(This article originally appeared on March 10, 2016)
By j.k. dineen, San Francisco Chronicle
The board of the cash-strapped Transbay Joint Powers Authority struck a deal Thursday with a developer willing to pay $160 million for a key parcel of land near the transit center, money that is badly needed to finance the first phase of the $2.1 billion facility at First and Mission streets.
Development group F4 Transbay Partners plans to build a mixed-use tower with upward of 300 hotel rooms, 200 residential units and as much as 425,000 square feet of office space. In addition, the developer has agreed to pay the transit authority an additional $15 million if it can hammer out a deal to acquire a contiguous piece of privately owned land at 540 Howard St.
The tentative agreement, which the board unanimously approved Thursday morning, represents the third time that the transit authority has tried to sell Parcel F, the last remaining development site in downtown San Francisco zoned for a 750-foot tower. Parcel F is on Howard Street between First and Second streets.
In December, residential builder Crescent Heights backed out of a deal to pay $165 million for the property after concluding that it would not be economically feasible to meet the 35 percent affordable housing requirement set by the transbay district plan. In September, the transit authority canceled a live auction for the property because of lack of interest.
“We accomplished our goal,” said transit authority Executive Director Maria Ayerdi-Kaplan. “We set out to sell it for $160 million and we accomplished that goal. This is a very important transaction for the finances of the project.”
The deal with F4, a joint venture of Hines, Urban Pacific and the Goldman Sachs real estate fund Broad Street Real Estate Credit Partners, is to close by summer. It is not a sure bet, however.
It is contingent on the city granting the developer an exclusive negotiation agreement to take on another piece of transbay land — Block 4 — currently being used for the temporary bus terminal. That property, zoned for a 450-foot residential building, would give F4 land to build the 70 affordable units connected to Parcel F, as well as additional housing.
Parcel F is adjacent to the transit center and the new suspension bridge to the bus ramp that will connect the facility to the Bay Bridge. It is also the final parcel that can directly connect to the Transbay Transit Center rooftop park via a pedestrian sky bridge.
Rising costs have left the transit authority with a $360 million shortfall for the completion of phase one, a figure that includes a rainy day fund. Phase one includes construction of the five-story Transbay Transit Center, bus ramps and an underground box intended to house a downtown Caltrain extension and high-speed rail someday.
Along with struggles to sell Parcel F, the transit authority found no corporate sponsors willing to buy the naming rights to the transit center. The transit authority is hoping such sponsorship could bring as much as $80 million.
Ayerdi-Kaplan stressed that the developer is taking on all the entitlement risks, meaning that the group has agreed to close on the purchase of the land before gaining the approvals needed to build a soaring complex of condos, hotel rooms and office space. The development itself will need to be approved by the city’s Office of Community Investment and Infrastructure and the Planning Commission.
With this transaction, the transit authority has raised $660 million by selling land around the new transit center, which is to open in 2017.
The money will enable the transit authority to pay back all of a $171 million bridge loan from Wells Fargo and Goldman Sachs, which provided interim financing for phase one, Ayerdi-Kaplan said. It will also reduce the amount that needs to be borrowed from the city. The transit authority has been in talks to borrow $360 million from the city. That loan would include reserves to cover unexpected costs or escalations, in addition to current shortfalls.
If it goes through, the deal would ensure there is enough money to build City Park, the 5.4-acre rooftop green space on top of the transit center. The transit authority board of directors awarded the contracts for the park after December’s Crescent Heights deal, but when that fell through it was unclear how the park would be funded.
“Absolutely, the park so going to be built, and it’s going to be beautiful,” Ayerdi-Kaplan said.
While the Goldman Sachs group, which raised a $4 billion development fund in 2014, controls 90 percent of F4, both Hines and Urban Pacific are veterans of the city’s land use politics. Hines is the co-developer of the Salesforce Tower next to the transit center, which will be San Francisco’s tallest building. And Urban Pacific built One Rincon Hill, the two-tower complex at the entrance to the Bay Bridge.
“We are pleased to have this opportunity to develop one of the key buildings in the dynamic transbay project area,” said Mike Kriozere, principal of Urban Pacific. “What we create will be an asset to this vibrant neighborhood, and we look forward to enhancing San Francisco and its skyline with our plans for a mixed-use tower on Parcel F.”
Block 4 makes up about one-third of the land occupied by the temporary terminal. The rest of the property will be used for open space and more low-rise housing and townhomes. The transit authority had planned on releasing Block 4 later this year.