Retail condos, according to a recent article in the San Francisco Business Times, are becoming a popular alternative for small businesses. Owning your own space instead of renting it is a great way to for shop owners to eliminate ugly rent increases when it’s time to renegotiate the lease. It also eliminates the threat of a landlord easing you out when more favorable tenants come a courting. .

Many developers also see a benefit to retail condos.  With hundreds of living spaces stacked on top of one another in neighborhoods like Mission Bay or SOMA, retail goods and services that can serve the residents is a big draw. Usually the market for a retailer lives within 1/2 a block,  so these larger new building off an immediate customer base. Whole Foods Market, which occupies two contiguous commercial condos on the ground floor at The Potrero, is a perfect example. The store is one of the project’s biggest draws for prospective buyers who love the idea of running downstairs for a cup of Peet’s or healthy grab-and-go food.

To buy their condos, many small businesses are turning to the SBA’s 504 loan program. These loans are designed specifically for property acquisition and only require 10% down. That’s far less than the 25-30% a traditional lender requires for a commercial investment.

(Caveat– last I heard, the SBA loan process is onerous and requires copious amounts of paperwork– so look carefully before you leap at this option).

Purchase prices for new retail condos run about $500/square foot.  but you can occasionally find a retail space in an older mixed-use building. Right now there’s a storefront office on Divisadero at Pine– approximately 750 square feet listed for $429,000, and a tiny storefront at the corner of  Larkin and Jackson that used to be a nail salon listed for $155,000. Keep in mind that both of these listings are TIC units and will not qualify for the SBA financing.

At Paragon we have a handful of commercial condos for sale and/or lease along the Van Ness corridor.  Please call me if you would like more information.

Purchase prices for retail condos in the city are running around $500 per square foot, she said. The demographics for the buyers of the new residential condos are also attractive — lots of young couples without kids and downsized baby boomers who are clearly not living on fixed incomes.

Retail condo buyers, House said, represent a varied landscape — restaurants, home decor, wine bars, coffee cafes and service business that include optometrists, dentists and spas.

Things to ponder
Business condos certainly come with their own set of potential problems — just as with residential condos, retail condo owners are part of an owners association and must agree on marketing decisions, which might include who they allow to buy in the building and other provisions. But there are no lawns for a neighbor’s dog to soil and no one will complain about late night piano practicing.

Some developers and management companies are being as cautious as little old ladies crossing a busy street — building in soundproofing, extra ventilation and thicker walls and flooring to buffer upstairs tenants from restaurants. One Florida mixed-use project, next to a busy port, is requiring that residents to agree not to sue over noise.

Posted in Buying Strategies, Investors | No Comments »

I visited the Montgomery yesterday to preview what they have left and I think even more now that this is an overlooked gem.

The Montgomery was built in the 1900s and was used as offices up until its conversion to 107 residential units last year. The exterior of the building remains absolutely original, including the big double hung windows, which were entirely rebuilt with state-of-the-art glazing that buffers sound.  The project won a prize for 2007’s San Francisco Times best development projects for best rehab or renovation.  

These oversize windows are a distinctive architectural feature in each unit, along with exceptionally high ceilings that run anywhere from 9′6″ to 20 feet and higher.  The floor plans are fairly conventional, except for the “Executive Studio,” which has an entry and stepped-up sleeping space with its own doorway so you don’t see the bed until you walk all the way into the unit and turn around.

Here is some general pricing (as of today) and square footages. I have some idea about why they are putting weird numbers on at the end of their prices– it’s a scientific strategy designed to get higher prices (i.e. $476,845 sounds like less than $475,000):

The Executive Studios run $476,845 to $545,845 and run 635-752 square feet (that’s big for a studio). These units have an exceptionally clever floor plan with a sleeping area set slightly above the main level, which creates a sense of privacy and keeps your bed from intruding into the rest of the space.

The 1br /1ba’s run $586,845-625,845 and are 782-960 square feet. 

The 1br+den/1ba’s run $755,845-881,845 and are 816-946 square feet. The dens are (just) large enough to accommodate a full-size bed and you could install sliding doors for privacy.

 2br/2baths start at about $1,050,000 and run up to $1,275,000. Their square footages run 1531-1678 square feet.  Every two-bedroom is a corner unit with light on two sides.

On a practical level, the biggest change at the Montgomery is that they now offer three years of pre-paid parking at the Paramount Apartments across the street.  So buying a unit without deeded parking becomes less of an objection.  (Deeded parking does come with the upper-end units, like a penthouse for $1.4M.)

