So far it’s all cash for Nob Hill’s deluxe TICs
Russell Flynn is hoping to get $100 million for 33 units at Park Lane on Nob Hill where large, renovated units with fabulous views have already created buzz.
The city’s biggest tenancy in common project has hit the market — and so far it’s proving to be a cash cow.
After more than 80 years as one of Nob Hill’s most luxurious rental towers, the first 10 units of the 33-unit Park Lane building at 1100 Sacramento St. are for sale. So far five are in contract, including all four of the penthouses, and offers on the table for two other units. One penthouse, that has been renovated, sold for $6.995 million. Another slightly larger 4,400 square foot penthouse, which has not been renovated, went “as is" for $7 million.
While four banks are offering to make loans on the units, thus far the deals have been all cash.
“The top floor is taken care of,” said Carol Goldberg TRI Coldwell Banker, who is marketing the property with Pamela Dubier & Don DeFranco. “We are sitting in a nice position up here.”
DeFranco said the group of buyers includes a “construction CEO” and a leader in the entertainment industry. “No. 1, they are wealthy. No. 2, they are empty nesters whose kids are off to college and they want to sell their homes in Atherton and Piedmont and get into the city again,” he said.
The building is owned by Russ Flynn, who owns more than 3,000 units in San Francisco. While Flynn is normally content to hold buildings as rentals and operate under the city’s strong rent control regulations. the cost of operating 1100 Sacramento, where several units have rented for $10,000 a month, makes it different, he said.
“Rent control is fine for most of the buildings, but doesn’t apply to a building like this, with 24-hour doormen,” said Flynn. “To keep a building like this properly maintained you have to raise rents 5 or 6 percent a year. And what do we get (under rent control laws), a half a percent? It doesn’t make sense.”
Two of the current renters are in talks to buy their units. “A lot of them didn’t think this was going to happen now it is clear we are making sales they are having to think very hard about leaving a building they love living in,” Goldberg said.
San Francisco’s TIC market has grown sporadically over the last 10 years as banks have run hot and cold on the idea of individual fractional lending. For many years tenancy in common partnerships were forced to take out a group loan on an entire building, but starting in 2005 local banks began offering individual loans to TIC buyers.
The loan structure attracted buyers who would never have considered TICs in the past, however conversions came to a halt in 2008 when the financial markets collapsed and most lenders shut down their fractional loan programs. Slowly banks have started up TIC lending again over the last 18 months.
Up until now the biggest TIC conversion in San Francisco has been the 17-unit Francisco Palms in the Marina, which Maven Investments completed in 2008. Around the same time on Nob Hill, developer Sean Whalen converted the 14-unit Nob Hill Gardens. Flynn said 1100 Sacramento compares with the high-end co-ops common in New York. He said the structure of the TIC would be similar as co-op buildings.
J.K. Dineen covers real estate for the San Francisco Business Times.