It's debatable if the fiduciary standard is 'higher' than suitability. But the better question might be, who's holding the bar?
Principal Real Estate Investors and Urban Pacific Investors (UPI), reported that it broke ground July 16 on One Rincon Hill Phase II, a 52-story, 299-unit residential development in San Francisco's South of Market (SoMa) District.
The Phase II project, which the Company said is designed to achieve LEED certification, is a companion to the existing 64-story Phase I tower.
Principal Real Estate reported that that construction will begin in July 2012, with occupancy planned for summer 2014 and completion in fall 2014. Phase II is expected to be the largest residential project currently under construction in San Francisco.
"The Phase II development of Rincon Hill is an attractive addition to our real estate investment portfolio," said Rod Vogel, managing director at Principal Real Estate Investors. "The iconic development will bring much needed housing to the San Francisco residential market, while at the same time, adding another high- quality real estate property to the fantastic city skyline."
Principal Real Estate Investors, an institutional real estate managers in the U.S., is developing One Rincon Hill Phase II on behalf of the Principal Green Property Fund I. The Company noted that UPI, the development management company for the project, is a new entity formed by Michael Kriozere, the developer of One Rincon Hill Phase I.
"One Rincon Hill was always envisioned as a two-tower development," said Mike Kriozere, development principal at Urban Pacific Investors. "We are thrilled to be breaking ground on the second half of what is still the tallest residential tower west of the Mississippi. With the continuing density of residents and commercial tenants, we are pleased to have such a well-situated property."
In addition, Principal Real Estate noted that One Rincon Hill has become one of San Francisco's most recognizable landmarks and the tallest building on the skyline, in part due to its location atop Rincon Hill, the last buildable hill in the city. Topped with a glowing weather beacon at its crown, the 64-story Phase I tower, with 376 luxury condominium homes and 14 townhomes, with 90 percent reserved two weeks after the sales center opened in 2006. Residents began moving in Feb. 2008, and it is now home to more than 650 people. About a dozen homes, all on upper floors, are currently available for sale, and the building is on pace for a sold out, fully occupied tower in fall 2012.
The 52-story Phase II tower, offering 299 units, will complete the development, which the Company said will eventually feature a total of 689 private residences and be home to more than 1000 people.
The addition of the 485,000-square-foot (Total Gross Building Area) Phase II tower is the fulfillment of a journey begun nearly eight years ago when Kriozere identified the site on Rincon Hill as the location for this iconic development.
According to Kriozere, One Rincon Hill's second tower will be a "52-story 450-foot version" of the existing tower with some subtle internal changes and new features:
-The 299 units include a mix of one-, two- and three-bedroom homes, ranging from approximately 613 square feet for a junior one- bedroom to approximately 3,214 square feet for three-bedroom plus den penthouses.
-Approximately 60 percent of Phase II unit floor plans are the same as in Phase I. Phase II will combine the two adjacent small one- bedroom units at the center of the building curve above floor 25 into one two-bedroom unit. The number of two-bedroom units will increase and the number of one-bedroom units will correspondingly be reduced. Like the first tower, the second tower units will feature views of the city and bay from panoramic floor-to-ceiling windows and extra-large balconies.
-The weather beacon lights on Phase I will be mimicked on the new tower, offering a view to a much greater expanse of the city.
-Significant new features in the Phase II building will include a 3,600-square-foot fitness center on the plaza level and a 4,000- square-foot penthouse "Sky Lounge" on the 49th floor. (As comparison, current Phase I amenities include a plaza level 750- square-foot exercise room and a 1,100-square-foot hospitality room). All amenities, including the existing plaza level podium with swimming pool, reflecting pool and sundeck, as well as the elegant parking facility with valet parking, will be available to occupants of both towers.
The Company reported that Phase II will be offered as rental apartments, with condo mapping allowing for making units for sale at a future date. The core project team for Phase II remains as it was for Phase I, including architecture by Solomon Cordwell Buenz and structural engineering by Magnusson Klemencic Associates; however, the new general contractor is Webcor. A construction loan has been provided by Pacific Life Insurance Company.
As with the $24 million in fees paid for Phase I, the developer will pay a fee to the city in-lieu of including any Below Market Rate (BMR) units. In addition to the approximately $15.1 million BMR fee for Phase II, Principal Real Estate added that the city also will collect an estimated $4 million Rincon Hill Infrastructure Impact Fee, a $5.1 million SOMA Stabilization Fund Fee, and a School Fee of about $1 million.
One Rincon Hill is situated in the heart of one of San Francisco's neighborhoods. One of the city's oldest sections, the SoMa District experienced conversions of warehouses to lofts in the 1980's, the opening of AT&T Park in 2000, and most recently, new condo developments with thousands of new residents. SoMa is at the center of the latest technology boom, where trendy restaurants, bars, boutiques and the proximity of the waterfront make this a great location to live, work and play. The Company noted that One Rincon Hill is also two blocks from the MUNI F line, and offers convenient access to freeways connecting east to Oakland across the Bay Bridge, and south via Hwy. 101 and I-280 to San Francisco International Airport, the Peninsula, Silicon Valley and beyond.
Principal Real Estate Investors manages or subadvises commercial real estate assets. The firm's real estate capabilities include both public and private equity and debt investment alternatives.
The Principal Green Property Fund I is a closed-end commingled fund sponsored and managed by Principal Real Estate Investors. The Fund is focused on multifamily, office, industrial, retail and hotel properties and is pursuing both ground-up development of commercial real estate, and the acquisition of value-add properties throughout the U.S. designed to achieve LEED certified status.
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