Plan C, and the C stands for Condo conversions

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No politically savvy San Franciscan has ever really bought the rhetoric espoused by the so-called “moderate” political action group Plan C that it's all about finding middle ground between what its website calls “a 'downtown' machine, and a far-left, dogmatic, so-called 'progressive' machine.” As if that unbalanced labeling wasn't enough of a indicator, the fact that its funding comes from all the biggest cogs in the downtown machine should be.

But now, as the group's members aggressively work to open the flood gates on converting San Francisco's rent-controlled apartments into privately controlled condominiums, it's become more clear than ever that the C stands for Condo and that the financially motivated group is moving the agenda of the real-estate and investment interests that dominate its Board of Directors.

City Hall sources connected to the ongoing meetings that Sups. David Chiu and Mark Farrell have been holding with stakeholders on the controversial condo lottery bypass legislation sponsored by Farrell and Sup. Scott Wiener say there were indications of possible compromise that came out of the first mediation meeting.

That one primarily involved the tenant advocates who have led the charge against the legislation and the representatives for tenancy-in-common owners seeking to buy a bypass to the city's condo conversion lottery that only allows 200 new condos per year. There were whispers that came from that meeting of a compromise that would allow a one-time bypass in exchange for shutting down the lottery for several years, or indexing it to the construction of new housing for low-income San Franciscans.

Since then, the sources say, Plan C and their partners in the real-estate industry have dominated the meetings with their dogmatic advocacy for indefinitely allowing the maximum number of condo conversions. Despite public statements by Farrell and Wiener that they just want to clear out some backlog without encouraging more landlords to convert apartments to TICs in the future, Plan C just wants to feed more affordable apartments into the expensive real estate market.

Some basic research on the group and its Board of Directors seems to show that this position is about financial self-interest rather than values or ideology.

Plan C Co-Chair Steve Adams is a regional manager for Sterling Bank & Trust, which has consistently been one of the city's top TIC lenders and which recently sponsored a forum encouraging more conversion of apartments, promising to increase its loan volume, and painting a rosy picture of the TIC financing market that belies Wiener's claims that TIC owners can't get financial relief and need the city's intervention.

One of the key presenters at that symposium was TIC attorney Lyssa Paul, who is also a Plan C board member and someone who makes her living creating more TICs. Other members of the 12-member board who make their living in the real estate industry and benefit directly for TICs conversions are Amanda Jones and Brian Hecktman. Other bankers or investment managers on the board that benefit from the TIC business are Ashley Lyon and Bob Gain.

Co-Chair Mike Sullivan is a venture capital attorney who created Plan C in 2001 and used it to help then-Sup. Gavin Newsom sell his Care Not Cash homelessness plan and run for mayor. Randy Brasche is in software marketing and got involved in the issue being frustrated with the condo lottery and [[CORRECTION/DELETION: last year]] forming the San Francisco TIC Coalition.

Board member David Fix is [[CORRECTION/ADDITION: the former]] president of the Small Property Owners of San Francisco, so it's possible that his interest is as much ideological as financial, particularly given his past public statements against rent control. That may also be the case with Baha Hariri, a principal at A&F Properties and the former political director of the downtown-funded-and-created Committee on Jobs.

Among the downtown players that fund Plan C, which was sitting on $73,872 in the bank as of the start of this year, are the Committee on Jobs, the San Francisco Association of Realtors, PG&E, San Francisco Apartment Association, Small Property Owners of San Francisco, Shorenstein Realty, the San Francisco Chamber of Commerce, and venture capitalist Ron Conway.

So Plan C appears to be little more than Plan A's deceptive effort to push Plan Condo. BTW, I've been waiting more than 24 hours now to get a call back from the Plan C board, after leaving a message with its only paid administrator, Richard Magary, who told me Sullivan and his colleagues are all quite busy now. But I'll be happy to update this post if and when I hear back.

2/22 UPDATE: Still no call back from Plan C, but Fix made a comment requesting the two minor corrections above. C'mon, Plan C, gimme a call, what are you so afraid of?

Comments

That's why you are sitting behind the desk doing hack journalism rather than actually out there making thigns happens.

