Falling land values imperil public-private development deals
San Francisco Business Times – by J.K. Dineen
Plummeting land values and the deep recession have taken a toll on one of San Francisco’s central business models for urban redevelopment: public-private development deals.
With many developers predicting that highrise development of any sort won’t work economically for another five years, public agencies are struggling with a development model in which private builders pay for the right to develop valuable land and, in the process, bankroll public benefits like parks, roads and affordable housing.
Until the capital markets are willing to invest in the next generation of highrise condos, hotels or office buildings, public entities like the Port of San Francisco and the city Redevelopment Agency are stuck with prime land that has little or no current value.
The challenges came into focus last week when the Redevelopment Agency canceled the request for proposals process for one of its most promising projects, a housing complex slated for First and Folsom streets in the Transbay district, “because bids came in well below the potential value of the site in a healthier real estate market,” according to Fred Blackwell, the agency’s executive director.