Related California doubles size of hotel-office tower in SF

Nearly two of every five offices in San Francisco are empty and two of its largest hotels are on the rocks, searching for a buyer.

But that hasn’t stopped Related California from upsizing its plans to build a 41-story boutique hotel and trophy office building, from an initial 19 stories at 530 Sansome Street, in the Financial District, the San Francisco Chronicle reported. 

The project near the Transamerica Pyramid is expected to cost $600 million.

The Irvine-based developer has filed plans to construct the 575-foot tower with a luxury hotel on the first 11 floors, topped by 375,000 square feet of premium offices on its upper 24 floors. 

Matt Witte, a principal at Related California now in his fourth market downturn as a developer in San Francisco, called it a winning combination — making the stalled redevelopment of an aging fire station pencil when construction across the city has hit a wall.

“The office and the hotel markets are not homogeneous,” Witte told the Chronicle, adding that the offices are designed for “very specific types of tenants that historically have been interested in smaller floor plates with views.”

Earlier plans, approved in the summer of 2021, had called for a 19-story mixed-use tower that would add a hotel, 45,000 square feet of coworking areas and a fitness club above a reconstructed city-owned firehouse.

Related California now wants to tear down the two-story Fire Station 13 from the 1970s and build a hotel-office tower more than twice as tall. 

Under the revised plan, the hotel and offices would be divided by “an amenity floor,” plus another floor containing a spa and fitness center. The two floors above the building’s ground floor lobby would be home to a restaurant and conference rooms.

Instead of being rebuilt at the base of the proposed tower, a $40 million replacement fire station would stand alone on an adjacent lot at 447 Battery Street, which Related is in contract to buy out of foreclosure.

Related’s proposed tower tapers toward the top, providing floor plates ranging from 18,000 square feet to 9,000 square feet.

That’s a range that has proven highly attractive to venture capital firms and non-tech companies that have flocked to Jackson Square over the past year to historic offices and a calm, neighborhood feel, according to the newspaper.

Related’s tower would rise a block away from the Transamerica Pyramid, the site of a $400 million renovation by New York-based developer Michael Shvo.

In order to bypass the neighborhood’s 200-foot height limit, Related would need the city to rezone the site through a development agreement approved by the Board of Supervisors. Though it doesn’t plan to build homes, the developer has agreed to pay $4.5 million toward senior housing in Chinatown as an in-lieu affordable housing fee.

“Related is banking on this because they are going to pay this fee soon after entitlement, regardless of whether or not they put a shovel in the ground,” Dan Sider, chief of staff for the Planning Department, told the Chronicle. 

“This is not Related’s first rodeo. They’re saying, ‘We’re banking on downtown. We’re banking on the office market rebounding. We’re banking on this project.’”

The office vacancy in San Francisco just hit a record 37 percent, according to CBRE. At the same time, the troubled Hilton San Francisco Union Square and Parc 55 hotels have struggled to find a buyer after Virginia-based Park Hotels & Resorts defaulted on a $725 million loan tied to the 1,921-room Hilton and the 1,024-room Parc 55.

Related California, a unit of New York-based Related Companies, had partnered with the city to build a 40-story luxury apartment tower at 1500 Mission Street, plus a 460,000-square-foot office building for 1,800 city employees next door. 

— Dana Bartholomew

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