The developers behind a delayed condominium-and-hotel tower planned in Downtown San Francisco have renegotiated their purchase agreement as part of the financing picture for the project.
F4 Transbay Partners cut a deal with the Transbay Joint Powers Authority to pay a fixed $40 million in damages for its delay in building the 1.1 million square-foot tower at 542-550 Howard St. in the East Cut neighborhood, the San Francisco Business Times reported.
The F4 consortium, a joint venture between Hines, Urban Pacific Development and Goldman Sachs, saved tens of millions on their renegotiated agreement with the seller and allowed the developers to obtain construction financing.
Under the previous agreement, F4 Transbay Partners would have had to pay $70 million to the authority if it didn’t complete the mixed-use tower known as Parcel F by Dec. 31, 2023. It would also have had to pay another $15 million a year per delay.
The new amendment to the purchase agreement would require F4 Transbay to pay $40 million in four installments through July 2027, according to the Transbay Joint Powers Authority documents. The $40 million in damages would be a fixed amount regardless of when construction is completed.
The TJPA board is expected to allow its executive director to agree to the amendment.
F4 Transbay, which hasn’t broken ground on the 800-foot highrise near the Salesforce Transit Center, said the uncertainty of the $70 million, plus annual accruing damages, made it impossible to get construction financing.
The entitlements for Parcel F were completed last month. It expects to break ground this year and complete the project by 2027.
The original purchase agreement was signed in 2016, when F4 Transbay paid $160 million for the 0.67 acre parcel, which was the last patch of land zoned for a tower in the area. Plans for Parcel F include 165 condos, 189 hotel rooms, 275,647 square feet of office space, 9,000 square feet of shops and restaurants, and 20,000 square feet of open space.
New York and New Haven-based Pelli Clarke Pelli — who drew up plans for the 60-story Salesforce Tower in Chicago, and designed the Salesforce Tower in San Francisco — designed the Parcel F building. The silver-blue skyscraper will be topped by a crown that references the city’s Coit Tower, Transamerica Pyramid and Pacific Bell building.
The delay in construction stems from Salesforce, which had pre-leased the office component of the tower in late 2018, backing out of its commitment as the Covid pandemic hit San Francisco, The developers had expected to break ground early this year.
In September, Hines signed up Rosewood Hotels & Resorts to operate the 15-floor luxury hotel. It’s expected to compete with 5-star brands such as the Four Seasons, Ritz-Carlton and the Fairmont.
[San Francisco Business Times] – Dana Bartholomew