Obviously there is a reasonable compromise here, i.e. create some condo's without opening the flood gates to more evictions. And in fact this emasure neither evicts any tenant nor promiseds any future conversions. And of course Ellis'ed buildings can never be condo'ed anyway.

But you don't care about any of that, do you, Steven? Facts never trouble your afternoon nap - only blind, one-sided ideology.

And then you wonder why you are going nowhere fast and the SFBG is a pale shadow of what it once was.

Posted by Guest on Feb. 21, 2013 @ 4:52 pm

The yelping of "Guest" continues. Boooooorrrrrrrinnnnng

Posted by Guest observer on Feb. 21, 2013 @ 9:58 pm
Posted by anon on Feb. 22, 2013 @ 8:56 am

Steve I was wondering if the SFBG could determine ownership at Sterling Bank, which is a non-stock company. This is what I see...

http://www.seligmangroup.com/about-overview.asp

"Scott Seligman chartered the Sterling Savings and Loan Association which focused on mortgage lending and servicing. In 1990, an expansion of Sterling led to the development of the commercial lending division, including commercial equipment leasing and financing, as well as commercial real estate lending. In 1993, with the addition of a Trust division, Sterling became Sterling Bank And Trust, FSB—a Federal Savings Bank. Further diversification in 1994 led to the development of the consumer lending area which focused on indirect auto and marine lending."

Posted by Guest on Feb. 22, 2013 @ 3:00 pm

Also see this,

http://www.jewishagency.org/JewishAgency/English/About/Board+of+Governor...

"Mr. Seligman was born in Detroit, Michigan and has been involved most of his life in the establishment and operation of family-owned businesses.

He is a graduate of the University of Michigan. During 1973 and 1974 Mr. Seligman was Vice-President of Seligman of Florida, Inc.; In 1976 Mr. Seligman become Group Vice-President of Seligman & Associates, Inc. and from 1977 to 1983 he was President, Director and CEO of Seligman & Associates, Inc. In 1984 Scott Seligman and his father, Irving R. Seligman, established de novo’d Sterling Savings and Loan Association. Scott retired in 1999 as Chairman, President and CEO.

Since then, Mr. Seligman has overseen the diversification of the family’s Michigan apartment portfolio to regional malls; power centers; multi-tenant industrial buildings; apartment complexes; and offices all over the US.

Mr. Seligman currently serves on the Capital Planning Committee at the Jewish Community Federation of San Francisco and was a board member of the Jewish Federation of Las Vegas for three years. He serves as a Committee Member since September 2007."

Posted by Guest on Feb. 22, 2013 @ 3:14 pm

This Irving R. Seligman Trust involvement with mid-market....

Office Property at 1540 Market Sold for $6.7M
Investor Buys 43,300-SF Building

http://www.costar.com/News/Article/Office-Property-at-1540-Market-Sold-for-$67M/75820

Robert Dumas of Grubb & Ellis in San Francisco represented the seller, the Irving R. Seligman Trust. --The buyer's representative was unknown.--

Posted by Guest on Feb. 22, 2013 @ 3:22 pm

Scott J. Seligman, apparently the owner, or an owner, or the founder of Sterling Bank is seriously into San Francisco real estate.

1830-1850 Ocean Avenue, LLC
2709 Larkin, LLC
555 Francisco Street, LLC
785 Market Street LLC
945 Green Unit 5 LLC

http://www.corporationwiki.com/Michigan/Southfield/scott-j-seligman-P271...

Plus ha ha ha this....

Presidential Aviation, Inc

http://www.corporationwiki.com/Michigan/Southfield/presidential-aviation...

Posted by Guest on Feb. 22, 2013 @ 10:51 pm

So ok Scott Seligman is a heavy player on Mid Market who stands to gain from Twitter tax break, which makes me doubt Randy Shaw even more, tho I didn't think that was even possible.

Plus one of the owners of the Giants.....

http://www.counterpunch.org/2012/10/31/the-san-francisco-giants-of-real-...

