MIke Koozmin/The S.f. ExaminerA developer bought a Goodwill site at Mission Street and Van Ness Avenue for $66 million. It will be converted into an 18-story government office building and 550 housing units.

San Francisco's plan to construct a $327 million, 18-story government office building at Mission Street and Van Ness Avenue would be partly funded through the sale of three public properties, according to an agreement that moved closer to approval Wednesday.

Real estate developer Related California would construct 550 housing units on the site, of which 110 would be below market rate, and, in an agreement with The City, the 463,300-square-foot government office building.

The developer purchased the 2.3-acre Goodwill site in October for $66 million. Under the agreement, The City's project cost includes the purchase of its share of the parcel from the developer.

To finance the government building project, The City plans to sell three public properties: 30 Van Ness Ave., 1660 Mission St. and 1680 Mission St. Combined, the sales could generate nearly $83.2 million. The City will also borrow $300 million using certificates of participation. Repayment of the debt due to interest would double the amount owed to $600 million.

The new office space would allow The City to consolidate departments, such as building inspection and planning, and terminate existing leases.

City officials say that the project is basically a wash in terms of costs. If The City continued to lease the existing space and completed necessary tenant improvements over the next 33 years it would cost $759 million, city officials say. Constructing the new office building, with operating expenses and debt payments included, would cost about $884 million. But after incorporating the property taxes received from the three public sites sold, The City's costs would essentially break even, officials said.

Real Estate Director John Updike said of the office building project, “This was never intended to be a huge financial savings for The City.” Some “intangible savings,” however, include making it easier for a person who might need city permits to meet with the relevant people at one site, he said.

While public projects are generally competitively bid, an exemption was made in this case for both the developer and the architect.

Related California CEO William Witte said, “We're particularly excited about the potential of this development. It brings together a lot of components our company specializes in.” That includes mixed-income, mixed-use housing. The ground floor will include a restaurant and retail space.

The developer is no stranger to San Francisco. In 2002, the company built the 43-story Paramount in South of Market and has ongoing projects, such as the 550-foot residential Transbay tower and the rebuilding of Sunnydale public housing.

On Wednesday, the Board of Supervisors Budget and Finance Committee approved spending $8 million for design work and permit fees, which the full board will vote on next week. Subsequent board approvals are required.

The project is scheduled for an early 2019 completion.

Bay Area NewsdevelopmentMissionPlanningVan NessWilliam Witte

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