SFHA substitutes affiliate as Plaza East developer partner, agrees to oversee repairs

The Housing Authority of the City and County of San Francisco on Wednesday approved replacing the developer general partner of Plaza East Apartments with an authority affiliate, authorized staff to provide contract oversight for the property under a memorandum of understanding, and increased a repair contract to address additional unit damage, officials said. Plaza East Associates LP owns Plaza East Apartments, a 193‑unit property with units restricted to households at or below 60 percent of area median income. The partnership was formed using HOPE VI implementation grant funds and low‑income housing tax credits.

Authority project staff told commissioners the change follows a formal request by the developer affiliate MBA Urban Development Company to withdraw from the ownership entity. "They formally requested to withdraw from the ownership entity in 09/18/2024," an SFHA presenter said. The board approved substituting SFHA Housing Corporation, another authority affiliate, as a developer general partner to prevent the partnership from dissolving while the authority seeks a new developer partner and a new LIHTC investor. "It does not affect the living conditions or the legal rights of the residents at Plaza East," the presenter said.

The commission also authorized a memorandum of understanding under which SFHA staff will provide contract negotiation, management and oversight services to Plaza East Housing Corporation, the managing general partner. Under the MOU the authority will perform tasks such as overseeing third‑party property management and construction contracts, notifying HUD and other lenders of ownership changes, and preparing requests for proposals for a replacement developer when appropriate. The MOU states the authority will be reimbursed by Plaza East Housing Corporation for staff services and expenses "to the extent financially feasible," staff said.

During discussion housing authority counsel Crute described the proposed indemnification language as requiring a showing of gross negligence before triggering joint indemnity. "The idea here is that the indemnifications happen because somebody really should have known there was a problem or somebody wasn't watching the store," counsel Crute said, explaining why the higher standard was appropriate for this arrangement.

Separately, commissioners approved an increase of $1,000,000 to the existing DC Construction contract for vacant‑unit rehabilitation at Plaza East, bringing the contract not‑to‑exceed total to $3,000,000. Procurement staff said the change adds 10 additional vacant units to the project after field crews discovered more extensive dry rot, subfloor failure and water‑intrusion damage than originally anticipated. Mason Wilson, project manager for DC Construction, gave a high‑level description of the added scope: "new flooring, full unit paint, new cabinetry, countertops, kitchen sinks and faucets, and in some cases bathroom toilets and vanities."

Commissioners voted unanimously to approve the ownership substitution, the MOU and the contract amendment. Staff said HUD approval of the developer substitution was required and that the authority has completed HUD's required submission steps; the substitution will proceed only after HUD's review. Authority staff also said they will lead the process to select a new developer partner and will provide oversight of repair and contractor work at Plaza East while the ownership entity remains in its current configuration.

Next steps include final HUD approvals, execution of the MOU and continued on‑site rehabilitation work. Staff said residents should see no immediate changes to tenancy rights as a result of the ownership substitution and that any developer selection would be the subject of future public reporting to the commission.