SF developer builds housing everywhere except on site

San Francisco-based developer Bora Ozturk is currently building a lot of housing, with projects currently underway in Houston and Salt Lake City, Austin and Boise, Idaho.

Apparently everywhere except in the company’s hometown of San Francisco.

“We see tremendous opportunities in Texas cities right now,” he said, adding that they have built “in Nashville, in Idaho, in Hawaii, in Nevada, Utah and Louisiana.”

The focus outside of California is significant because Ozturk’s firm, March Capital, has focused almost exclusively on San Francisco for nearly two decades, completing about 30 projects there. Most of them were small- to medium-scale redevelopments in established neighborhoods that the city wants to promote as part of its state-mandated housing goals.

Even during COVID, the company continued building, completing 130 units in West SoMa, 24 units across from California Pacific Medical Center’s Mission-Bernal campus, and smaller projects in Marina and Haight.

But not anymore, said Oztuck.

“Capital flows where it is welcome,” he said. “It is not welcome here at the moment.”

Oztuck is opposed to San Francisco for a combination of political and economic reasons. A powerful cocktail of challenges, he says, has led to the city being put on the red line by most lenders.

Last week, Oztuck and I led a tour of the historic Lane Medical building at 2395 Sacramento Street, a 1912 neoclassical-style building that March Capital purchased three years ago for $8.5 million. Plans call for converting it into eight apartments and building an additional 16 condominiums on two adjacent lots to the south and west of the property.

The proposal calls for preserving the facade of the old Lane Medical Library building at the corner of Webster and Sacramento Streets and adding two towers – one 65 feet tall, the other 75 feet tall – that would provide 24 residential units. The existing building is about the same height as the lower residential tower. Much of the interior will be retained: the windows, vestibule, and a decorative oval spiral staircase with terrazzo treads and risers leading from the lowest floor to the attic.

The project received unanimous support from the city’s Historic Preservation Commission and Planning Commission before the property’s neighbor appealed to the Board of Supervisors, arguing that the city acted improperly by allowing the developer to attach itself to a broader, citywide environmental study that was part of the city’s housing element rather than conducting a more complex “project-specific study.”

Although the Board of Supervisors rejected the appeal by a vote of 10 to 1, the same neighbor, Jonathan Clark, who lives directly west of the library, appealed the decision in court under the California Environmental Quality Act (CEQA), arguing again that the state’s environmental laws had not been properly followed.

Richard Drury, an attorney for the appellant, said allowing the construction of 24 housing units without a project-specific study would “open the floodgates” for developers to bypass environmental reviews “in a very irresponsible manner.”

“If this were allowed, the city of San Francisco would no longer be required to undergo project-level environmental review of any residential development,” Drury said. “And that’s just not right.”

City attorney David Chiu, who is defending the project approvals, said the environmental study was adequate.

“This is a modestly sized residential development in a well-resourced area,” he said. “The environmental assessment for the project met all applicable CEQA requirements.”

Ozturk, who has not commented publicly on the project, said the process has been incredibly frustrating. He estimates the appeal and legal challenges will add up to two years to the schedule and increase costs by 20%. The project will likely cost $1,000 per square foot to build, or $45 million.

Since the permitting process takes at least four years and construction takes about two years, the project will take six to seven years. In other cities, March Capital needs no more than two years to complete multi-family housing projects – from purchasing the land to obtaining building permits to the grand opening.

“When you leave California, the tone of the conversation is generally, ‘What concessions would you like?'” Oztuck said. “It could be fee waivers, higher population density, tax credits or additional water rights. There’s always an incentive to build more and a friendly attitude aimed at accelerating the timeline.”

The lengthy approval process ties up money for years, meaning that that capital cannot be reinvested in other projects. Capital that could be deployed twice in a 10-year period in San Francisco can be used five times in a city like Houston, where a project can be approved, built and sold in less time than the approval process requires in San Francisco.

“The opportunity costs are enormous,” Oztuck said.

He said the neighbor who had led the opposition to the medical library construction had privately offered to withdraw his objection if March agreed to reduce the height of the new buildings from six and seven stories to two stories and move the parking lot entrance to the other side, away from his house.

“You can get the thumbs up from everyone and say, ‘I think I have a viable project here.’ And then you’re tied to that one neighbor who says, ‘I don’t want to get the project built … and you can’t build it.'”

Although he has stopped looking for new projects in San Francisco, Oztuck said he is committed to building 2395 Sacramento.

“Our message to opponents is: You can fight us ad infinitum and we will build this thing,” he said. “It may not happen this year, but we will build it. We will not back down.”

He added: “It bothers me that a neighbor can use an irrelevant issue as a weapon and delay or stop a project. It happens all the time.”

Meanwhile, a group of preservationists has applied to have the building listed on the National Register of Historical Places. Built in 1912 and designed by master architect Albert Pissis, the building is an excellent example of an early 20th century neoclassical library with Beaux-Arts influences, they say.

Conservation architect Katherine Petrin said the plan to renovate the historic medical center is in line with federal standards, so designation as a protected state site would likely not affect March’s ability to proceed with the project if the appeal is denied.

She said that this designation would even make the project eligible for a 20% tax credit.

“It won’t affect the project,” she said. “It could be beneficial.”

Reach JK Dineen: [email protected]