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One Rincon Hill: We Didn't Really Promise to Pay

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This news hit yesterday: the developer of Ionic Breeze One Rincon Hill apparently had his fingers crossed when he agreed to pay the city millions in development fees in exchange for the go-ahead to build. In Mike Kriozere's words: "I did not give a personal guarantee that if the building failed to make a profit I would personally write them a check." Oh no he didn't. There is a reason, of course. With sale prices earthbound and the tower only 70 percent sold, One Rincon isn't exactly rolling in cash— and on top of that the second tower's been delayed indefinitely. So... yeah. It's not like they pinky swore on it or anything. But there's more juice: a commenter at SocketSite thinks this is all Kriozere trying to "push the City to become a partial investor in the second tower [of One Rincon Hill] through the use of Federal stimulus money." So there's hope after all!

UPDATE: Developer Mike Kriozere cheerfully disseminates damage control to the bloodthirsty media.

Quoth:

An open letter to the leaders of the City of San Francisco, One Rincon Hill residents, our project partners and the media: While it is unfortunate that my discussion with the San Francisco Chronicle was taken out of context and thus reflected inaccuracies, it does provide me with an opportunity to share what has been and continues to be our commitment to both the project and the City. As such, I share the following.

Not only is One Rincon Hill more than 70% sold, but sales once again are brisk; in fact, sales traffic has been above the pre-crash level (60-100 tours) every week in 2009. We are pleased to report that we have almost fully paid our construction lender and contractors, have no liens against the building and appreciate the unwavering support of our partners. We have not received any funds from the City in any aspect of the development of this project.

We have every intention to complete Tower II, but, as I said publicly months ago, we are waiting for the economy, and the residential real estate market in particular, to turn on the upswing. There is no rush to proceed at this time.

In specific response to the reporting in the San Francisco Chronicle that “he does not plan to pay the $5 million in fees that were central to obtaining city approval to build the high-rise,” this is not my plan. In fact, to date we have paid over $16.6 million in fees:

Affordable housing in lieu fee (offsite) $11,026,146 (Dec. 2005)
S.F. public school fee $858,448 (Feb. 2006)
Rincon Hill Community Improvement fee $3,162,889 (Sept. 2006)
SOMA Stabilization Fund fee $1,268,306 (Dec. 2005 and Sept. 2006)
Total: $16,615,789

The sole remaining fee to be paid is the balance of the SOMA Stabilization Fee of $13.75 x 393,884 square feet or $5,415,905. This payment is not yet due. The payment becomes due when we obtain a final Certificate of Occupancy (which has not yet occurred); or, alternatively, we can post a letter of credit at that time to delay the payment by 6 months. In other words, we are not in default nor do we intend to be. Furthermore, the developer will not receive any distributions from the project before the SOMA Stabilization Fund fee is paid.

In my typical candor, I shared with the Chronicle the realities of today’s economy on our project – no different from what most every project is the country is experiencing. As we are in the most egregiously difficult financial environment of our times, I am realistically concerned with the burden of this fee. This was the intent of my discussion with the Chronicle, and I am disappointed it was not more clear. That said, we plan to pay the fees when due and proceed onto Tower II of this project which will provide a very singular living experience in a world class city.

Thank you for this opportunity to update our project and our vision.

· City fees for One Rincon unlikely to be paid [SF Gate]
· Stimulating San Francisco To "Partner" On The Second Tower At ORH? [SocketSite]
· The Ripple Continues: Rincon Hill Suspended [Curbed SF]

One Rincon Hill

425 1st Street, San Francisco, CA 94105 Visit Website