten months to issue a permit, compared to six months in Los Angeles and New York City." https://starboardcre.com/editorials/governor-newsom-wants-to....
> By now I would think most builders can expect 1-2 years for obtaining permits

It takes 6 to 12 months in New York [1]. In the meantime, 90-day temporary COIs are issued.

Permitting hell is a California specialty.

[1] https://propertyclub.nyc/article/certificate-of-occupancy-ny...

That is certainly not the case in Austin. There's no reason SF can't replicate that if they even try a little bit.
SF has been actively tarpitting permits for a very long time. The last thing they want is speedy or effective.
According to Zillow, rent in SF is about flat over the past year and a half, so it's not like all SF real estate across the board is getting twice as cheap.

I kinda like the NEMA building itself, but the location near Civic Center is right in the middle of the fentanylpocalypse. Of all the places to lose value, this one doesn't surprise me much.

Why do you need new buildings? This article is literally about the value of a building declining.

The problem is that there are large numbers of dwellings that are empty, but the property owners don't want to rent them out in the vague hope that in the future they'll be able to charge much more.

So you get high rents and homelessness (that's your fentanylpocalypse that you've decided is the city's fault and not the predictable consequence of cost driven homelessness) while also having large numbers of unoccupied apartments. All because a bunch of investors are hoping that by restricting the supply they can push rent prices up.

It's not that rents are declining, it's that interest rates keep going up.
Interest rates have doubled in the last 2 years, so rents being flat roughly corresponds to asking price of about half..
I don’t follow.

There isn’t a perfect relationship between cap rates and interest rates, especially during this cycle cap rates haven’t fallen as quickly as expected.

> NEMA’s debt-service coverage ratio, which measures the ability of a property’s cash flow to pay its debt, has been below 1 since 2020, a troubling sign for the ability of the developer to control the building.

The cap calculation on the property has also been fixed by cutting the price in half, but more importantly a new commercial owner would at least be able to service a loan based on the new value.. While the cap rate could be such that expectations are insufficient for debt service, I think that means there are no realistic buyers.

When property like this goes underwater, it starts the clock for how long people can wait things out while staying solvent.

The exponential rise in property prices have helped people stay calm but I think there’s a lot more pain ahead.

good to see a single person in this thread understanding the problem in a sea of the willfully ignorant
An intuition I am open to being incorrect: I found NEMA ostentatious and overpriced even at the peak of Uber/Twitter hype (the offices of which form a NEMA sandwich). Second only to the condo building that tilted because its piles were driven too shallow, it does not surprise me that this building would "lose value" in a correction.
Correct. NEMA was always kind of ill-conceived.
Current vacancy rate is still less than 10%, so unsure what makes it ill-conceived. There is/was a lack of amenity-rich rentals targeted to young professional types in SF like you’d see in NYC and it fills a certain niche.

Main issue is rental market in SF is still soft so they can’t charge what they did pre-pandemic, and the location doesn’t help.

"so unsure what makes it ill-conceived"

The headline of the article is that it has lost 50% of it's value. During that same multi year period we have had well over 10% inflation.

So Maybe that part. Yeah I'm gonna go with that part.

Or maybe the investors just hate money and were going for -60% ROI. Who knows.

This is a really uncalled for response. The original comment pointed to the ostentatiousness of a luxury rental building, as if there is no place for it in SF.

It lost value because of a global pandemic years after it launched that has caused rents to fall, but has still managed to keep vacancy rates below 10%. Obviously it could not have planned for something completely outside of its control.

Real estate values aren't included in inflation calculations.
This is wrong. Housing accounts for about a third of CPI. There's some funkiness about how the Owners Equivalent of Rent is calculated but real estate prices definitely show up in inflation.

https://www.brookings.edu/articles/how-does-the-consumer-pri...

Nope. Owner's equivalent rent is not the same as real estate price.
Now we see the real reason for forced RTO to city centers. The people that own the tech companies also own real estate and needs the farce of white collar workers being around their property to keep its value inflated.
So, developer tried to jump into the insanely hot condo market of 2018/2019 where foreign investors would buy up units and rent them out to people in tech.

Pandemic happened, and interest rates shot up. Looks like timing is everything, and it wasn't really SF's fault.

Nah, it's really important that we blame the SF governance (which has plenty of issues) for the poor planning and failure to accept basic capitalism of a for-profit condo company. Seriously this is basic capitalism: if your customers/tenants all work for one industry, and that industry craters and lays them all off, you aren't going to have customers/tenants any more - and the local government can't control that.

[Blaming SF's governance for literally everything as if it controls many of the companies based in SF collapsing because they were poorly run and/or poorly conceived failing and leaving is the only thing that passes muster in HN comments :D]

Lost valuation, which is a distinct concept from value.
Please. If we accept the validity of use-value separate from exchange-value there is an entire dialectical chain of consequences we have to contend with. It's much easier to conclude that its value is equivalent to its price.
Easy and appropriate are not synonyms.
Marx is neat but theory of value money credit and time pref is much better understood under an empirical framework so much so I’m sure even drunken Karl would agree.
Sure, but at 92% occupancy and a delinquent loan on the building with negative cash flows, the lower valuation removes the ability to sell and come out ahead. They're in a hole, digging deeper and the escape plan just collapsed in on them.
There is just nothing about this statement that is profound
It's not meant to be, it's meant to challenge assumptions.
Well that sucks.

Anyways…