An already confusing development deal grew even more convoluted last month when the city sold its 30 Van Ness property to Australian developer Lendlease. 

Lendlease, who may consider 30 Van Ness an opportunity to aggressively enter the American market, got a $10 million discount on the deal, though they may potentially offer the exact same amount of affordable housing as the previous developer, Related California, had negotiated.

The building currently houses a variety of City offices along with a Walgreens pharmacy, and was first put up for sale with the goal of redevelopment in late 2015. The city expected to sell the property for around $87 million. They ended up with a number of lowball bids after it was revealed that significant seismic work would have to be done on the building.

In the end, the City was set to accept a bid for $80 million from Related California, along with a promise by the developer to reserve between 15 and 20% of future on-site residential development for affordable housing. The building, which is zoned for up to 40 stories, has a potential buildout capacity of between 500-600 residential units.

Last year, Aaron Peskin, freshly elected to the Board of Supervisors after a hiatus, joined fellow Supervisor Jane Kim (in whose district the project sits) to lead a majority opposition to the sale, arguing that the City could get a better deal, in both total sale price and the amount of affordable housing. The board ended up rejecting the sale by a 7-4 vote. It was a surprise result that put both the Hub plan and the funding of a new City office building on hold. The building was placed on the market again in September 2016 with hopes for better results, but without a listed price.

A new offer for $70 million was tendered by the Sydney-based firm Lendlease in February of this year. 30 Van Ness would be Lendlease’s first solo project as a developer in the San Francisco market. (In 2005 the company was a partner with Mapletree Investments in the Watermark condominiums at 30 Beale Street, and has been active as a construction contractor.)

The deal includes an increase in the on-site affordable component to 25%, 5% higher than with the Related deal. A promise of additional “fee-out” payments of $8 million to the Mayor’s Office of Housing would go to fund additional off-site affordable housing units, in an adjacent project built by a nonprofit contractor. This would bring the total percentage of affordable housing associated with the project to 33% - which, according to earlier reports, would have also been possible with the Related deal with anticipated subsidies.

Still, not everyone was satisfied with the offer. Peter Cohen and Fernando Marti, co-directors of the Council of Community Housing Organizations (a trade group for Affordable Housing nonprofits), denounced the deal in an Examiner editorial as an attempt to “undercut desperately needed affordable homes to cover the costs of [city-owned] office space.”

When the new sale was up before Supervisors again last month, newly-elected supervisor Ahsha Safaí introduced a motion to continue the vote on the sale. That motion was rejected and in the end Safaí, along with Board President London Breed, were the only two votes against the sale.

"Admittedly, I was coming in at the end of this conversation," Supervisor Safaí said, "but that property is the only one in our portfolio that's zoned for 500 feet, and I wanted to make sure that we looked at all of the possible options, given the needs that are out there."

The expanded affordability concessions in the Lendlease deal reflect recently passed legislation governing affordable housing funding, and the ongoing debate over its effectiveness. Last summer, San Francisco voters passed Proposition C, a measure which called for the affordable component of new housing developments to be increased to 25%, with the condition that the Board of Supervisors could amend those numbers based upon feasibility studies done by the Controller. The first such study found that the new requirements were actually slowing down the development of housing production, by making projects too expensive to finance.

Nevertheless, if the deal works out, it could add up to 175 affordable units to the city’s inventory. “I can’t speak about a previous deal that involved other parties. For us, providing affordable housing is an important part of the project,” says Alexa Arena, West Coast director at Lendlease.

How could Lendlease commit to such a deal where other developers couldn’t? As an international developer highly motivated to enter the North American market, with parallel projects in Chicago and New York, Lendlease has incentive to invest a little extra capital in the project. With an estimated $10 million discount, Lendlease may find the San Francisco market much friendlier than expected.

Correction: an earlier version of this article described 30 Van Ness as Lendlease's first project in the San Francisco Market. In fact, the project is their first solo project as the developer.
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