Other big shot real estate investors who own minority stakes in the Giants include David S. Wolff of the Wolff Companies, and Scott Seligman of the Seligman Group. Wolff controls a huge portfolio of Houston office properties.

Scott Seligman’s company owns the Sterling Bank & Trust, and numerous office properties in California, Nevada, and Michigan. Seligman has been singled out as the ugly face of gentrification in San Francisco by non other than Lawrence Ferlinghetti, the famed poet and owner of City Lights books. Back in 2001 Seligman was in the process of evicting tenants from a building he controlled in the Mid-Market area (the same part of San Francisco now being colonized by Twitter thanks to a big tax break the Board of Supervisors gave the company). In a press release Ferlinghetti lashed out:

“A developer from Michigan, Scott Seligman, who runs Sterling Bank and Seligman Western Enterprises, wants to gentrify the Mid-Market zone. Not to make the City a better place but to make his bank account a little fatter. He wants a better class of tenant. No more photographers or poets or translators or editors or painters. No more small businesses serving the City. No more small nonprofits, like Streetside Stories, which publishes work by 650 middle school kids every year to foster a love of reading and writing.”

Ferlinghetti was trying to draw a line: “It’s long past time for San Francisco—the people who live here and care about the place, the politicians, the small businesses, the kids who will inherit either a theme park or an exciting, urbane City—to stand up and stop the development juggernaut.”

Posted by Guest on Feb. 22, 2013 @ 11:28 pm

The secret history of the mortgage crisis will have to stay secret.

Posted by Guest on Feb. 22, 2013 @ 10:04 pm

Not since Ronald Arnall's stated interest "liar loans" at Ameriquest or Bernard Osher and Marion and Herb Sandlers Negative Amortization "Pik a Pay" loans at World Savings has there been as hair brained a mortgage scheme at Scott Seligman's fractional TIC loans. Can't wait for the nick name.

Just like the NegAm and the liar loans, the fraction TIC now requires a government bail out for a wealthy real estate wheeler dealer on Mid Market who is swimming in money and is an owner of the Giants.

Gag.

Posted by Guest on Feb. 22, 2013 @ 11:52 pm

unsafe. If, for instance, there is substantial equity, then it is less risky than a condo loan with little equity.

Posted by Guest on Feb. 23, 2013 @ 8:15 am

"There's nothing about a fractional loan that is essentially
unsafe."

TIC fractional loans are RADICALLY tea bagger style unsafe you douche.

Only one small non stock bank offers them, which says right there they are orders of magnitude more risky than the pik a pay or the liar loan.

A fractional TIC loan is a 5 or 7 year balloon mortgage that is so risky it has been implicated in causing the great depression of the 1930s and was the catalyst for the federal government to create the GSEs and the 30 year fixed.

http://en.wikipedia.org/wiki/National_Mortgage_Crisis_of_the_1930s

-National Mortgage Crisis of the 1930s-

" ...As a result, the federal overhaul stemming from New Deal legislation gave rise to a paradigmatic shift in mortgage lending, popularizing longer-term maturity, fully amortizing mortgages and creating a thick secondary market for mortgage-related securities."

Posted by Guest on Feb. 23, 2013 @ 10:46 am

that means that it may not be repaid in the same way as other loans. They do not imply default.

There are obviously some technical issues, like the extra cost, and the difficulty of a bank foreclosing, and so it remains desirable that TIC's enjoy a path to going condo.

This really should be a non-issue.

Posted by anon on Feb. 23, 2013 @ 10:54 am

"You misunderstand. therer is nothing about a fractional loan
that means that it may not be repaid in the same way as other loans. They do not imply default."

Not sure what you mean.

My understanding is fractional TIC loans are 7 year interest only, with a reset to fully amortized. The refinance risk is considerable.

-The Amortization of a Mortgage-

http://homeguides.sfgate.com/amortization-mortgage-2809.html

"Mortgages in America were not always amortized loans. Before the Great Depression, the typical mortgage was an interest-only balloon loan with a large required down payment and short term. Loans payments only paid the interest on the money you owed, with the loan balance due in full at the end of the loan term. Five-year loans were the norm, so the average homeowner faced either paying the loan in full or refinancing the loan every five years. If they only made the minimum payment, they would never own the home they were in, since they never paid toward the original loan balance. During the Great Depression, many banks were skittish about extending credit, so a large number of homeowners were not able to refinance their loans and did not have the money to pay the balance in full. This resulted in a rash of foreclosures."

