Date: February 20, 2014
SAN FRANCISCO-Recently, KB Home purchased a shovel-ready, 81-unit site at 2655 Bush St. in San Francisco’s Lower Pacific Heights from Los Angeles-based investor Ares Management LLC and Mill Valley, CA-based multi-family developer Thompson | Dorfman Partners LLC. GlobeSt.com chatted with Brett Betzler, director of Chicago, IL-based Moran & Co., who represented KB Home in their off-market purchase of the property, about what this deal could signify.
Betzler tells GlobeSt.com that when Thompson Dorfman and ARES purchased the property in 2012, apartment developers were regularly outbidding condo developers. “However, condo prices went up about 20% while they were designing the building. This significantly increased the purchasing power of condo developers.” According to Betzler, “This allowed KB to make a compelling offer just as Thompson Dorfman was about to break ground on the project.”
Betzler said this could signify a larger trend. “To my knowledge, this is the first time in this cycle that a well-capitalized apartment developer was enticed to sell a major, shovel-ready California site that it fully intended to build out to a condo developer.” According to Betzler, “It could be the beginning of a trend in which condo developers will outbid apartment developers.”
This is one of the few entitled multifamily sites in a traditional San Francisco neighborhood,” Betzler says. “The location at the corner Bush and Divisadero is close to great restaurants and shopping, including those on upper Fillmore, and is adjacent to the UCSF/Mt. Zion Medical Center and near Kaiser Permanente’s San Francisco hospital campus.”
2655 Bush St. is a perfect example of the type of urban infill projects that cities and experienced developers are focused on in this economic climate, says Betzler: “core, urban locations that offer close proximity to jobs, amenities, transportation and established infrastructure where people can live, work, play and shop.”