Re: In Nancy Pelosi's shithole San Francisco, Government Failure Erases Billions of Dollars of Commercial Real Estate Valuations

[Progressive pedophiles]

NRA GUNCRIME <patr...@protonmail.com> wrote in
news:umqk39$1fjco$2...@dont-email.me:

> Nancy Pelosi suckered San Francisco voters into destroying the city.

San Francisco is proving to be ground zero in the nationwide commercial
real estate collapse. While the values of offices and malls are tumbling
in many US cities, the losses in San Francisco are more dramatic and,
unlike elsewhere, have extended to hotels. City and state government
mismanagement have played a major role in destroying billions of dollars
in assessable real estate values, but the role of these policies is easily
overlooked.

San Francisco’s plight was thrown into sharp relief on June 5, when the
owner of two downtown hotels containing a combined 2,925 rooms announced
that it would cease making payments on a $725 million mortgage backed by
the properties. Commercial bond investors will now have to find a company
willing to purchase the hotels at a small fraction of their estimated 2020
valuation of $1.561 billion.

In explaining the company’s decision to walk away from the hotels, Thomas
J. Baltimore, Jr., Chairman and Chief Executive Officer of Park Hotels and
Resorts stated:

After much thought and consideration, we believe it is in the best
interest for Park’s stockholders to materially reduce our current exposure
to the San Francisco market. Now more than ever, we believe San
Francisco’s path to recovery remains clouded and elongated by major
challenges – both old and new: record high office vacancy; concerns over
street conditions; lower return to office than peer cities; and a weaker
than expected citywide convention calendar through 2027 that will
negatively impact business and leisure demand and will likely
significantly reduce compression in the city for the foreseeable future.

Another nearby hotel is also experiencing a dramatic valuation decline.
The 1,195-room Westin St. Francis Hotel has asked the local tax assessor
to slash the combined assessment of its two parcels from $1.037 billion to
$101 million.

The hotels are within walking distance of the Westfield San Francisco
Centre mall that is losing its anchor retailer, Nordstrom, this summer.
Before Nordstrom announced the closure, S&P had already estimated that the
mall’s value had declined by over 70% since it was appraised in 2016.

An even larger value decline was suffered by a 22-?story office tower at
350 California Street. After being valued at around $300 million in 2019,
the property recently changed hands for between $60 million and $67.5
million according to media reports.

When considering why San Francisco has suffered so much commercial real
estate value destruction in the 2020s, it is tempting to conclude that the
city’s tech-?heavy workforce was better equipped to work from home. This
factor played a role but should not be overestimated. Indeed, one common
software development methodology, known as agile, often involved daily in-
?person team meetings. So, it is not strictly true that software
engineering is a solitary job.

Rather than blame the pandemic or the local business mix, San Francisco
and California political leaders should look inward at their policy errors
that exacerbated the city’s distress. Among these unforced errors were
their harsh lockdown policies and the failure to provide adequate security
in the downtown core.

The Lockdown

San Francisco and neighboring counties were the first to impose sweeping
stay-?at-?home orders at the beginning of the COVID pandemic in the US.
More importantly, San Francisco and its neighbors were slower than most
other population centers to relax COVID-19 restrictions.

Over a three-?year period, San Francisco’s public health officer issued a
blizzard of rules that were often lengthy and challenging to implement. As
late as January 27, 2021 (over ten months into the pandemic), he issued an
order that required “all residents in the County to reduce the risk of
COVID-19 transmission by staying in their residences to the extent
possible and minimizing trips and activities outside the home.” At the
time, California had more cases per capita than the less restrictive
states of Texas and Florida, begging the question of how effective
lockdown measures were.

By continuing shelter-?at-?home restrictions for so long, San Francisco
normalized remote work, thereby encouraging employers and employees to
adopt to a new normal. Many employees moved beyond easy commuting distance
from the city on the assumption that they could retain hybrid or fully
remote work arrangements permanently.

Although San Francisco’s political leaders trumpet the city’s low per
capita death rate from COVID-19, some of that is attributable to
individuals temporarily or permanently leaving the area, thereby deflating
the true denominator of any death rate calculation. Economist Stephen
Hanke has concluded that lockdowns had “a negligible effect” in COVID
deaths.

Lack of Security

As the accompanying map shows, San Francisco has a very high concentration
of high value properties in a small geographic area. Many of these $100
million plus properties (based on assessed value) are within walking
distance of the Tenderloin neighborhood which has struggled over several
decades. But in recent years, the social problems of the Tenderloin have
increasingly spilled over into the adjacent, high-?value areas, deterring
tourists, shoppers, and office workers from visiting.


