In 1848, entrepreneur James Lick brought 600 pounds of chocolate to San Francisco. After selling out…
Tag: sanfrancisco
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Unbelievable facts
San Francisco’s Fleishhacker Pool was so enormous that lifeguards patrolled using rowboats….
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‘San Francisco is not dead’: Not everyone is shunning the city’s reeling office market
Barry DiRaimondo, chief of SteelWave, a West Coast property developer that in the past half-century has partnering with many of the biggest names in commercial real estate, is looking for diamonds in the rough, distressed office properties located in the American city that many have given up on.
Others may be shunning San Francisco while it’s down on its luck, but DiRaimondo sees better days ahead, despite the city’s threat of a growing deficit, its fentanyl crisis, homelessness and a reluctant return of office workers to its financial core.
“Not much is coming up right now,” DiRaimondo said of buying opportunities, while speaking from his office in the heart of San Francisco’s financial district. But he was eager to point out several nearby buildings that could be candidates to buy, at the right price.
“I think over the next 12 to 18 months, you’re going to see a tsunami,” of distressed office properties, DiRaimondo said.
Like in many big cities, a wave of office buildings bought at peak prices before the pandemic now have a pile of debt coming due, at much higher rates. But San Francisco’s financial core only recently has begun to show flickers of hope in its weak recovery post-COVID.
“Whether it’s San Francisco, Oakland or anywhere here, and your debt is rolling, you’re having a conversation with your lender,” DiRaimondo said. “There’s either a restructuring going on or a foreclosure going on.”
A number of high-profile property owners this year surrendered local properties to lenders, including Westfield’s namesake shopping center downtown and a string of well-known hotels, a blow to the city’s comeback efforts.
Still, DiRaimondo expects the bulk of property ownership transfers in this boom-and-bust cycle to take place quietly, behind the scenes, often through a building’s debt changing hands. It’s a familiar playbook for veteran real-estate developers like SteelWave and its partners, especially when San Francisco office property values tumble and new loans remains expensive and hard to come by.
“Office is a nasty word, right now. Especially tech office,” he said. “We are doing something that’s a bit different.”
Booms, busts
San Francisco’s history as a boom-and-bust town perhaps is best suited for real-estate developers able to take a bunch of lemons and make lemonade.
That has been SteelWave’s signature move in the notoriously rough-and-tumble commercial real-estate industry, through its ups and downs. It has bought over $17.5 billion in properties and developments in the past five decades, first under the Legacy Partners Commercial brand before it was renamed in 2015.
It has partnered with some of the biggest names in commercial real estate, including with Angelo Gordon & Co. in 2021 on two Silicon Valley office buildings, but also distressed debt titans that include Rialto Capital, and with Chenco, one of the largest Chinese-owned U.S. real-estate investment firms.
Its stronghold is the Bay Area and DiRaimondo is now looking to raise a $500 million fund to buy distressed buildings, including in downtown San Francisco, a place major Wall Street lenders have been backing away from for months.
“It’s hard to raise equity to buy this stuff right now,” he said, but argues his strategy, which includes expanding its reach to potential investors in the U.A.E., Israel and parts of Europe, will pan out.
SteelWave’s model of buying a property includes a final tally of costs often three to four times the initial purchase price, due to extensive overhauls.
“Typically, what we do is buy something, tear it apart, put it back together, lease it, sell it,” DiRaimondo said.
It’s niche in the distressed world that’s already produced overhauls of buildings from Seattle to Colorado to Los Angeles, places the tech industry wants to lease.
In the southern California town of Costa Mesa, that meant partnering with Invesco to turn an old newsroom and printing press for the Los Angeles Times into a creative work campus. An opinion piece in 2022 from the newspaper described the revamp as turning, “the glum newspaper architecture into something inviting.”
Forget being a ‘rent bandit’
“In New York, people rushed back and refilled the apartments, streets, and subways. Restaurants and stores flooded with customers again,” a team from Moody’s analytics wrote in a recent “tale of two cities” report. “San Francisco, on the other end, battled safety concerns, homelessness, and population exodus which existed before but only became more obvious with barren neighborhoods.”
SteelWave thinks the old days of landlords raking in top-dollar commercial rents in San Francisco, while adding little back to office buildings, are a thing of the past.
“You have to have owners who want to create cool work environments to attract people back into the city,” DiRaimondo said of downtown San Francisco’s long slog back from the brink.
That means buying properties at low prices, but also risking putting money down for major improvements. He isn’t a distressed investors looking to become a “rent bandit,” he says, because the strategy will fail to get quality tenants.
