The quirky wedge of Mission Street with vibrant signs screaming “THRIFT” and “PAWNBROKERS MONEY LOANED” may become decidedly blander in the coming years.
The Kaplan Family Trust, the owners of 2316-2326 Mission St. — which includes Mission Thrift and the shuttered Mission Jewelry and Loan — has submitted a preliminary application to build a five-story apartment building on the site. It would include 21 market-rate units and three affordable ones, along with 4,840 square feet of commercial space.
The Kaplans are but one of many San Francisco property owners hopping into the risky housing development business for the very first time. The payoff, say local investors, can be huge — as long as they unload the property after winning all of the planning approvals — a process known as getting a site “entitled” to build.
“A reason so many families are doing this is, there’s a tremendous upside in getting approval for building” new projects on under-utilized parcels, said Michael Wornick, a local real estate investor.
He estimates the Kaplan Family could double the value of its property, which Zillow currently estimates to be worth $2.3 million, with a 24-unit entitlement.
But, he said, actually doing the construction — which requires immense up-front capital and expertise — is a completely different endeavor.
Getting entitlements vs. actually doing the construction, he said, is “the difference between the ability to diagnose someone [vs.] doing surgery.”
Likewise, said a local market source, “Even experienced developers are gun-shy to build, because construction costs are so high.”
Members of the Kaplan family and their representatives did not respond to requests for comment, but documents they submitted to the Planning Department make clear their intention to at least shoot for entitlement. It’s unclear if they will then sell the property, or try to develop it themselves.
Other examples of the “newbie developer” phenomenon in the Mission District abound.
Hawk Lou, the embattled owner of the empty lot at 22nd and Mission, where a fire ravaged his three-story building in 2015, submitted preliminary plans last October for a nine-story, 129-unit building. He told Mission Local at the time he was open to both courses of action: selling the entitled land or taking out a construction loan and building it himself.
“Anything can happen,” he said, though he received immediate and intense pushback from activists, who want his plans to include a “right to return” for more than 50 tenants displaced by the blaze. In the ensuing months, he has not moved forward his plans for development.
The Valencia Street corridor currently has 51 units in the pipeline across three separate sites, all being pushed forward by longtime landowners turned amateur developers, sold by realtors delray beach. The largest, at 1021 Valencia St. near 21st Street, is being developed by the grandchildren of Norman Elkington, who bought land in the 1930s. The heirs have proposed a six-story building with 25 units that would replace the S.F. Autoworks car garage. The family did not return a request for comment.
Two blocks north at 811 Valencia St., Eugene Power, the owner of the Phoenix Irish Pub, plans to raze the building he’s owned since 2008 and erect a six-story building with 18 luxury SRO units. Meanwhile, Ken Leung, who both opened the U-Save Hardware and bought the building at 1146 Valencia St. in 1987, is attempting a five-story, eight-unit building on the lot.
“Today it’s so different to be an owner-operator,” said Phil Lesser, a longtime Mission District landowner and permit expeditor. Lesser said older people and their heirs are “no longer operators and are looking at the next stage.”
“One of the exit strategies is seeking entitlements,” he added.
Lesser helped the owners of Big House Inc. wholesale store, at 2632 Mission St., earn entitlements for a five-story, 16-unit building. The property is currently a vacant lot, as the previous building was ravaged by a fire in 2014 and subsequently demolished.
“The logical thing to do if you’re not utilizing the property for your business — and how to maximize the value of the property — is, in some cases, getting entitlements and doing something different,” Lesser said.
Two weeks ago, the Muffareh family submitted preliminary plans for its property at 3260 26th St. at Shotwell, currently the site of B&W Automotive Service Center. The family is seeking to entitle the property for a four-story, 22-unit building with ground-floor commercial space. Members of the family did not return requests for comment.
Even getting entitlements, however, can be brutal — and long-time owners often discover that being local does not always make the challenges easier.
The Goode family has owned a 34,598-square-foot parcel near Potrero Del Sol Park for several generations. Although Christopher Goode, the family representative, told community members “we’re not developers,” nearly 100 nearby residents expressed overwhelming discontent toward his plans for a 205-unit project at 1458 San Bruno Ave. at a meeting earlier this month.
Because of the project’s scale and lack of affordability, community members worried that the property would exacerbate gentrification in the neighborhood.
The property used to be home to the artist community and punk-rock venue called The Farm. But that was disbanded in 1987, and family has wanted to do something new with the land — currently the site of warehouses being used for creative endeavors.
Goode said his family decided to build housing because it’s “important,” but said other family members who co-own the site want to “maximize their profits.” It’s unclear what Goode will do. He may well build it himself — if it gets approved. “I want to build cheap and rent cheap,” he told his audience.
But experience indicates that sometimes landowners can and will say anything at an early stage.
Take the case of Susan and Dennis Ring, owners of the now-shuttered Elbo Room, who spent some four years entitling their land at 647 Valencia St. for a five-story condo project. The couple told community members in 2014 that they would build the project and “spend the rest of their days” there. Once the project received its entitlements, they sold the property for $4.05 million and are spending the rest of their days elsewhere.
The same went for Robert Tillman, who dubbed himself a “newbie developer” and spent nearly five years entitling his property, a laundromat at Mission and 26th streets, a saga that ended last October. After winning city approvals to build 75 units, he quickly sold off the property in April for $13.5 million.
But Lesser said that not all properties may be suitable for these so-called “infill” projects. For example, the Kaplans’ property at 19th and Mission is listed as having a “Class A” historical status, which means it must undergo an intense environmental evaluation before being approved for demolition, according to Gina Simi, a spokeswoman with the San Francisco Planning Department.
“It’s not completely dead on arrival, but a major hurdle,” Lesser said of the Kaplans’ plans.