Condo sales team gets creative in “critical” market

Sales agents at the Serif condo development have flexed their creativity to entice buyers to, as its marketing slogan says, “Look Again” at its Mid-Market location.

Since sales began in Spring 2021, promotions have ranged from two years of HOA credits to upwards of $15,000 in unit upgrades, including beds and storage spaces that tuck away into the ceiling. Recently, the sales team decided to go back to basics and cut the price on the latest release in the 242-unit building.

“The next few months will be critical,” said developer Joy Ou of the decision to lower prices to move the needle on sales.

Ou said the Market Street building, which also has a 236-key hotel from The LINE planning to open with an entrance along Turk Street this fall, is over a quarter sold and was doing “quite well” until interest rates went up this spring. About 30 residents have already moved into the building, where prices start at $499,000 for a studio and go to more than $2 million for some two-bedroom, two-bath units.

Sales slowed to a trickle when interest rates went up and the stock market, particularly tech stocks, went down — a double-whammy for Serif’s largely entry-level buyers who found themselves with less to put down and monthly payments nearly double what they were a few months ago.

“They lost wealth,” Ou said. “Their stock options are all of a sudden worth nothing.”

‘Challenged’ location

The Serif condo development (Jason O’Rear)

Polaris Pacific is representing the property and, of the eight condo communities the firm is selling in San Francisco, President Paul Zeger said Serif is the one that has been most impacted by the contracting purchasing power of entry-level buyers. He also mentioned the building’s “very challenged” location. It’s a project he is watching closely as the overall housing market softens in the city.

“This has not been the easiest part of the market,” he said. “Sellers are getting an education on what it takes to move product right now.”

Ou would not reveal exactly how much the price had dropped in the new release, but said the average of $1,200 to $1,400 per square foot is about 10 percent below what she imagined they would be when she began construction on the 400,000-square-foot project with her then-partner Eric Tao in 2018. After four years of working as a team known as L37 Partners, the partnership dissolved at the end of July. Ou has reinstated her former company, Group I, which also owns the retail and office space in the Warfield Theatre building on the same block as Serif.

Ou said she has rented out three empty retail spaces at the Warfield building in the last three months at only the triple net for the first six months. The businesses — a hamburger restaurant, a boba tea shop and a bar — will gradually start paying a percentage rent, with a low base rent. It is one of several attempts to activate the street during a time when the office vacancy rate in the area is nearly 30 percent, according to second quarter CBRE data, and downtown can feel like a “ghost town,” Ou said.

“You want them to survive,” she said of her retail tenants, adding that little changes by owners and developers can “push this engine forward” to bring life back to the neighborhood.

She’s also trying to bring the Magic Theatre, currently located in Fort Mason, into a dedicated arts space in Serif and spent $80,000 on several murals on the block, including one on the roof of the Crazy Horse strip club between Serif and the Warfield that needs to be power-washed every two months. She said she told the owner of the Crazy Horse that if he doesn’t repaint his peeling sign by the time her hotel is due to open in September, she’ll do it for him.

“Before the pandemic this area had more life to it than right now, but we’re bringing that back,” she said. “I’m trying everything I can.”

Revitalization plan

Serif’s Rooftop Solarium (Jason O’Rear)

The revitalization Ou is hoping for as well as the amenities promised by the hotel are key sales points for Serif moving forward, according to Elena Trierweiler of Polaris Pacific. She has been working on the building’s sales team since 2018 and said getting buyers to see the “vision” for the neighborhood on the cusp of the Tenderloin had been difficult even before the pandemic.

The “quietness of the neighborhood for many, many months” has made the area an even harder sell. For the past two years, she has been constantly updating the building’s “neighborhood map” to account for all the retail and restaurant closures, she said.

When hundreds of people are coming and going every day from the hotel, which will offer room and food discounts to Serif owners as well as exclusive access to events, it will bring some much-needed energy to the location, she said. The five new dining and drinking options in the hotel, including a beer garden currently under construction along Market Street, and those expected to come to the long-empty IKEA-owned multi-use project under development across the street also helps her address safety concerns. Buyers have expressed trepidation about where they could safely park their cars when they come for tours. Others who found the building online and may not have been to Mid-Market before have canceled planned tours once they arrived in the neighborhood, Trierweiler said.

“You don’t have to walk two blocks in the winter when it’s dark,” she said of the new on-block offerings. “I think that’s going to make a huge difference for folks.”

There’s a gym onsite, as well as a rooftop deck with a lounge and private dining areas available for rent – important additional spaces when many studio units are less than 500 square feet. The Bumblebee ceiling storage system available as an upgrade through the building’s design center, and formerly covered by previous incentive programs, has been particularly popular for those who plan to work from home and want to put their bed and storage cubes up when they start the work day, she said.

Even as the prices on smaller units drop, the building’s most expensive floor plans — two-bedrooms, two-baths in the flat iron portion of the building with unique U-shaped windows in the entertaining space — have been among its most popular. Trierweiler said she’s seen little pushback on price to those units, which start at $1.7 million for a condo on the second floor and go up to about $2.2 million on higher floors of the 12-story building.

“I think for that unit, people see a lot of value,” she said. “We’ve sold a lot of that stack so I think that speaks for itself.”

Ou said she expects the building to sell out by the end of next year, at which point she hopes to move the equity in the building to an entitled 321-unit high rise project she has at 1270 Mission a few blocks away. She added that buyers coming to view Serif even six months from now will be pleasantly surprised by what they see in the neighborhood.

“I can see Mid-Market turning its light on,” she said.

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