Like the Moody’s team, DiRaimondo thinks San Francisco eventually will bounce back, but he thinks not before reality hits older office properties.
Take a “commodity” building downtown, often older and midblock with generic features, that previously might have been worth $750 to $800 a square foot. It now looks worth less than $300 a square foot, he said.
The early stages of fire-sales have begun already, with the 22-story tower at 350 California, nearby to DiRaimondo’s office, reportedly fetching $200 to $225 a square foot.
“San Francisco is not dead,” DiRaimondo said. “I think there are opportunities in San Francisco.”
See: San Francisco’s office market erases all gains since 2017 as prices sag nationally
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‘San Francisco is not dead’: Not everyone is shunning the city’s reeling office market
Barry DiRaimondo, chief of SteelWave, a West Coast property developer that in the past half-century has partnering with many of the biggest names in commercial real estate, is looking for diamonds in the rough, distressed office properties located in the American city that many have given up on.
Others may be shunning San Francisco while it’s down on its luck, but DiRaimondo sees better days ahead, despite the city’s threat of a growing deficit, its fentanyl crisis, homelessness and a reluctant return of office workers to its financial core.
“Not much is coming up right now,” DiRaimondo said of buying opportunities, while speaking from his office in the heart of San Francisco’s financial district. But he was eager to point out several nearby buildings that could be candidates to buy, at the right price.
“I think over the next 12 to 18 months, you’re going to see a tsunami,” of distressed office properties, DiRaimondo said.
Like in many big cities, a wave of office buildings bought at peak prices before the pandemic now have a pile of debt coming due, at much higher rates. But San Francisco’s financial core only recently has begun to show flickers of hope in its weak recovery post-COVID.
“Whether it’s San Francisco, Oakland or anywhere here, and your debt is rolling, you’re having a conversation with your lender,” DiRaimondo said. “There’s either a restructuring going on or a foreclosure going on.”
A number of high-profile property owners this year surrendered local properties to lenders, including Westfield’s namesake shopping center downtown and a string of well-known hotels, a blow to the city’s comeback efforts.
Still, DiRaimondo expects the bulk of property ownership transfers in this boom-and-bust cycle to take place quietly, behind the scenes, often through a building’s debt changing hands. It’s a familiar playbook for veteran real-estate developers like SteelWave and its partners, especially when San Francisco office property values tumble and new loans remains expensive and hard to come by.
“Office is a nasty word, right now. Especially tech office,” he said. “We are doing something that’s a bit different.”
Booms, busts
San Francisco’s history as a boom-and-bust town perhaps is best suited for real-estate developers able to take a bunch of lemons and make lemonade.
That has been SteelWave’s signature move in the notoriously rough-and-tumble commercial real-estate industry, through its ups and downs. It has bought over $17.5 billion in properties and developments in the past five decades, first under the Legacy Partners Commercial brand before it was renamed in 2015.
It has partnered with some of the biggest names in commercial real estate, including with Angelo Gordon & Co. in 2021 on two Silicon Valley office buildings, but also distressed debt titans that include Rialto Capital, and with Chenco, one of the largest Chinese-owned U.S. real-estate investment firms.
Its stronghold is the Bay Area and DiRaimondo is now looking to raise a $500 million fund to buy distressed buildings, including in downtown San Francisco, a place major Wall Street lenders have been backing away from for months.
“It’s hard to raise equity to buy this stuff right now,” he said, but argues his strategy, which includes expanding its reach to potential investors in the U.A.E., Israel and parts of Europe, will pan out.
SteelWave’s model of buying a property includes a final tally of costs often three to four times the initial purchase price, due to extensive overhauls.
“Typically, what we do is buy something, tear it apart, put it back together, lease it, sell it,” DiRaimondo said.
It’s niche in the distressed world that’s already produced overhauls of buildings from Seattle to Colorado to Los Angeles, places the tech industry wants to lease.
In the southern California town of Costa Mesa, that meant partnering with Invesco to turn an old newsroom and printing press for the Los Angeles Times into a creative work campus. An opinion piece in 2022 from the newspaper described the revamp as turning, “the glum newspaper architecture into something inviting.”
Forget being a ‘rent bandit’
“In New York, people rushed back and refilled the apartments, streets, and subways. Restaurants and stores flooded with customers again,” a team from Moody’s analytics wrote in a recent “tale of two cities” report. “San Francisco, on the other end, battled safety concerns, homelessness, and population exodus which existed before but only became more obvious with barren neighborhoods.”
SteelWave thinks the old days of landlords raking in top-dollar commercial rents in San Francisco, while adding little back to office buildings, are a thing of the past.
