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The Best Intentions

Feb
3
2004

San Francisco Supervisor Tom Ammiano is in many important respects, a wonderful guy. There is no one who is more in love with this city and its greatest attraction: it’s tolerance and diversity.
But he ain’t no banker.
Today’s San Francisco Chronicle has a big story about the $98 million that developers stand to make if the Ricon Hill project that’s already made it past the Board of Supervisors and the Planning Commission wins final approval. Only Ammiano has voted against the measure.
Now, $98 million is a huge sum of cash, a pile o’dough. But for a real estate developer, it’s nothing to get too excited about particularly given how long his project has taken. Developers stand to make about $181,000 off the sale of each Rincon Hill unit they eventually sell, assuming that planning forecasts done in 2001 remain accurate, not exactly a safe bet. The $98 profit relies on two-year-old planning forecasts. Doesn’t that mean the project has been awaiting approval for two years? So, that means Rincon Hill’s developer are making $98 divided by 4 years (two for planning, so far, two for building), or about $25 million. I know people who are worth $25 million. More importantly, it’s hard to tell from the Chron story if the $98 million is calculated with or without the low-income housing concession that Supervisor Chris Daly recently secured.
San Francisco’s property mavens, from the developers down to the apartment brokers are a conniving bunch as any one who got here at the beginning of the Interet stock bubble would be happy to testify. But having spent much of my career listing to business guys talk, I’m not going to curse the profit-makers. Particularly in a city that as hard up for housing – please sir, can we have some more? – as this one is and will remain for the foreseeable future. Developers make money by borrowing against the future. It’s risky. That’s why it pays well.
If the Rincon Hill developers have shown the patience necessary to go through San Francisco’s painful, slow and expensive development process in a market that’s slowing in an fiscal environment where interest rates are increasing (driving up their costs and driving down demand and price for the units) there doesn’t seem to be a whole lot of sense in saying they can’t make money.
It can’t be that Supervisor Ammiano — who is proposing the city add economic analysis to its planning review — is hoping that the board will get into the business of deciding “how much” is “enough” profit. Can it? No, I suspect what Ammiano wants to do is have the city better examine the economic outlook for a particular project. That’s a good idea; done in 1997 an analysis like this could have saved the Board a lot of anguish and heartache. But to key zoning on how much a property will improve in value, well, even if it’s paved with good intentions it’s a road to a certain kind of San Francisco Liberal Class Warfare Hell. And I for one, can’t take much more of that.

Share  Posted by Chris Nolan at 11:53 AM | Permalink

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