Related California trades land for permit to build larger

Matthew Witte of California and 98 Franklin Street, San Francisco (Related California, Getty)
Matthew Witte of California and 98 Franklin Street, San Francisco (Related California, Getty)

Kindred California could build a taller tower in San Francisco in exchange for donating a nearby affordable housing site.

The Irvine-based developer has proposed adding 35 feet and 40 more apartments to a tower at 98 Franklin Street in exchange for purchasing a former McDonald’s restaurant site at 600 Van Ness Avenue and handing it over to the city for affordable housing, reports reported the San Francisco Chronicle.

Supervisor Dean Preston, who finalized the deal with the developer, plans to submit legislation to the Board of Supervisors to make the agreement.

The deal would kickstart a stalled mixed-use development near Van Ness and Market Streets by raising its tower from 365 feet to 400 feet and increasing the number of apartments from 345 to 385 units.

The base of the building would be occupied by a 90,000-square-foot French-American International School, which purchased the Franklin Street parking lot in 2012 and hired Related to develop the tower.

In exchange, Related entered into a deal to purchase the former McDonald’s, which would give it to the Mayor’s Office of Housing and Community Development.

The site has been approved for 168 apartments, but it is unclear who will fund and develop them.

Because the Van Ness location can accommodate significantly less expensive units than would be required locally, Related would not have to pay approximately $6.5 million in fees under the agreement.

While the land donation would allow Related to avoid fees, the developer has agreed to pay an additional $1 million to get an affordable 54-unit project off the ground in Hayes Valley.

The deal comes as homebuilders look for ways to plan projects while construction costs are skyrocketing and rents are falling.

Related California’s Matthew Witte said construction costs have increased 50 percent since his company completed 1550 Mission Street, a 550-unit tower and city office building that was completed early in the pandemic. At the same time, rents have fallen.

To compensate for this, developers are trying to increase the number of units in projects. Tishman Speyer, the developer of 655 Fourth Street, has proposed expanding the project from 960 to 1,148 homes. At 1 Oak Street, developer Build was granted approval to increase its tower from 304 to 460 units.

The fact that the former McDonald’s site was stalled and could be bought for affordable housing shows the lack of capital for market buildings, according to the Chronicle.

The Franklin Street deal is similar to an agreement between Crescent Heights and the owners of the so-called “Monster in the Mission” property at the 16th Street BART station. The developer was permitted a taller tower at 10 South Van Ness Avenue in exchange for the 1979 purchase of Mission Street and surrender to the city for low-income housing.

Jeff Cretan, a spokesman for Mayor London Breed, said: “It’s something we’ll see again and again.”

– Dana Bartholomew