“You have to have owners who want to create cool work environments to attract people back into the city,” DiRaimondo said of downtown San Francisco’s long slog back from the brink.
That means buying properties at low prices, but also risking putting money down for major improvements. He isn’t a distressed investors looking to become a “rent bandit,” he says, because the strategy will fail to get quality tenants.
Like the Moody’s team, DiRaimondo thinks San Francisco eventually will bounce back, but he thinks not before reality hits older office properties.
Take a “commodity” building downtown, often older and midblock with generic features, that previously might have been worth $750 to $800 a square foot. It now looks worth less than $300 a square foot, he said.
The early stages of fire-sales have begun already, with the 22-story tower at 350 California, nearby to DiRaimondo’s office, reportedly fetching $200 to $225 a square foot.
“San Francisco is not dead,” DiRaimondo said. “I think there are opportunities in San Francisco.”
See: San Francisco’s office market erases all gains since 2017 as prices sag nationally
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Driverless cars are driving San Francisco crazy — ‘They are not ready for prime time’
A street was blocked for road work in my San Francisco neighborhood this month, with a worker holding a large STOP sign to direct traffic.
A white car did as instructed, stopping in the middle of the intersection and blocking traffic at the four way intersection. No one was in the driver’s seat and there were no passengers, nor any training drivers — it was a Cruise driverless car, one of many that have flooded streets in the city in the last two years.
The public works employee holding the sign was flummoxed as how to get the car to move away. After several minutes, the car slowly backed its way out and crossed the street, but ended up on the wrong side. After another 10 minutes, it managed to pull itself together, get in the right lane and drive down the hill.
Most San Francisco residents can tell a similar story. The growing driverless car fleets in San Francisco are both a fascinating glimpse of science fiction come to life and a scary example of how Big Tech and auto companies have run roughshod over a congested city, with technology that really isn’t ready yet and little regulation to keep it at bay.
Now, the problem is coming to a head. San Francisco public officials have had enough, and are speaking out about safety threats ahead of a hearing next month that could let companies expand into larger fleets of fare-generating robotaxis.
“They are not ready for prime time,” San Francisco Fire Chief Jeanine Nicholson told MarketWatch in an interview.
“They have run over our hoses, they have blocked our fire engines from going on calls, they have just blocked our vehicles from getting down streets where there is a possible fire. They have just done a multitude of things. We had to break the window of one once because we could not get its attention,” Nicholson said.
While the average citizen can laugh at the stalled cars in city streets, the vehicles represent a major impediment for first responders. The San Francisco fire chief believes they put the city’s firefighters and residents at risk.
“Response time matters — a fire can double in size in a minute,” she said.
Aaron Peskin, president of the city’s Board of Supervisors, said there have been 66 incidents in which driverless cars interfered with first responders this year. But the city has little control over the cars operated by Cruise, a unit of General Motors Co.
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and Waymo LLC, a subsidiary of Google parent Alphabet Inc.
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Both companies already have Department of Motor Vehicle permits to deploy a driverless passenger taxi service, a process Peskin described as “Kafka-esque.”“You have this thing where the DMV colluded with the industry to redact information that otherwise was public,” he said, referring to the result of a lawsuit Waymo filed last year against the DMV to keep its crash data private, arguing that it held trade secrets. “The funny thing is it’s not like San Francisco is trying to say ‘let’s put the genie back in the bottle.’ We are trying to ensure that our streets are safe. They have become too congested.”
Both companies are seeking to expand their operations into fare-generating robotaxis in San Francisco, leading to a crucial meeting of California’s Public Utility Commission now slated for July. Waymo is seeking to begin passenger robo-taxi service in the city, while Cruise is seeking to expand its passenger robo-taxi service to the entire city, 24 hours a day, and remove exclusions of steep hills and roundabouts, deploying 100 vehicles. Helpfully for the companies, one PUC commissioner appointed by Gov. Gavin Newsom in 2021 is John Reynolds, who was managing counsel of Cruise until 2019.
Resistance is building locally and nationally. Cathy Chase, president of Advocates for Highway and Auto Safety, a nonprofit in Washington seeking more regulation and data transparency on autonomous vehicles as part of its mission for more highway and road safety, said it was “illogical and irresponsible at best, and dangerous and deadly at worst, to go forward with any expansion until the significant problems have been resolved.”
The San Francisco Municipal Transportation Authority (SFMTA) wrote letters of protest to both company’s applications. In May, the SFMTA said that since it wrote its first letter in January, “new hazards from driverless AV operations in San Francisco have been reported, and general public complaints about driverless AV operations have increased significantly.”
