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OCII approves loans and ground leases to fund Mercy Housing's 184-unit Transbay Block 2 East project
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Summary
The San Francisco Office of Community Investment and Infrastructure approved amended loan and ground-lease agreements to fund Transbay Block 2 East, a 184-unit 100% affordable family housing project with on-site childcare and two community-serving commercial spaces; commissioners pressed staff on cost increases, local hiring and outreach plans.
The San Francisco Office of Community Investment and Infrastructure on March 19 approved amended and restated loan agreements and long-term ground leases to support construction of Transbay Block 2 East, a 184-unit, 100% affordable family rental housing development led by Mercy Housing.
OCII Director Koslowski and senior development specialist Kim Obstfeld told commissioners the Block 2 East project includes 184 units ranging from studios to three‑bedrooms, two on‑site manager units, a childcare facility operated by Wu Yi that is expected to serve about 45 children, and two ground‑floor community‑serving commercial spaces. Obstfeld said the residential portion will include 40 units for families experiencing homelessness supported by the city’s local operating subsidy (LOSP).
The agency described a three‑tranche OCII funding structure that will total about $73 million in OCII support: roughly $62 million as a permanent residential gap loan, about $9 million to fund the commercial component, and approximately $2 million for site preparation. Obstfeld said additional residential financing will come from Low‑Income Housing Tax Credit equity and a roughly $41 million award from the Affordable Housing and Sustainable Communities (AUSIC) program, which includes about $13 million for pedestrian and transportation improvements in coordination with SFMTA, the Department of Public Works and BART. "The development program for Block 2 East includes a total of 184 new units," Obstfeld said.
Commissioners pressed staff for clarity about the request’s size and how previously authorized predevelopment funding related to the current ask. One commissioner asked whether the request was an $8 million increase or a substantially larger amendment. Obstfeld responded that the $53 million being requested is in addition to $8 million previously authorized for predevelopment, bringing the residential piece to about $61.9 million and the all‑in project estimate to roughly $72.9 million. "So our all in amount is still the 72,900,000," Obstfeld said.
Commissioners raised several implementation concerns during a robust question-and-answer period. They requested more outreach to hard‑to‑reach communities, multilingual workshops, and assistance for small businesses; staff and Mercy said they would incorporate those strategies into the required early outreach and commercial marketing plans. Obstfeld noted occupancy preferences that will be applied at lease‑up: first priority to certificate-of‑preference (COP) holders and descendants of originally displaced households, then displaced tenant preference holders, neighborhood residents, and then San Francisco residents or workers. Forty supportive units will be referred through the Department of Homelessness and Supportive Housing’s coordinated entry system.
On workforce and contracting, OCII reported that about 88% of current professional services contract values have been awarded to SBEs or SBE joint ventures; Maria Pico of contract compliance said San Francisco LBE participation is roughly 58–59% in purchased scopes to date. Mick Penn, community relations director for the Swinerton Rubicon joint venture, described partnerships with CityBuild and community organizations and a new employee training and retention program intended to improve local hiring and support workers’ re‑indenturing into union trades.
Mercy senior project manager Sean Wills described transportation supports built into the project: 92 secure bicycle spaces and three years of transit passes for each unit, with a minimum monthly ride allocation. Wills also said that many current funding sources and tax‑exempt bond rules make adding parking infeasible without sacrificing units.
After discussion, Commissioner (speaker 7) moved to approve item 5b (the amended loan agreements). The commission voted 4 ayes, 0 no, 0 abstain, 1 absent; the motion carried. The commission then separately voted to approve item 5c (the residential and commercial ground leases) by the same 4–0 roll call vote, with one absence.
Construction for Block 2 East is scheduled to begin immediately after financing closes in May 2024; initial residential occupancy is projected for May 2026, childcare tenant improvements are expected to begin in December 2025 with an August 2026 opening. Obstfeld said a groundbreaking ceremony is planned for late May and staff will circulate outreach and a project newsletter during construction and lease‑up.
The commission’s approvals allow the developer to close construction financing and move the project toward start of construction, while requiring OCII compliance with equal‑opportunity, SBE, prevailing‑wage and nondiscrimination policies and the submission of outreach and marketing plans during early construction.
