From: SF Business Times

San Francisco Business Times - by J.K. Dineen

The new Presidio Landmark apartments in San Francisco bring SoMa-style highrise amenities to the trails, surf and tranquility of a national park.

The question is whether renters will pay a downtown luxury premium for a rustic setting on the edge of the Inner Richmond district.

Forest City is betting that they will. The developer is gearing up to open its $71 million, 154-unit Presidio Landmark in July, the long-awaited transformation of the old 220,000-square-foot U.S. Public Health Service Hospital, which closed in 1981.

The pricing of the apartments is aggressive: The six-story building’s third and fourth floors will be released first, and asking rates on junior one-bedrooms, which weigh in at 500 square feet, will be $2,125 a month. Full one-bedrooms, most of which are about 850 square feet, will average $2,875 a month. And two-bedrooms, which range in size from 1,000 square feet to 1,500 square feet, will average $4,325 a month. Parking will be $150 a month for an outdoor spot, and $200 a month for a space in the underground garage.

Pac Heights prices?

In calculating asking rents, Forest City first looked at rental comps in neighborhoods like Pacific Heights and Russian Hill, as well as rentals available in top condo buildings like the Infinity. They then factored in a premium for the amenities in the building: yoga studio, fitness center, New York-style doorman, courtyard fire pit, private dining room, chef’s kitchen, bamboo-enclosed outdoor hot tub and wine tasting room.

And then there were the intangibles. How much is it worth to live in a national park with Baker Beach a 10-minute walk in one direction and Clement Street’s restaurants a quick jaunt in the other?

It was an inexact science, said Forest City Vice President Alexa Arena.

“It’s hard to calculate on a per square foot basis. In Russian Hill or Pacific Heights rarely would you get the amenities or the park setting,” said Arena.

The Presidio has a 98 percent occupancy rate for its 1,150 housing units, about 3 percent higher than city averages. Rents dipped slightly in the recession but not as much as other neighborhoods, said Craig Middleton, executive director of the Presidio Trust.

“There are no comps that are a real comp,” said Middleton. “How many places can you live in a national park, see the ocean and walk out your back door to the beach? It is a quality of life that is difficult to quantify.”

Part of self-sufficiency

The current construction and future projects are all part of meeting a legislative mandate that requires the Presidio to become financially self-supporting by 2013. Developing and leasing properties are a key part of meeting that requirement. The park contains 768 buildings, both residential and commercial, and has completed several ventures in the last five years.

Forest City started construction 18 months ago in the midst of the Great Recession, but it persevered.

“Everything is going through economic cycles but at the end of the day you just don’t have opportunities to have a building like this in a national park,” said Arena. “It felt like the right package, the right positioning, the right opportunity within the context of the Presidio to feel confident.”

The LEED gold building on the park’s southern border is about one-third junior one bedrooms, one-third one bedrooms, and one-third two bedrooms. Most of the building consists of one bedrooms because the Presidio now has just 10 one-bedrooms. The project was designed by Perkins + Will and built by Plant Construction, the team that did the Ferry Building.

Arena said there is no hurry to lease the apartments.

“It’s a long-term hold and that is how Forest City is structured. We always pick investments that work over the long term because we are an owner and developer and manager. So we are not going to rush to lease it as quickly as possible. We are going to make sure it is positioned in a way that makes it valuable and a great place over the life of the project. We are not going to go on a fire sale.”

Designed for athletes

The project originally called for 350 units, but was scaled back to appease neighboring residents, who worried about the traffic and parking issues. Middleton said the project benefitted from downsizing as it allowed the building’s non-historical blue wings to be removed.

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