In May, a Waymo vehicle hit and killed a small dog that was off leash, while a test driver was at the wheel, in what the company said was an unavoidable accident. In June, a Cruise vehicle with no driver started to enter a mass shooting scene in the Mission District, and a video on Twitter showed a police officer yelling to get the car removed. Cruise said a lane was open for emergency vehicles and that its car did a U-turn and pulled over. In April, five Waymo cars stopped and blocked traffic in the Balboa Terrace area, in dense fog, a big problem for the vision systems.
The letters note that both Waymo and Cruise have “committed numerous violations that would preclude any teenager from getting a California’s Driver’s License.” The SFMTA also calls out the PUC for relying on the DMV for approvals, saying that its draft resolution to approve expansions of both companies is an attempt to “deflect rather than exercise the Commission’s duty to protect public safety.”
Waymo said it has been working with public safety officials and provides them a phone number to reach Waymo directly in the event that one of its cars stop. Cruise said it is proud of its safety record “which is publicly reported and includes millions of miles driven in an extremely complex urban environment.” Both companies have over 30 letters of support for their plans, from a range of groups including many representing the disabled, such as the National Federation of the Blind of California.
“It’s because of the donations,” Peskin said.
But the city’s fire chief Nicholson said there needs to be more from the companies than PR statements and lessons on how to stop their vehicles.
“They really need to sit down with us and figure out a solution,” she said, adding that when the fire department is in the middle of putting out a fire or rescuing victims or dealing with a health emergency, “to have to handle one of their vehicles, it’s just ridiculous.”
As is the case with many new technologies, history does tend to repeat itself.
Chris Gerdes, a professor of mechanical engineering at Stanford University and co-director of the Center for Automotive Research at Stanford (CARS) said that as part of work he has been doing with Ford Motor Co.
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he has been researching ethical and legal issues associated with automated vehicles. These same issues came up when the first automobiles started to arrive on public streets at the turn of the 20th century, clashing with horses and buggies.“You go back and look at the debates when the car came out,” Gerdes said, and “there were a lot of debates around should these things be allowed on the road, should they be allowed everywhere? These questions that are coming now were asked about cars back in the day. They can block the road, they can scare horses. Is this something we want to have on the roads? Is it even legal for them to be on the roads?”
But there is a need to demonstrate that driverless cars are compatible with existing laws and the uses of the roads, he said. “The question becomes at what point do these isolated incidents add to up to danger, to what extent do these compromise the city’s priorities or mobility and traffic flow.” He said they need to compare the autonomous-vehicle data with that from human drivers.
The SFMTA provided comparison data in its letters of protest. According to the SFMTA, based on data filed with the NHTSA, Cruise’s injury crash rate is estimated to have been 506 injury crashes per 100 million vehicle miles traveled (VMT) between June and November, 2022—approximately 6.3 times the 2021 national average, which is 80 injury crashes per 100 million VMT. Waymo’s injury crash rate is estimated to be 104 injuries per 100 million VMT, approximately 1.3 times the national average, the SFMTA said, when looking at the same period.
“The collision rate from that small fraction of Cruise driverless operations appears to exceed the collision rate for human drivers,” the SFMTA said in its Cruise letter. For Waymo, the agency said it recommends the commission expand on the findings with a more thorough analysis. “Within the complex driving environment of San Francisco city streets, we must conclude that the technology is still under development and has not reached this goal,” the SFMTA said in its Waymo letter.
Some in San Francisco are hopeful the delay of the PUC meeting to July 13 is a good sign that the commission is listening to more input from city officials. In its letters, the SFMTA and the San Francisco City Attorney hint at the next step they could take, noting that the PUC “must conduct an environmental review” of Cruise’s and Waymo’s expansion plans, because its actions could cause environmental impacts. What goes unsaid is that the city could seek to compel such a review with a lawsuit.
Peskin said he has received letters from former employees of the companies saying that autonomous robotaxis are, as the fire chief said, “not ready for prime time.” The workers said they had signed nondisclosure agreements that kept them from saying so publicly. Peskin suggested it could end up like the tobacco industry’s whistleblower case.
“We would rather work with them than waste taxpayers’ money on lawsuits,” Peskin said, adding that the companies could continue to test their cars with test drivers — an option that is not likely to be acceptable by the companies seeking to make money from their big investment.
“San Francisco is the perfect place to test them,” he said. “But they still haven’t worked these kinks out.”
The city of San Francisco is beaten down at the moment, thanks in part to its past close relationship with tech. As the downtown core suffers from the departure of the tech workers that defined it for the past decade, city officials are doing what they can to ensure that the technology some of them created does not become the next hated addition to the city.
