MacFarlane Buys SF Site for Apartment Tower
- Jun 07, 2011
San Francisco–MacFarlane Partners has acquired a development site at 1844 Market Street in San Francisco on which it intends to build an eight-story multifamily residential building. According to the developer, which specializes in urban revitalization, the building will consist of 113 rental apartments–99 market-rate and 14 affordable units–along with 5,500 square feet of street-level retail and an underground garage with 81 parking spaces.
The one-, two- and three-bedroom apartments and ground-floor retail will face both Market and Waller Streets, as well as an interior courtyard. A fifth-floor terrace will offer residents recreation space with views of downtown.
The company acquired a non-performing note secured by the half-acre site and has taken title to the property, which is fully entitled for residential development. The investment is the first by MacFarlane Partners on behalf of MacFarlane Urban Real Estate Fund III, a closed-end, commingled fund managed by the firm that is capitalized with $211 million in equity from institutional investors. MacFarlane Partners will serve as the property’s developer.
Urban Fund III is pursuing an investment strategy that MacFarlane Partners has pursued since the 1990s on behalf of institutional investors. The goal is to acquire, develop or redevelop properties in urban and high-density suburban submarkets that promote smart growth and urban revitalization, beside providing a handsome return on investment for the institutional investors. For instance, the company received a Mixed-Use Design Excellence Award in 2007 from MHN for its 750,000-square-foot Bay Street Emeryville, a brownfield redevelopment near the San Francisco-Oakland Bay Bridge that included 284 apartments and other uses.
Regarding the sustainability aspects of MacFarlane’s developments, Susan Smartt, managing director-development with the company, tells MHN: “MacFarlane Partners is committed to a minimum of LEED Silver and using green building products. Also, the benefits of urban infill are multiple. Building closer to jobs reduces greenhouse gases, providing access to transit improves quality of life by spending less time in cars, and reusing existing infrastructure contributes to the overall sustainability of the region.”
It’s likely a good time to develop multifamily properties in San Francisco, not only because of the generally good climate for apartments in most places, but also for reasons specific to the Bay Area, provided current trends continue. The South of Market submarket, for instance, saw apartment vacancies drop 180 basis points to 4.9 percent in 2010, according to investment specialist Marcus & Millichap, as tech firms locate and expand in the area, attracting young tech professionals who want to live near their work. Asking rents in the submarket were up 8 percent in 2010.
The property’s location in the city is further enhanced by the recent enactment of a payroll tax abatement plan on Market Street, within several blocks of the site, notes the developer. That initiative by the city also helped attract Twitter to relocate its headquarters to 10th and Market.