Posted by Guest on Feb. 23, 2013 @ 11:21 am

or interest-only loan, of which we have seen millions. I am not aware that different tersma nd types cannot be offered for TIC's but, either way, if there is substantial equity in the property, then there can never be a problem.

I have heard of very few TIC loan failing. But we can help TIC owners get a better type of mortgage, certainly, and this law change will obviously help them, while harming nobody. No brainer.

Posted by anon on Feb. 24, 2013 @ 1:19 pm

" we can help TIC owners get a better type of mortgage..."

By attacking rent control like the rest of the Romney voters. Makers vs. Takers?

Posted by Guest on Feb. 25, 2013 @ 12:18 am

I just condo'ed my building and no tenant was affected.

Posted by Guest on Feb. 25, 2013 @ 8:21 am

You eliminated rent control units from the market permanently and you made 20 to 30% on your building, or rather hundreds or thousands of percent on your downpayment or money at risk?

As fully described to you by your immoral con artist real estate agent.

Posted by Guest on Feb. 25, 2013 @ 11:35 am

precisely because they were TIC's and so subject to rent control.

Now they are condo's, they are more likely to be rented out in the future.

Property owners are not evil, but nor are they stupid. They are willing to provide rental homes, but not at any cost.

Posted by anon on Feb. 25, 2013 @ 12:01 pm

Most people move after 5 to 7 years so it is completely reasonable to assume some units will wind up as rentals.

Plus that it gives TIC scammers hope that another round of condo convert legislation will come around again in a few years.

You don't mention that your property will appreciate by 20 to 30% once you convert. That wouldn't have anything to do with it?

Posted by Guest on Feb. 25, 2013 @ 12:28 pm

until and unless they can condo convert, because re-renting a TIC is so unattactive. Remember, we are not talking about pro-landlords here, but recent tenants who took a risk on home ownership.

Unrealized gains are of little interest to someone who wants a permanent home in Sf, and most of the TIC owners that I know are mid-income folks like teachers and nurses - not the speculators that you claim.

Posted by anon on Feb. 25, 2013 @ 12:54 pm

"Unrealized gains are of little interest to someone who wants a permanent home in Sf..."

Pseudologia fantastica

http://en.wikipedia.org/wiki/Pseudologia_fantastica#Pathological_liars

"...Pathological lying is considered a mental illness, because it takes over rational judgment and progresses into the fantasy world and back."

Posted by Guest on Feb. 25, 2013 @ 1:29 pm

probably makes 50K a year and has found a way to buy a home and avoid the risks of renting. Instead of praising that, you seek to devalue it by claiming that they are speculators.

Shame on you. They buy to have a home, and not to make a buck.

Posted by anon on Feb. 25, 2013 @ 1:49 pm
Posted by Guest on Feb. 25, 2013 @ 2:54 pm

left-wing piece of toilet paper?

Or someone who trolls one?

Posted by anon on Feb. 25, 2013 @ 3:14 pm

Top job would have to be TIC salesman.

Posted by Guest on Feb. 25, 2013 @ 3:31 pm

TIC's are created by the people, i.e. tenants who get sick of renting, and want to own their own home. You are picking on people like teachers and nurses whose only "crime" is wanting to buy an affodable home.

Shame on you.

Posted by anon on Feb. 25, 2013 @ 3:57 pm

Psychopath.

Posted by Guest on Feb. 25, 2013 @ 4:40 pm

"most of the TIC owners that I know are mid-income folks like teachers and nurses - not the speculators that you claim."

Exactly. See link below....

http://www.sfgate.com/default/article/Condo-conversion-law-OKd-by-S-F-bo...

