Martin Building Co. Plans $60MM Apartment Project in Downtown San Francisco
By Jon Peterson
Martin Building Co. owner Patrick McNerney says he is in no way spooked by the fat pipeline of new apartments slated for delivery in San Francisco over the next two years.
San Francisco-based Martin expects to plow $60 million into the city’s multifamily market in the next 16 months to build 121 apartments in the city’s gentrifying Mid-Market neighborhood.
That includes the $8 million that the company paid for the 1415 Mission St. site plus the cost of development. The Mission and 10th Street project is to include a rooftop gym and a barbeque pit.
“We know about all of the projects being planned for the city, but we still feel good about our site,” McNerney said. “I think that there are going to be some cases where developers look at changing their projects from apartments to condos as that kind of housing makes a comeback.”
Both Cassidy Turley Real Estate Services and multifamily research firm RealFacts say their most research indicates that the crazy increases in Bay Area apartment rents over the last three years are drawing to a close. San Francisco apartments were among the top-performers nationwide last year, charting an 8.8 percent average rent increase to $1,859 a month. San Jose’s 2012 rent rise was even greater at 9.3 percent to $1,954.
But San Francisco rents were flat in the final quarter of last year, RealFacts said, and San Jose’s average rents actually fell 1.4 percent.
Cassidy Turley estimates there are more than 15,000 apartments under construction in the Bay Area today and that 5,400 of them will be delivered in San Francisco in the next 30 months or so.
The Mission and 10th Street site was previously owned by San Francisco-based R&K Investments, which was represented in the sale by the San Francisco office of Colliers International. Erik Hanson, a vice president for Colliers in its Investment Services Group, said the transaction illustrates that demand remains strong for fully entitled apartment sites in the city.
The transaction’s escrow took almost all of 2012 at the request of the seller, Hanson said. He and Executive Vice President Tony Crossley and Senior Vice President Frank Wheeler worked on the transaction.
The project is expected to have 11 units on each of its 11 floors with 3,000 square feet of commercial and retail space, McNerney said.
The site was most recently used as a surface parking lot. A concrete building there now is being demolished. The developer expects to start construction in May or June and to take about 16 months to finish.
Martin Building will be developing the property with its own capital and construction financing from the U.S. Department of Housing and Urban Development. McNerney declined to provide details. Fifteen percent of the units, or 18 of the total number, will be set aside as “affordable” under a requirement from the city.
“I would think that we would draw in people who want to live and work in the city and empty nesters who are looking to move into an apartment,” McNerney said.