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    Woke San Francisco Facing Disaster as Real Estate Prices Crash Dramatically

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    Yet more bad news has hit San Francisco, afflicted as it already is by everything from rampant and extremely open use of hard narcotics to defecating in the streets to areas being overrun by vast numbers of homeless individuals that camp in the streets while also often being responsible for the aforementioned drug and defecation issues.

    The new bad news is that real estate prices in the city are crashing hard, creating a potentially unmitigated disaster for the city, as municipalities rely on real estate taxes for tax revenue and crashing prices means crashing tax revenues for the city.

    In any case, the latest peek at that behind the scenes, slowly but inexorably moving disaster comes from the downtown  60 Spear St. tower, an 11-story office building in downtown San Francisco that is currently just 30 percent occupied but is expected to be vacant by the summer 2025.

    That building was sold to Presidio Bay Ventures for $40.9 million, a sale which the company confirmed on Thursday. Somewhat shockingly even for the disaster that is downtown San Francisco, the price the building fetched is about 66 percent less than its most recently assessed property value, which is $121 million.

    Even if the price drop is shocking, what seems more shocking is that someone could be found to buy the building in the declining city. K. Cyrus Sanandaji, the founder and managing principal of Presidio Bay, addressed the sale in a statement.

    Beginning, he described why Presidio Bay bought the building and what he envisions for it, saying, “We have remained optimistic about the San Francisco office market and saw 60 Spear as a phenomenal opportunity in a prominent downtown location that will attract quality tenants who are seeking a unique product.“

    Continuing, the statement expressed optimism that the problems with San Francisco could be overcome, with Sanandaji saying, “Though we acknowledge the formidable challenges that confront San Francisco, we have already witnessed substantial improvements in these areas and believe that a true urban renaissance is unfolding within the city.”

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    Apparently, the way Presidio Bay plans on turning the building around by expanding the its square footage from 157,436 to 170,000 square feet and transforming that available space into a “Class-A trophy office building with exceptional design and hospitality-driven amenities.”
    The 60 Spear St. tower’s sale for just 66 percent of its assessed value isn’t even the worst real estate sale in the city recently. According to a report in the San Francisco Business Times, 350 California St. just sold for for somewhere between $60 million and $67.5 million. That was a 75 percent decline from the building’s assessed value in 2019 of $300 million. 
    San Francisco, as of 2018, collected $3 billion a year in property taxes. So, a building crashing in value by 75 percent is a big problem, as the city collects about 1.2 percent per year in taxes on the assessed value of a buidling. So, if it crashed from $300 million to $60 million, the city went from collecting $3 million off of a single building to just $600,000. Multiply that by all the real estate in the city, and the huge issue the municipality could soon face from a tax perspective can be seen.