[BTinSF]

Olson halts big Oakland condo project
San Francisco Business Times - by Ryan Tate

Developer Olson Co. quietly halted construction on a half-finished condominium project in downtown Oakland, a troublesome turn for a project long seen by city officials as the centerpiece of their downtown housing push.

The construction freeze at City Walk comes amid a rash of cancellations and slowdowns for housing developments in downtown Oakland.

"It's a tough market right now," said Stuart Greundl, who is leading BayRock Residential's nearly-complete development of an 11-story condominium tower on the edge of Oakland Chinatown. "It's slow. But it's still plugging along."

There are roughly 1,300 market-rate condos available in the city, not counting projects smaller than 20 units, just under half of which have been on the market for one year or more. Another 1,600 rental and for-sale units are under construction.

Meanwhile, many lenders have stopped extending common forms of construction financing amid the debt market turbulence. Combined with falling prices and fears of glut in supply, that's sending developers throughout the city back to the drawing board.

Olson is the most dramatic example. The company confirmed it ceased construction on its 252-unit, seven-story City Walk project July 24, saying general contractor UPA California stopped work on the site at 1260 Martin Luther King Jr. Way. Olson declined to comment on when construction might resume, and city officials said they had no indication from the company on when the project might start up again.

Dick Whitney, a senior vice president at UPA, said the company had not been paid by Olson, filed suit against the company and is now busy working on other projects. Olson declined to comment on UPA's allegations.

Olson bought the land from the city's redevelopment agency in 2004 after a previous developer abandoned plans for a 36-story, 480-unit rental tower, saying the rental market was too weak. Ironically, the rental market is now surging right around the time that project would have been coming to market, with Bay Area rents up 7 percent this year to $1,499 according to RealFacts.

Other developers are feeling the chillier market as well. Developer Alan Dones delivered an office building to Alameda County in November 2005, on time and under budget. But he's intentionally dragging his heels on 88 units of housing going in above a parking lot completed at the same time as the office building.

There was also an unplanned delay when construction temporarily stopped due to unspecified "issues" with a contractor, said Dones, who left a message but was traveling in Belize and could not be reached for elaboration.

Dones has construction under way again, but said he is taking a "more deliberate pace" in order to meet the housing market in spring, roughly a year later than originally planned.

"The market is a little slow," Dones said.

Dones and Olson are not alone. Over the past six months, three of the projects on the city's official list of "Major Development Projects" have been withdrawn or become inactive.

They include a 356-unit condo tower at 226 13th Street, a 315-residential-unit project called Cathedral Park at 2100 Martin Luther King Jr. Way in the Upper Broadway district of downtown and a 43-story tower at 1930 Broadway that was to mix office with housing, retail or hotel and is being reconfigured.

In July, the average sale price of a non-subsidized Oakland condominium fell to an average $435 per square foot from $450 per square foot in the first quarter, according to condo marketing firm the Mark Company.

rtate@bizjournals.com / (415) 288-4968

Source: http://www.bizjournals.com/sanfranci...ml?t=printable