Ultra-luxury SF condo projects could test just how high home prices can go: ‘They have a lot of money to spend’

It is a good time to be condo shopping in San Francisco — if you happen to be rich.

From the Embarcadero to Yerba Buena Island to Nob Hill to SoMa, the wave of deluxe condo offerings washing over the city will test the upper reaches of one of the nation’s priciest housing markets.

The latest crop of super-duper deluxe towers includes the 154-unit Four Seasons Private Residences at 706 Mission St., a glass-and-stone-tower where Stephen Curry just bought an $8 million condo and the penthouse is on the market for $49 million. There is the 120-unit One Steuart Lane — on the Embarcadero over looking the bay — where several penthouses are expected to top $20 million.

Other high-end projects on the market include the Crescent in Nob Hill, the first new project in that neighborhood in decades, and the 118-condo Avery, with a $16 million penthouse up for sale. At 181 Fremont, the largely sold-out tower with 55 condos above a Facebook office building, a sprawling apartment on the 68th floor went for for $14.5 million. The “Panorama Collection” of units atop the Jeanne Gang-designed Mira tower at 163 Main St. start at about $5 million.

The increase in housing for the 1% is being driven by rising construction costs, land values, city fees and affordability requirements, according to real estate experts. Only two sorts of projects make economic sense: developments for the super-rich and subsidized affordable projects for very low-income people. Housing for everyone else is increasingly difficult to finance.

In a city where every new market-rate housing development bills itself as “luxury,” the idea that San Francisco is on the cusp of a luxury condo boom can be confusing. Aren’t the new towers that have popped up around SoMa, Transbay and Mission Bay fancy enough to qualify as luxury housing?

The answer is no, according to developers and brokers.

Polaris Pacific, a brokerage that handles sales for many of the region’s condo buildings, defines luxury as above $2,000 a square foot and “ultra luxury” as over $2,500 a square foot, according to research director Miles Garber.

These buildings afford spectacular views and shower owners with services — everything from valet parking to yoga classes to dogwalking to on-duty bartending, according to Polaris Pacific. They are constructed of “rare materials” and designed by coffee table book-worthy architects and interior designers. Buying a unit in one of these buildings is, Garber said, “a discretionary purchase.” They are to shelter what a Maserati is to transportation.

Unlike cities like New York and London, the modern ultra-luxury condo market in San Francisco is fairly new. The first wave started with two branded hotel-condo buildings, the Four Seasons on Market Street and the St. Regis, which opened about 15 years ago. Those were followed by Millennium Tower, which generated $750 million in sales, and The Pacific at 2121 Webster St., where the average condos exceeded $5 million.

For developers targeting super high-end apartments, there’s a large audience. The Bay Area has over 6,000 residents with a net worth of over $30 million, according to Wealth-X, a firm that tracks wealthy people. That is up about 20% from 2010.

While San Francisco’s uber-luxury condo market is largely untested, the number of units coming online is modest compared to New York, which has over 9,000 unsold condo units, many of them priced at over $4,500 a square foot, Garber said.

The One Steuart Lane site — a former parking garage at the foot of Howard Street overlooking the Embarcadero — was a natural for the deluxe market. Even the lower floors have water views and many units have large terraces, including the 5,000-square-foot penthouses, which have wraparound decks.

The developer paid a $15.7 million affordable-housing fee rather than include below-market-rate units on site.

“We knew from the beginning this was going to the highest level of luxury in San Francisco because of the waterfront location,” said Paul Zeger, who is heading up sales at One Steuart Lane. “The buyers for these homes are not people worried about paying the mortgage. This is not necessity housing. This luxury is for the discerning buyer. They’ve made the money. The question is if they want to put it here.”

Planning Director John Rahaim said he has mixed feelings about the deluxe condo market, but that it’s part of the city’s housing ecosystem.

“If we don’t build it, people with those incomes will find other places to buy and that will push other people out,” he said.

On the other hand, the proliferation of these condos gives ammunition to anti-development critics who complain that the city is building for the wealthy, rather than for average citizens, Rahaim said.

Luxury condos “provide a good sound bite for opponents,” he said.

The next chapter in luxury condos may not be in mainland San Francisco, but out in the bay on Yerba Buena Island. There developer Wilson Meany is building 266 condos that will include some five-bedroom units priced to be competitive with projects like the Four Seasons and One Steuart Lane.

“What San Francisco offers at its best is killer views, connection to the outdoors, connection to the bay and accessibility to the cultural and economic benefits of the region,” said developer Chris Meany. “These things are all on steroids at Yerba Buena Island.”

Sotheby’s broker Gregg Lynn said that he had a client fly in from Hong Kong last week to look at the Four Seasons project.

“There are more exciting high-end condo developments coming online at the same time than there have been in a long time,” said Lynn.

Broker Mia Takami said she recently put two units in contract for clients at the Four Seasons residences. One of her clients plans to buy condos in both the Four Seasons and One Steuart Lane.

“My clients are CEOs of start-ups,” she said. “They have a lot of money to spend, and they want to spent some of it on real estate,” she said. “He likes the Four Seasons because of the services and lifestyle and One Steuart Lane because it’s the last waterfront project.”

As for Warriors star guard Stephen Curry, brokers say he took a hard look at 181 Fremont before settling on the Four Seasons Private Residences.

“It makes sense that he chose the Four Seasons for the services and privacy,” Takami said. “And $8 million is not a lot money for him.”

Investing in luxury condos has not always done well in San Francisco. The most obvious example — and definitely an outlier — is the Millennium Tower, where a design flaw caused the building to sink and tilt. A dozen units in that building sold in 2018 and 2019 for an average of $986 a square foot — well below the $1,400 a square foot the building averaged during its original sell out a decade ago.

But even investments in structurally sound buildings have not always offered healthy returns. In 2008, real estate mogul Victor MacFarlane bought three penthouses at the St. Regis for $30 million and then spent millions more combining them into a six-bedroom mansion in the sky. In 2008, he put it on the market for $70 million, where it sat until 2010, when he cut the price to $49 million. Eventually, the bank took the property back and sold it for $28 million.

J.K. Dineen is a San Francisco Chronicle staff writer. Email: jdineen@sfchronicle.com Twitter: @SFjkdineen

Article source: https://www.sfchronicle.com/local-politics/article/Ultra-luxury-SF-condo-projects-could-test-just-15075358.php

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