Each unit comes with its own storage space (an unusual feature) that is at minimum 5X4X6 feet.  The closet space inside the units is also unusually generous.

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I’ve been getting questions lately from first-time homebuyers and clients interested in investing in the Bayview. The new Third Street Corrido light rail is stimulating new interest in this neighborhood.  Residential and commercial developers have also targeted the area as one that holds promise and opportunity.

Parts of the Bayview still have a scrappy feel to them. It’s a block-to-block affair, particularly in the residential neighborhoods that straddle either side of Third. I know people who have lived happily lived there for years on tidy blocks lined with post-war single family homes, but the crime rate remains relatively high in other parts of this large district.  remain troubled by high crime activity (to learn about the crime rate in any particular neighborhood, you can visit the SFPD’s Crime Maps sight.)   

A second post will be up shortly that focuses on the Bayview strictly from an investors perspective. This one will discuss the Bayview in more general terms to help those unfamiliar with the area gain some understanding.

The backbone of the Bayview is Third Street, stretching southwards from the Lefty O’Doul Bridge towards the Daly City border.  If you start at this end and head towards the new development, your journey will seem endless. A better way to approach the neighborhood’s heart might be to cut East on Cesar Chavez from the edge of Noe Valley . This wide, busy street runs the dividing line between Bernal Heights and the Mission District, then edges the South Slope of Potrero Hill. Cut a right on Evans and you will shortly hit Third. 

The streets run in alphabetical order, heading South (Evans, Fairfax, Galvez, Hudson, etc.). It’s so long that it runs all the way through one alphabet and starts a new one before ending at Mead. 

Noteworthy developments, finished or in the works: 4343 Third (16 units, starting at $350,000 for a 1br/1ba), some small loft buildings on the 800 block of Innes completed between 2000-2005 (resales in the mid-500K range), and 5800 3rd Street (360 condominiums in the works) and 833-881 Jamestown, (+/- 175 condos in the works). 5800 Third has been getting attention lately because the developer signed a deal with Fresh and Easy on the ground floor– this wildly popular grocery chain from the UK is doing aggressive roll-outs across the country.

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We’ve got good stuff this week:

 $3,000,000 / Pacific HGTS/BR/BA:3/2.5/ PKG:2  Single family home on double lot set in the middle of an English Garden. Designed by Henry Gutterson in 1825, Guest cottage with an additional bath./ First showing Sat.4/19.  

$3,000,000/  Noe Valley/ BR/BA: 3/3  PKG: 1  Thoughfully renovated 30’s home on one of Liberty Heights best blocks. 3000 sq ft. Detached 3 sides. So facing garden + terrace. Bay views. Open LR/DR, Den, Media Rm, Office.

$1,499,000/ UKIAH/ BR/BA: 3/3 PKG: 6  40-Acre Wine Country Estate 2 hours from the Golden Gate, private, magnificent views, stunning indoor/outdoor remodel. Redwood forests, meadows, hiking and biking trails.   

$1,250,000/ Telegraph Hill/ BR/BA: 2/2  PKG: 1 Quintessential San Francisco condo tucked right beneath Coit Tower  with stunning Bay Bridge views. Top-floor condo- updated kitchen and baths, private deck.

$859,000/ GUERNEVILLE/ BR/BA: 2/2  PKG: 6  Unique Russian River home on 10.5 acres. Site is sunny with sunny with bright, airy floor plan ideal for entertaining. High end finishings. Five minutes to Guerneville, 15 minutes to coast and wineries

$499,000 /Emeryville Loft/BR/BA: 1/1   PKG: 1— Emeryville Warehouse loft. NY style single-level floor plan. Large bedroom  (with a door), split bath. Great, functional layout.  Views to the north, slightly west and east to the Oakland/Berkeley Hills with great natural light.

These next two properties are ‘pocket listings’ that may never hit the open market:  

$995,000 /  Noe Valley / Condo /BR/BA: 3/2   PKG: 1 Cottage condo on quiet alley street.

$799,000 /Haight Ashbury /BR/BA:   2/2   PKG:  1 car + storage. Top floor contemporary condo in small 3 unit building.  Good block. Tenant occupied until July 1st.  Photos available prior to showing. Great light, lots of storage, large private patio off master bedroom with north views over to St. Ignatius.

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