I am sure that many of you have heard that….
Condo Conversion reform legislation was introduced last week by Scott Weiner and Mark Farrell. Their proposal would create an exemption opportunity for a cost of $20K per unit with discounts for each year you were in the lottery before 2012. The fee revenue collected would be placed into the Citywide Affordable Housing Fund aka Mayors Housing Trust.
This is by no means a done deal, this now goes to Land use subcommittee and can be called up at any time. Given the sensitive political nature of this topic it will likely sit for a while before any hearing.
As an owner of 2 unit bldg I benefitted from the owner occupancy lottery exemption process, HOWEVER, I know a number of people who own fractional interests in Tics and have been in the lottery for a number of years with no success bec the applicant pool has grown so large over the last 10 years.
It would seem to me that this legislation provides a opportunity accomplish a number of tasks:
1. provide opportunity for those in the pool to subdivide their properties and add equity to their property (+/- 10%).
2. provide much needed revenue for the affordable housing trust since its primary source of funds came from Redevelopment agency which no longer exists.
3. clears out the current condo lottery pool and provides more reasonable timeframe for conversion for those entering in the future.
I would encourage you to write to your district supervisor and express your feelings on this proposal at the appropriate time and if you are interested in more information, please look up PlanCsf.org
The market of multi unit buildings is extremely tight for buyers and especially for any seller looking to complete a 1031 exchange with the up leg in the SF market. I would encourage anyone selling and planning to exchange that you maintain good communication with your agent with regard to inventory. You do not want to get stuck paying the tax.
Be aware of your transaction timeline and when you are at the last stop to get of the train.
I spoke with a colleague whose client (seller) elected to kill the deal at day 75 of 90 day escrow because the buyer had gone out of contract over a Contingency Removal. The seller found that the market was too competitive to rely on completing the 1031 and took that last chance to kill the deal.
There are currently 33 buildings in contract right now with the avg list price of $2.75M with avg days on market at 65. I can assure you that it seems much shorter than that as individual class A building offerings are rare and sell at a premium to asking price with multiple offers.
The number of buildings in contract is set to increase significantly in the near future as a well known portfolio of 22 buildings is considering offers tomorrow.
Many of you have likely been receiving postcard mailers about this portfolio and others before it. The marketing material suggests that these buildings may be available on individual basis but the reality is that is probably not going to happen anytime soon.
Many of these building are cross collateralized with each other thus making the unbundling of these assets very complex. The complexities are deemed non lucrative nor practical in the short term because there are a slew of investment groups with large capital resources that can and will make offers on the large portfolio.
The hope that these portfolios will eventually be broken apart and become available to local investors will have to wait for another time, perhaps when cash is worth more that .5% to your bank.