This is how I feel. We are stuck in a place that's too small for us now that we are married and want to have children and cannot sell or refinance as we are held back by the other owners' ability to refinance. I also do not want to have to continue living with the risk of the other owners being able to make their payments. In order to sell everyone has to pay-off the lender which means everyone has to refinance. We're totally stuck. If we rent it, we would barely be able to get enough rent to cover taxes and insurance (not enough to cover HOA's and reserves), and who knows how long that would go on for if we cant evict them due to rent control. When we bought our RE agent and TIC lawyer told us it would convert in 3 years back in 2005. Nine years later our nest egg is stuck and I'm still living in a room the size of a walk-in closet. I'm certainly not one of the "big cogs from downtown", and I'm guessing many other people in my situation are probably too busy working to pay their mortgages to have time to stand up for their rights. How can this happen? I keep hearing of people who convert in three years (a banker from downtown), but we have played the lotto for 7 years.... somethin's not right.

Posted by Guest on Jun. 13, 2013 @ 3:10 pm

as they bypass the lottery anyway. I do feel for your situation and, hopefully, this new law will help you rapidly move towards more security.

Sadly, the price paid for that is to significantly limit the future ability of those not already in the lottery to convert. not only will that cause suffering to others like you but further back in the line, but it will also hurt tenants who will now be Ellis'ed because their property owners see condo conversion being 20 or more years away.

The blame here lies firmly on a flawed city management that seems intent on controlling everything and helping nobody.

Posted by Guest on Jun. 13, 2013 @ 3:21 pm

"Your criticism applies to any non-amortozing loan."

No my criticism applies to a balloon loan in a market without rising prices and the ability to refinance or afford the reset payments.

http://en.wikipedia.org/wiki/Balloon_payment_mortgage

"Adjustable rate mortgages are sometimes confused with balloon payment mortgages. The distinction is that a balloon payment may require refinancing or repayment at the end of the period..."

Posted by Guest on Feb. 25, 2013 @ 12:24 am
Posted by Guest on Feb. 25, 2013 @ 8:22 am

TICs depend on being converted to condos within the time frame of the balloon mortgage. If that doesn't happen the loan becomes toxic for the first time home buyers whom otherwise would not qualify.

I believe non-amortizing loans are usually a way for investors who expect to earn lots more in the future to place money in a tax deferred account rather than after tax income applied to a mortgage that they will in fact afford to pay off.

These TIC fractional non-amortization loans marketed to first time home buyers are toxic as you can imagine in an environment where the more the scammers flood the market, the less chance the sucker unsophisticated first time home buyers have to find a chair when the music stops.

Posted by Guest on Feb. 25, 2013 @ 11:42 am

so would need to be financed either thru a jumbo loan or by fractional loans on each unit. In practice, both happen, but the fractional loans are becoming more popular.

The non-amortization of loans is a separate issue, and no or negative amortization is always a problem regardless of property type.

If you have a TIC loan that is paying off and you have a decent chunk of equity, there should be few problems

Posted by anon on Feb. 25, 2013 @ 12:03 pm

The fractional mortgages were risky enough under previously accepted underwriting standards. Non-amortization mortgages--interest only--only compound the underwriting risk.

Did underwriting standards really evaporate to the extent that the nascent fractional TIC mortgage market had actually written interest only notes as well?

Posted by marcos on Feb. 25, 2013 @ 1:17 pm

assumed that they will set standards for due diligence. The type of property and it's value will naturally be a factor, long with the borrowers credit score and income, the amount of equity, and various other things.

That is no different for TIC's than any other property type. That said, it is in everyone's interests that those loans be more substantially covered and less risky, and if condo conversion helps with that, then what kind of narrow-minded misanthrope would object to that?

Posted by anon on Feb. 25, 2013 @ 1:30 pm

of 2007 to present, where bad loans became everyone's problem.

Posted by Eddie on Feb. 25, 2013 @ 1:39 pm

SF condo's are up 8% in the last 6 months, and now average 755K each, which is more than 2007.

Crisis? What crisis?

Posted by anon on Feb. 25, 2013 @ 1:51 pm

Seriously.

Posted by Guest on Feb. 25, 2013 @ 8:59 pm

The next storm will be bigger than the last one.

