Holliday Development

Developer Rick Holliday is stepping in to take over the stalled 198-unit project on Jamestown Avenue in the Bayview District, a condo development that was abandoned two years ago amid a storm of lawsuits and the collapse of the housing market.

Holliday will start work immediately to complete the first two buildings totaling 66 units: One of the buildings is 80 percent done and the other is 40 percent complete. Construction costs to finish phase one will total approximately $10 million. Work on the $20 million phase two, also 66 units, will commence once sales of phase one gain traction. Holliday said he doesn’t know when they would build the third and final 66-unit phase.

The project, a glaring example of how the real estate downturn hit hardest in underserved neighborhoods, will generate “$25 million or $30 million” worth of sorely needed construction jobs at a time when many of the construction trade unions are suffering 30 to 40 percent unemployment, according to Holliday.

“This has been a very troubled project, but there is a new sheriff in town and we are going to make it a good project,” said Holliday.

The Jamestown development was one of two projects developer Noteware Development and equity partner Goldman Sachs paid top dollar for at the apex of the frothy real estate market. Noteware and Goldman Sachs shelled out an eye-popping $18.5 million for the Bayview site in 2006. At nearly $100,000 a door, Noteware and Goldman’s investment cost more than most luxury developers were paying for the most expensive highrise sites in Rincon Hill and SoMa. The team proceeded to snag a $90 million construction loan from Citibank for the Jamestown project.

By 2008, it was clear that the market was heading down and construction was halted on the project, along with the 340-unit 5800 Third St., another Noteware/Goldman Sachs joint venture that was taken over by Holliday a year ago.

After the project was stalled, 15 subcontractors and suppliers filed complaints worth more than $10 million against contractor Thompson Pacific and Jamestown Equity Partners, the limited partnership set up to develop the property, according to legal complaints.

These included Nicodemus Plumbing, which was owed $3.6 million, and smaller claims by Hillside Drilling, Enterprise Roofing, Northside Plastering, Mark Horton Architects, Bode Concrete, Helix Electric and others, according to the complaints. The new development team was able to settle for less than half the original lien amount, and many of the original subcontractors will be brought back on the job, according to Holliday.

“Cleaning the liens up was not terribly expensive, but it was complicated because so many people were involved,” said Holliday. “Those (subcontractors) are our first choice to put back to work now that we have bank financing back in place.”

Holliday has brought on Cannon Constructors to jump-start the project, the same team that took over Noteware’s 5800 Third St., which is nearing completion.

James Noteware, who was president of Noteware Development, is now working as the director of housing and community development for the city of Houston and commented through a spokesperson, Janice Evans, that he didn’t walk away from the project.

“He sold his interest in those projects and didn’t owe anyone anything,” said Evans.

While Noteware had originally positioned the development as workforce housing priced about $600 a square foot — $600,000 to $700,000 a unit — the new pricing will likely be just under $400 a square foot. The project will be billed as family housing close to biotech jobs in South San Francisco, the state park at Candlestick Point, as well as the massive redevelopment project slated for the Hunters Point Shipyard.

Holliday said Citibank and Goldman Sachs deserve credit for not completely walking away from what was essentially a terrible investment. He particularly credited former Goldman Sachs executive Jesse Blout for pressuring the banks not to sell the note as a write off. Blout declined to comment.

“It could have been bad — it could have sat there and rotted and rusted for years,” said Holliday. “Everyone knows full well they are not going to make money. I think it speaks particularly well for Citibank and Goldman to say, we made some mistakes, but we need to finish this thing so it’s not an eyesore.”

In addition to the construction issues, Holliday faces 11 complaints from the San Francisco Department of Building Inspection. The property was cited under a new ordinance that requires abandoned or vacant buildings to register and pay an annual fee. They also face some angry ex-Noteware team members who say they are owed money. Claude Everhart, a community outreach specialist who worked with the neighborhood to get the land entitled, said he was not paid for his work. He declined to say how much he is owed.

“I am angry at how these guys have treated this neighborhood,” said Everhart. “You would not treat a neighborhood in another part of the city like we were treated. My community has sat out here with this albatross of a project for all this time and all the people who worked with the community have not been paid.”

Holliday has been working with the city Planning Department to redesign some of the landscaping around the development and will meet with neighbors to discuss the latest developments.

“We need to do some redesign and consider different landscaping and meet with neighbors to reconnect because there have been so many promises made for different things,” he said.

Chris Foley of Polaris Group, who brokered the sale of the property to Goldman Sachs and Noteware, said Holliday and Citibank deserve credit for cleaning up all the liens on both projects and moving them forward.

“It has been a lot of work for them and I salute them,” said Foley. “I think the real goal here is to finish a project that was started, to keep a promise made to the community, while recouping as much capital as possible.”

J.K. Dineen covers real estate for the San Francisco Business Times. Contact him at jkdineen@bizjournals.com or (415) 288-4971. Read his blog postings at Bay Area BizTalk. Read more: Developer Holliday takes over Bayview job – San Francisco Business Times

"This has been a very troubled project, but there is a new sheriff in town and we are going to make it a good project," said Holliday.