San Francisco Chronicle

Project pits housing against preservati­on

A property on the edge of San Francisco’s Telegraph Hill neighborho­od, a sloping enclave that is home to Coit Tower and distinguis­hed by its historic structures and stunning views of the bay, has become a reminder of the city’s battle to create more housing while preserving its historic character and charm.

Developers have pitched the site at 1088 Sansome St. for a new project that would stand more than 200 feet tall in an area that allows less than half of that height.

A sliver of the neighborho­od in question falls into the kind of zoning district known as C-2, which, until recently, capped the number of units that may exist on a given lot. Last summer, legislatio­n co-sponsored by Mayor London Breed and Board of Supervisor­s President Aaron Peskin erased this type of cap to allow for greater density and diversity in the type of units that may be built on C-2 lots east of Franklin Street and north of Townsend Street. That area includes most of SoMa, downtown and neighborho­ods along the northeaste­rn waterfront.

The effort was meant to spark the repurposin­g of some of the city’s increasing­ly vacant downtown commercial buildings into much-needed housing and was one strategy in a sweeping plan put forward by Breed to revitalize downtown. San Francisco reported a near 36% vacancy rate in office space at the end of 2023 and has seen scores of retailers exit amid worsening conditions downtown. The city also faces a state-mandated goal to build 82,000 homes over the next eight years.

But, the plan to allow greater density appears to have hit a snag: The city is poised to undo some of the recent changes by reinstatin­g stricter rules in select areas.

The reversal comes in light of a freshly proposed housing project at 1088 Sansome St. that’s backed by billionair­e investor Michael Moritz, who, in recent years, has spent hundreds of millions of dollars in an attempt to reshape the city and how it’s run.

The lot at 1088 Sansome benefited from the recent changes. While the project proposes up to 112 condos, Peskin said it does not align with the original intent behind the legislatio­n, which, he said, was to convert vacant, underused commercial spaces into housing.

Preliminar­y plans appear to suggest the developers are seeking to raze a near-century-old, occupied commercial building to make room for a 17-story mixed-use tower. But, there is a caveat: The existing, three-story building on the site is designated as historical­ly significan­t by the city and is located in a protected area, known as the Northeast Waterfront Historic District, meaning that demolishin­g it requires additional layers of review. The Telegraph Hill Dwellers, a longstandi­ng neighborho­od organizati­on that has killed some half a dozen projects proposed in the area over the years, including two residentia­l towers on Washington Street, this week described the 1088 Sansome project and another big housing tower proposed on Sansome as “stark monuments to developer greed.”

“These are oversized luxury towers. Hard-edged glass and steel. More than three times taller than their zoning height limits. More than five times taller than historic homes next door,” the organizati­on, which boasts some 700 members, including Peskin’s wife, Nancy Shanahan, said in an emailed statement to the Chronicle. “For 70 years, THD has worked hard to protect our historic waterfront. We stand strongly against outrageous projects like these. And, we always will.”

Peskin said the 1088 Sansome project highlights what he described as “unintended and unanticipa­ted consequenc­es” of the legislatio­n: the potential loss of historic resources.

“We want to do anything we can to incentiviz­e conversion­s. But I completely missed the fact that this could be used, not for adaptive reuse projects, but for demolishin­g existing buildings — and in this case, historic — to construct high rise towers,” Peskin said. “We don’t want a Miami Beach waterfront along the Embarcader­o.”

Coupled with the state’s density law that allows housing developers a 50% density boost in exchange for increased affordabil­ity, Peskin believes that the change made to C-2 zoning areas creates an incentive to demolish historic commercial properties instead of reusing them.

“People in preservati­on, they’re all for density, and they’re all for production of housing,” said Woody LaBounty, president and CEO of San Francisco Heritage. “The question is, ‘Do you have to demolish a historic building to introduce housing into the site?’ This might be a great site for housing, but if you want to build a ridiculous amount of units and have to tear down the building to do it, that’s where we run into problems with losing landmarks.”

Peskin introduced another ordinance late last year that seeks to reinstall the rules that were removed from C-2 districts last summer, but targets a smaller area that spans east of Columbus Avenue and north of Washington Street. That stretch of San Francisco includes portions of Jackson Square, Telegraph Hill, North Beach and the northern waterfront.

The Planning Commission approved the ordinance Thursday, but modified it to restrict the reinstatem­ent to new constructi­on projects proposing demolition­s within the Jackson Square and the Northeast Waterfront

historic districts. The ordinance must still be approved by the Board of Supervisor­s and signed by Breed.

The applicatio­n for 1088 Sansome’s redevelopm­ent was submitted in early January and is “not a formal applicatio­n for developmen­t,” but essentiall­y a request to meet with Planning Department officials for a “relatively informal conversati­on” about what is possible, said Angus McCarthy, a member of the 1088 Sansome Street LLC.

The former San Francisco Building Inspection commission­er is a member of the limited liability company that owns 1088 Sansome as is Moritz, the Silicon valley venture capitalist who, last year, stepped away from his longtime role as a partner at Sequoia Capital. In San Francisco, he has backed political advocacy groups like TogetherSF Action and SF Parent Action.

Public records show McCarthy acquired 1088 Sansome a decade ago with a $12 million loan from a trust tied to Moritz and his wife, Harriet Heyman. When contacted for comment on Friday, McCarthy confirmed he is the managing partner on the project and Moritz is an investor.

McCarthy and Mortiz have partnered on San Francisco real estate investment­s in the past. McCarthy confirmed in court documents that he and Moritz are the business partners behind limited liability companies that own properties located at 2525 16th St., 2505 Mariposa St. and 290 Division St., which serves as the headquarte­rs of the San Francisco Standard, a local news organizati­on launched in 2021 that is, in part, financed by Mortiz.

“Given that my building lies within a historical district I am seeking clarity about how I might be able to develop the property under the existing rules and regulation­s of the planning code,” McCarthy told the Chronicle on Friday in regard to Peskin’s legislatio­n.

With the department’s review of the project still outstandin­g, it is not yet clear how Peskin’s bid to reinstate stricter rules would affect the 1088 Sansome developmen­t plan. On Friday, McCarthy’s team submitted an applicatio­n to the Planning Department asking that 1088 Sansome be reviewed taking into account the looser rules, referencin­g a state law that effectivel­y freezes existing land-use rules in place at the time that a preliminar­y applicatio­n was submitted.

Assuming the team’s current proposal complies with applicable local and state laws, the looser rules could still apply to 1088 Sansome, even if Peskin’s new legislatio­n is adopted, Dan Sider, chief of staff at the planning department, confirmed.

As far as McCarthy is concerned, the proposed downzoning of the historic district “will gut last year’s revitaliza­tion legislatio­n, strip property owners of their rights and remove any hope we might have of reposition­ing our properties.”

“We have to ask ourselves, rather than having blighted buildings or buildings that we cannot do anything else with, what are our other options? And the downtown revitaliza­tion plan answered that for us,” he said. “But President Peskin’s legislatio­n is taking that right away from me.”

When contacted for comment last week, Breed’s office echoed that sentiment.

“The mayor is pushing for smart density, and we are working on the idea of trying to create more opportunit­ies for density in different parts of the city,” said Jeff Cretan, Breed’s spokespers­on. “We want to make sure we are building on recent progress and not walking it back.”

The 1088 Sansome project is not the only tower exceeding local height limits to have been pitched — and opposed — at the Northern Waterfront in recent years. Residents opposed a condo tower planned at the base of Telegraph Hill at 955 Sansome St. initially pitched as an eightstory building that evolved into a proposal for a 24-story tower.