Aaron Peskin's Art of No Deal
Negotiations led by Supervisors Peskin and Kim in December of last year hamstrung an effort to create new city offices, halted the creation of five hundred housing units, and failed to net the city $80 million in revenue.
The sale of 30 Van Ness had been in the works since July. John Updike, Director of the city’s Real Estate Department, had come up with a plan to simultaneously create more housing and to move multiple city departments into a new office building.
The plan hinged on the sale of three city properties: 1660 Mission St, 1680 Mission St, and 30 Van Ness. According to the ordinance authorizing Updike’s proposal, the proceeds from the sales were to be placed into a shared project account.
The first $122 million would have gone towards the creation of new office space at 1500 Mission St for the departments affected by the sale. Any additional proceeds, however, would be used to finance the creation of additional affordable housing units at new residential developments atop the former office sites.
Unfortunately for a city desperately in need of new housing, the first crucial sale in Updike’s plan, 30 Van Ness, was denied by the Board of Supervisors on December 8th, 2015. Supervisor Aaron Peskin was a critical part of the Board’s decision.
Of those who voted against the sale, Supervisors Kim and Yee demanded that the percentage of affordable housing at the site be raised to 33%, stating that because 30 Van Ness was public land, any lower percentage would run counter to Proposition K.
Proposition K mandates that any “surplus public land” be given over to the Mayor’s Office of Housing and Community Development for the creation of public housing. The Office of Housing is then charged to create residential properties on these sites, each of which must contain affordable housing totalling no less than 33% of the total units.
However, in the case of 30 Van Ness, the city’s offices at the site fail to meet the definition of surplus public land outlined in the text of the California Government Code. The land is indeed owned by the city, but it is not, in fact, surplus, as the offices at the site are currently in use by the Recreation and City Parks Department. The 33% target demanded by Kim and Yee was therefore not applicable in this case.
All of that being said, the developer had already agreed by the time of the meeting to meet the 33% affordability target, using city subsidies to add the additional 13% Kim and Yee had asked for.
Peskin focused almost exclusively on the fiscal aspects of the sale. "We, respectfully, are leaving a little too much money on the table," he said.
The city’s minimum asking price for the property was set at $87 million. Related California’s final bid for the property, however, was only $80 million. It was this $7 million disparity that was the focus of Peskin’s argument.
What Peskin failed to mention was that 30 Van Ness lies within one of the most seismically hazardous areas in all of San Francisco. The building sits atop a base of loose sand and silt. According to the U.S. Geological Survey, such a base can “behave like a liquid when shaken by an earthquake.” As a result, the site would have required $60 million in seismic upgrades before any construction could begin: $60 million of work that was not factored into the city’s asking price.
Supervisor Eric Mar, one of the deciding votes to deny the sale of the property, was unaware of the property's value when he first began speaking, stating that the city's minimum asking price was "$37 million." Updike quickly corrected the supervisor, stating the actual price of $87 million.
"I still feel like we could have had a better deal," Supervisor Mar replied. "I also feel like maximizing the affordable housing at the site is absolutely critical."
Peskin was adamant that the city was losing money on the deal. “Even if we do the 10% better… at $87 million, we’ve paid for all of our salaries for the rest of our terms in office.”
"Our fundamental job is to get as much for our shareholders, the people of the city and of San Francisco as we can," he said. “I think we haven’t gotten that in this deal.”
It seems instead of improving the deal, Peskin’s actions resulted in its termination. Related California withdrew their bid.
At present, 30 Van Ness remains off the market. Sources close to the city’s Real Estate Department say it will be returning to the market soon for $60 million, $20 million less than the rejected offer.