Measuring crime trends is challenging. According to Police Department
statistics, reported crimes in the first five months of 2023 are below
pre-?pandemic levels. But some proportion of crime goes unreported and it
is possible that this proportion has increased given the low likelihood
that San Francisco police will identify a suspect. In 2022, only 2.9% of
larceny thefts were cleared within one year.

Also, residents clearly perceive an increase in crime. The most recent
City Controller survey found that San Franciscans rated the city’s safety
a C+, the lowest grade since 1996. Safety ratings were especially low in
the Tenderloin and two adjoining neighborhoods with high-?value commercial
real estate: South of Market and Financial District/?South Beach.

Critics have highlighted various public safety policy concerns including
the defund the police movement, lax prosecution, reclassification of
shoplifting goods worth less than $950 as a misdemeanor, disincarceration,
and lack of enforcement against open air drug markets. Since these issues
have been covered elsewhere and libertarians have varying opinions about
them, I’ll address a couple of other aspects that have received less
attention.

First, the city has encouraged many individuals who may be more prone to
criminal activity to concentrate in and around the Tenderloin. It has done
this by establishing a cluster of thousands of supportive housing units,
mostly in converted hotels in the area. Although residents of supportive
housing are no longer defined as “homeless”, many if not most are still
dealing with issues such as drug addiction that contributed to their loss
of shelter.

During the pandemic, the city converted hundreds of additional hotel rooms
in the area to temporary residences for unhoused homeless individuals in
hopes of preventing them from getting and spreading COVID-19. But the
unintended effect of this program, known as Project Roomkey, seems to have
been to increase drug abuse and disorder at the periphery of the
Tenderloin.

One Project Roomkey property, Hotel Whitcomb, housed about four hundred
homeless individuals, many of whom were continuing to use drugs. Shortly
thereafter, a new open air drug market became established in an alley just
south of Market Street. Both the hotel and the drug market were near a new
Whole Foods store which was forced to close due to high rates of theft and
violent criminal activity.

Aside from concentrating potential offenders in the area, the city and
activists appear to have neutered two quasi-?private mechanisms that allow
business districts to enhance security levels beyond that which the city
government would normally provide.

Since 1847, San Francisco has had a category of law enforcement officers
known as a Patrol Special Police. These trained officers can be directly
hired by groups of merchants and/?or homeowners to patrol and provide
other security services within a designated area. In 1994, there were 72
patrol special police serving 65 areas. But their ranks decreased in
recent decades and, as of 2022, only one officer remained.

Although clients expressed a high level of satisfaction with their
services, city policies have decimated the program. San Francisco’s
charter requires the city’s Police Commission to approve new patrol
special officers, but in recent years it has rarely done so. At the same
time, the San Francisco Police Department offered a competing program
under which city-?employed police officers could provide security services
to local business when they would otherwise be off duty.

Since clients must cover officer pay at overtime rates, this alternative
is more expensive. Further, given the shortage of police officers in San
Francisco today, there may not be enough staff to regularly serve clients
who might be interested in purchasing their services.

California has also given property owners the ability to form their own
Business Improvement Districts (BIDs) since the 1990s. BIDs, also known
locally as Community Benefit Districts (CBDs), are formed when owners
representing a majority of the assessed valuation in a given area vote to
tax themselves to finance district operations.

San Francisco’s Union Square area, the hotel and retail center that
borders the Tenderloin, has had a BID in place since 1999. By 2018, the
district was employing a large staff of cleaning ambassadors and safety
ambassadors to deal with trash and quality of life issues respectively.
The BID also installed a network of security cameras.

But the district’s efforts to force homeless individuals out of the area
faced criticism from UC Berkeley’s Public Policy Clinic and local
activists. Since the pandemic, the BID, now known as the Union Square
Alliance, may have become less effective at maintaining cleanliness and
safety in its neighborhood. It is not clear whether this is due to the
criticism it has received, the retirement of its long-?time executive
director, or some other factor.

Conclusion

An overly energetic lockdown and actions that concentrated violent and
unstable individuals in the downtown area have contributed to the collapse
of real estate values in San Francisco’s prime hotel, office, and retail
districts. Quasi-?governmental institutions that might have stepped in to
provide improved security and street conditions have been enfeebled in
part by city policy.

At this point, it does not appear that any set of feasible policies can
restore downtown San Francisco to the heights it reached in 2019. A more
realistic possibility is that it will stabilize at much lower levels of
occupancy, activity, and value forming a new base from which to grow. New
and remaining property owners should be given the tools and the space to
restore a sense of security among those visiting, shopping, and staying in
the neighborhood. Finally, city and state leaders should avoid
overreacting to pandemics.

https://www.cato.org/blog/san-francisco-government-failure-erases-
billions-dollars-commercial-real-estate-valuations