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OCII approves 90-day extension for Transbay Block 4 while staff reviews lower-affordability proposal
Summary
The commission authorized a limited extension to Sept. 30, 2021, for F4 Transbay Partners' option on Block 4 to allow staff to analyze a revised proposal that reduces deeply affordable units from the term sheet's 49% target to about 40%; vote was 4-1.
The Commission on Community Investment and Infrastructure voted June 15 to authorize a 90-day extension of the option agreement for Transbay Block 4, giving staff until Sept. 30, 2021 to complete a review of a revised housing proposal from F4 Transbay Partners.
Kim Obstfeld, OCII development specialist, told the commission the developer submitted a revised proposal on June 4 that reduces the share of deeply affordable units compared with the original 2018 term sheet. The term sheet had envisioned 49% affordability for the parcel; the developer's March submittal showed roughly 39% and the most recent proposal is approximately 40%.
Obstfeld noted OCII has a legal obligation to ensure a minimum of 35% of new residential units in the Transbay redevelopment project area are affordable to low- and moderate-income households and said the option agreement establishes a land price of $45,000,000. The proposed project overall was described in staff materials as roughly 685 units split among a 100% affordable mid-rise (now proposed at 202 units) and a mixed-income tower and townhomes with ground-floor community-serving retail.
Developers and Mercy Housing representatives told commissioners that financing is constrained by statewide competition for California Debt Limit Allocation Committee (CDLAC) credits and by rising construction costs. Dan Esdorn of Hines said an independent cost consultant has "pegged escalation at 15% or more since 2018 and over 30% since 2016," and he cited declines in condo prices and higher vacancy rates in the Transbay area since 2018.
Staff said the developer asserted the project "cannot sustain any payment for the land," a position supported by a developer-sponsored appraisal. OCII engaged consultants to review the developer's model; at the commission's direction staff rejected the 39% proposal and sought to retain the 49% target in keeping with the earlier term sheet. The June 4 submission at roughly 40% affordability prompted the short-term extension request.
Commissioners pressed staff and the development team for clearer documentation of the assumptions driving the proposal and for sensitivity analyses that would show how changes in construction costs, unit mix and financing would affect affordability. Commissioner Beiser asked staff to present the consultants' analysis and response to the developer's assumptions in the next packet. Vice Chair Rosales asked for early commission input on certificate-of-preference outreach strategies and community benefits outreach. Commission Chair Miguel Bustos voiced strong dissatisfaction with the current proposal, saying "the current proposal is pathetic," but supported giving staff more time for review.
After discussion Vice Chair Rosales moved to authorize the limited extension to Sept. 30, 2021; Commissioner Scott seconded. The roll call vote was 4 ayes and 1 nay (Commissioner Brackett), and the motion carried. Staff said it would return to the commission before September 30 with a recommended housing program and, if necessary, seek authority for a fourth and final extension to complete the Disposition and Development Agreement (DDA) and appraisal-based land valuation.
The developers and Mercy Housing remain engaged in negotiations with staff to refine unit mix, financing strategy and community preference outreach prior to the commission's next review.
