SAN FRANCISCO—The development of a mixed-use property comprised of 90 for-sale housing units and above-ground-level retail space at 1075 Market in the Mid-Market area is progressing. Commercial real estate investment banking firm George Smith Partners arranged $34 million in ground-up construction financing for the project, according to its principal, Jonathan Lee, senior vice president David Stepanchak and vice president Adam Candler.

“It took our team just two years for entitlement for the project, which is fast for San Francisco. The city is focused on redevelopment in Mid-Market, along with transit-oriented developments,” Lee tells GlobeSt.com. “There are less than 30 parking spaces for 90 units and 12 below-market rate units on this project. It is priced at $800,000 to $900,000, which is more affordable than most projects of its kind.”

George Smith Partners secured the loan on behalf of the developer, real estate investment and development firm, Encore Capital Management. Hector Calderon, managing director of Encore Capital Management, notes that walkability is a prime consideration when developing in this urban core.

“San Francisco's Mid-Market has transformed in the past four years, attracting major tech companies such as UBER, Square, Dolby and Twitter,” Calderon says. “The result is a tremendous number of new jobs within walking distance of our planned development. Our target buyers are singles and young couples who want to be near the vibrancy of Mid-Market, as well as empty nesters that are retiring, downsizing and moving back into the area. These are individuals who want to enjoy a walking lifestyle, and take advantage of being within four or five blocks of some of the hottest neighborhoods in the city.”

The ground-floor retail space is designed for restaurant use, and can be sold to a single user or easily subdivided and sold to two separate owner/operators in the future.

“The flexibility of this proposed project, coupled with its irreplaceable location in the urban core of San Francisco, made it an attractive project for lenders,” says Lee. “The challenge, however, was in addressing lenders' concerns with regard to fluctuations in the current residential market. Conflicting reports have emerged in recent months regarding the potential 'cooling' of the San Francisco condo market. To alleviate these concerns, our team focused on demonstrating the strength of the sponsor, as well as the steady demand for well-located mixed-use space that delivers the live/work/play environment today's consumers are seeking.”

Ultimately, the $34 million non-recourse construction loan was secured with only a completion and carve-out signature–there is no repayment guarantee. Sized to 60% of actual costs, the loan is priced at Libor plus 400 with a term of three years, and includes an option to extend an additional one year.

“As job growth continues based on high-paying tech industry positions in San Francisco, demand for housing remains on the rise,” says Lee. “Downtown San Francisco offers a lifestyle that is appreciated by a myriad of demographics, from millennials to baby boomers, and we were successful in demonstrating that widespread demand to lenders.”

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The ground-floor retail space is designed for restaurant use, and can be sold to a single user or easily subdivided and sold to two separate owner/operators in the future.

Instant Insights /

Entry-Level Price Point and Walkability Lend to Housing Appeal

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