Posted by Eddie on Feb. 26, 2013 @ 8:57 am

You know that you're in another asset bubble when the countercyclical policies enacted after the last bubble popped are repealed and pro-cyclical policies are enhanced.

Posted by marcos on Feb. 26, 2013 @ 9:19 am

Periods of calm are an opportunity to build.

Posted by Guest on Feb. 26, 2013 @ 10:20 am

"You misunderstand. therer is nothing about a fractional loan
that means that it may not be repaid in the same way as other loans. They do not imply default."

Which is why only one tiny non-stock family held bank offers them.

Posted by Guest on Feb. 24, 2013 @ 12:54 pm

Which I know because a friend of mine is currently refi'ing into a fractional loan. But since TIC's are a SF-only thing, it's not surprising that the big boys don't offer them.

In any other city, they'd be allowed to condo convert, which of course is what we're discussing here anyway. Makes more sense for everyone.

Posted by anon on Feb. 24, 2013 @ 1:17 pm

The conversion plan does not make sense for everyone. And these people would not be allowed to condo convert in NY or Boston, which have housing restrictions like SF's because they are small land masses with prosperous populations and there are laws that prevent predatory speculation with the housing stock.

In Detroit or Cincinnati, you can condo convert at will.

Posted by Guest on Feb. 24, 2013 @ 11:35 pm

Except that it's a myth. anyone who travels knows that all major US cities are essentially the same, even though each one yelps about how it is "unique" and "different".

NYC has co-op's which are essentially like large TIC's and they work just fine. In NYC, rich and famous people live in TIC's and nobody thinks anything of it.

But you have co-op boards to deal with who are a PITA, so condo is always better. We should not fear them.

Posted by Guest on Feb. 25, 2013 @ 8:19 am

You say SF is like New York, which is exactly what I wrote.

I travel all over the country, and SF is not like Detroit, St. Louis, Indy, Cincy, Milwaukee. It barely resembles Chicago or Philly or Miami or LA.

In terms of housing, it is most comparable to Boston, NY and Seattle.

And I don't fear condos. We should build them, not raid current stock to create them.

TIC owners need to grow up and stop asking government to hand them a more lucrative piece of property than they bought. We can't keep warping the real estate market in favor of people who made dumb decisions. If your stupidity lands you in a hospital or drug rehab, I'm willing to help. But hand you six figures of equity? That's just allowing fools to corner a market because we've been brainwashed to pity ''struggling homeowners.''

The only real struggling homeowner is a renter who wants to buy and keeps getting blocked out of the market by government supports for gambling losers who don't do their homework.

Those TICs should stay TICs. That's what made them affordable for this generation of owners, and the affordability should not be arbitrarily erased to the detriment of the next generation.

Posted by Guest Molly on Feb. 26, 2013 @ 9:24 pm

"If, for instance, there is substantial equity, then it is less risky than a condo loan with little equity."

Even way more unsafe because if forclosure you lose one H#LL of alot more....they depend on the ability to refinance JUST like pikapay and when the merry go round stops it's a total complete disaster.

http://en.wikipedia.org/wiki/National_Mortgage_Crisis_of_the_1930s

"In addition to their geographic range of influence, the four intermediaries differed in their preferred mortgage terms. Commercial banks, life insurance companies, and mutual savings banks typically offered 5-year balloon mortgages at a loan-to-value ratio 50%.[2] As with any bubble environment, borrowers and lenders alike expected asset prices to rise ad infinitum and tended to continually refinance at maturity, exposing themselves to the clear danger of default and resulting institutional insolvency in the event of tightened credit."

Posted by Guest on Feb. 23, 2013 @ 10:49 am

because a sale of the property will pay off the loan.

The problem is where there is negative equity and that can happen with any kind of property or loan.

In fact, TIC loans often require more equity, and so are less likely to be foreclosed, especially since the bank will have extra steps to go thru.

Posted by anon on Feb. 23, 2013 @ 10:56 am

Foreclosures seem to be at zero right now.

Posted by Guest on Feb. 23, 2013 @ 12:02 pm