S.F. to sell housing site at big discount

The San Francisco Public Utilities Commission is preparing to sell the 16acre Balboa Reservoir property to a private development group for $11.4 million, a bargainbasement price that has become the latest point of contention in the longsimmering dispute over city plans to build 1,100 housing units there.

The price for the land — a vast, flat parking lot just west of the City College main campus — represents a 50% discount from fair market value, according to the appraiser,

Clifford Advisory. The markdown takes into consideration the fact that the developer will be responsible for financing and building 366 units of affordable housing on the site, along with 550 units of marketrate housing. In addition the price takes into account the developer’s obligation to build out $48 million in infrastructure improvements, including four acres of parks, as well as roads, utilities and sidewalks.

Brad Wiblin, an executive vice president with Bridge Housing — which is building the project with AvalonBay and Mission Housing — said the $11.4 million figure was consistent with an appraisal his group commissioned earlier in the process. He said the 366 affordable apartments will cost about $91.5 million to subsidize, or about $250,000 per unit. He said the marketrate housing will occupy about half of the 17 acres, with the rest of the land going to the affordable housing, streets, sidewalks and open space. “That was the game plan from the beginning,” said Wiblin. “That half the site would be used for public good and in return the developer builds some marketrate housing on the other half.”

But critics say that the price tag is far below market value and that the city agency is getting a bad deal. They point to the fact that the city utilities commission was paid $9.9 million for the 3.3acre Francisco Reservoir, which was bought by the San Francisco Recreation and Parks Department. While the value of land in general is expected to drop significantly due to the economic devastation wrought by the coronavirus pandemic, the price of the Balboa property — less than $11,000 per buildable unit — is just a fraction of $100,000 to $200,000 per unit that has been paid in recent years.

Jean Bearish, a former City College biology professor, called the Balboa deal a “giveaway to a private developer, who’ll be able to line his pockets with money that should go to ratepayers.”

“I don’t know whether to call it a swindle or a heist,” she said. “I think it’s an outrage.”

The redevelopment of the lot below City College has been a hotbutton issue for more than 40 years as multiple mayors have attempted to build housing there, only to be blocked by neighbors, who object to the density and height of buildings, and by the City College community, which argues that the land should be set aside for expansion of the college.

The current proposal, which will likely be before the Board of Supervisors for final approvals in the early fall, calls for 50% of the units to be affordable. In addition to the 366 affordable units the developers are responsible for, the city has committed to funding another 184 units. Phase 1 would include 154 units of educator housing and 123 apartments that would be affordable to a family of four making between $37,000 and $98,000 a year. City College faculty and staff would have first preference for the educator housing.

John Manning, a broker with Avison Young who specializes in raising debt and equity for development projects, said with all the costs the developer is obligated to take on it’s not surprising the price tag is so low.

“At first glance the $11,000 per unit seems exceptionally cheap, but when you add the affordable housing and the infrastructure costs, the arithmetic smells about right,” he said.

Chris Foley, a broker and developer who has been negotiating land deals in the city for more than 20 years, said the price seemed reasonable. “Construction costs are still high and the infrastructure work is going to be a beast,” he said.

San Francisco Housing Action Coalition Executive Director Todd David said that the neighbors criticizing the low land cost are the same people who pushed for a lowdensity project. “If we double the number of units the underlying land value would go up and the PUC would be getting a much larger payment,” he said. “The opponents want to have it both ways.”

If approved, work on the $30 million of required infrastructure improvements — parks, roads, utilities, sidewalks, landscaping — will likely start in 2022. The first four buildings — two affordable and two marketrate — are to open in early 2024.

Bearish, the opponent, said that the improvements the developers are making are not so much public benefits as “mitigation” for the impact the development will have on public transportation, traffic, parking, and other things.

“They are not donating anything,” she said. “They are getting a deep discount on the land to offset the cost of the affordable housing.” SFPUC Deputy General Manager Michael Carlin said the agency has spent five years working on the project and was excited to bring it to the commission for approval.

“The project will provide 50% affordable housing, infrastructure improvements, and a number of other important community benefits that are much needed in our city,” he said.