Back row: Sharon Bacigalupi, Merla Zellerbach, Randall Kostick, Steve Pugh, Jay Costello, DJ Grubb, Stephen Gomez; Front row: Charlie Moore, Marsha Calegari, Nob Hill Gazette publisher Lois Lehrman, moderator Ray Taliaferro and Anita Head

REAL ESTATE

Power Brokers Pow-Wow

by Merla Zellerbach

   Five years and counting! Welcome to our Fifth Anniversary luncheon, a talk fest of tell-alls, teasing, and tidbits. This lively gathering of real estate colleagues and competitors, hosted by Nob Hill Gazette publisher Lois Lehrman, took place recently in the private dining room of the Four Seasons Hotel.

   Longtime KGO radio luminary Ray Taliaferro led the discussion, which starred Sharon Bacigalupi (Pacific Union); Marsha Calegari (Calegari & Associates); Jay Costello (Hill & Co.); Stephen Gomez (Gomez & Patton); DJ Grubb (Grubb & Co.); Anita Head (Paragon); Randall Kostick (Zephyr); Charlie Moore (McGuire); Steve Pugh (Alain Pinel); and Dawn Ross (TRI Coldwell Banker).

  Patrick Barber (Sotheby’s) was unable to attend, but was kind enough to contribute some thoughts. For space reasons, all comments have been edited.
   (Fashion Note: One stylish male broker was actually seen not wearing an Hermès tie!)

   Lois Lehrman: Welcome everyone, enjoy the Four Seasons’ gracious repast and let’s have some fun. You already know our moderator, but just to remind you, Ray Taliaferro’s been with KGO radio 36 years, and is a former longtime city commissioner appointed by Mayor Alioto. He’s well-known and revered in the community, and enjoys following San Francisco real estate.

   For those of you new to our luncheon, this is informal; you can say whatever you want….

   Charlie Moore: Be careful! (Laughter)

   Lois: I was just going to add the caveat that if you say “not for publication,” we’ll honor that. So — Ray?

   Ray Taliaferro: Thanks very much, Lois. It’s a privilege to be here. I’m a native San Franciscan, born here following the war, grew up here, love it here, have a gorgeous place on Russian Hill where I can see the entire city, and I walk. And I watch where the city is going. I’ve seen signs — Hill & Company, Pacific Union — but I did not know that behind those signs were such beautiful women and handsome men…although I’ve known Charlie Moore for years — I think we visited the Playboy Club together. (Hoots, laughter)

   Charlie: Mercy! Ray, that’s one of those “Be carefuls!”

   Ray: This morning, I saw the headline in the International Herald Tribune that the credit cost of the mortgage crisis created by the U.S. is going to be a trillion dollars. Then we have (Federal Reserve Chairman Ben) Bernanke, who mentioned the R word, and yesterday, (Alan) Greenspan said we are in a recession. Charlie, what does that do to you?

   Charlie: When you open the paper and read about the peril at hand, you assume it’s all very doom and gloom, yet I wonder what happens when someone calls and says, “I read that it may be a buyers’ market, and a good time for me to jump in and buy.” What happens when that caller realizes that what the paper says is happening isn’t happening in his experience?

  Home sales in San Francisco during the first quarter of 2008 were 21.7 percent below the same quarter in 2007… (Reads a list of statistics) Research shows we go through regular cycles—

  Jay Costello: (Interrupts) So Charlie, in substantially fewer words (loud laughter), San Francisco and other markets around it are islands in a sea of turmoil in the financial markets.

   Sharon Bacigalupi: I agree that we’re an island and always will be. Manhattan is the same. Our market is still very strong. We have 37 fewer sales than we had in March last year. But if it never gets any worse than that; we have nothing to complain about.

   Patrick Barber: Here in San Francisco we’ve seen more properties coming on the market and they’ve been snapped up. If we continue to see more properties coming on the market, the situation will improve, but right now, because of limited buyer interest, parts of San Francisco — the Excelsior district and outer parts of the city — will continue to get hurt. The market is very strong in the prime areas, and not strong in the outlying areas.

   Anita Head: It would make a big difference in the decline of San Francisco statistics if we realize that there’s a lot more inventory in some areas, like South of Market, and a lot less appreciation in other areas. No question we’re down unit-wise, but prices have stayed very strong.

   Stephen Gomez: The weak dollar is having an effect — a huge effect in New York. Locally, we get somewhat of a ripple effect, but we have about 1,500 units for sale in South Beach at this moment. Should the absorption of those slow down (translation: if they don’t sell), there could be a negative ripple effect at least through the condominium market in the city.

   Ray: What makes San Francisco so special? Why is it an island?

   Randall Kostick: I think it’s an island because it almost is an island, surrounded on three sides by water. The desirability to be here, some of the economic activities, the banking that takes place here, the high-technology…a lot of young people particularly really love to be in the Bay Area, and if you don’t live here, and you have to commute, that’s traumatic.

   We also have many sections of our economy, such as tourism, to support us through what may be bad times elsewhere in the country.

   Ray: It’s amazing that we are magnetic. I’d like to hear your thoughts about the city-approved construction of a 1,300-foot building, which will be more than twice the height of the Pyramid. They expect to have 120 to 130 floors. And there are five other proposals in the works for five other such buildings that will shoot up into the sun. Frankly, I hope they don’t mess up my view. What do you see in these buildings that will change the skyline of San Francisco?

   Stephen Gomez: I think the South Beach area will be the Manhattan of San Francisco. They’re trying to design taller, thinner buildings rather than bulky ones, so that the visual from all around the city down to that area will be quite spectacular.

   Sharon: The skyline has changed so dramatically in the last 10 and five years. Coming into the city now from the Bay Bridge, it’s so dense…entirely different. The skyline used to be on the north side of Market Street and now it’s everywhere. I think it’s wonderful!

   DJ Grubb: It’s a question of quality, whether it’s quality in brokerage companies, in construction, in what’s being built or not being built…that’s the good news in this market. It’s shaking out the mediocrity in the marketplace. And quite frankly, I think we celebrate that. Yes, unit sales are down; yes, we have some appreciation, but I think it’s all good for us. Now the question is…how long will it last?

   Charlie: I do know that there are 3,600 new condos coming on in the SOMA/South of Market corridor. When sales stall, the developers do what we do, and that is — protect price. You have to protect price. If that doesn’t work, the next step is bonuses and flights and giveaways. But there are so many new units coming on, and for buyers who want to be in the city, I would steer them South of Market.

   DJ: The easy way to look at this is that Pacific Heights is the hottest part of the radiator. From that point, the market cools off. In those special pockets, like Piedmont and Marin, it’s quality. The best homes will have multiple offers.

   Anita: There’s a large gap between what the buyers expect and what the sellers want. We could use more wonderful homes in great locations — we could sell them in a minute — but that’s not what’s out there now. Sellers fear they won’t get the kind of prices they would have gotten before. And buyers who read the papers feel they can get all sorts of bargains. There’s a lot more negotiations going on, and quirks in the market that cause additional issues, so it’s a difficult market, but a good one.

   Dawn Ross: Don’t you think that a lot of the issues that come up need to be addressed by education? It may be educating your seller that you may not get what your neighbor got six months ago, even though your property is better. On the other hand, by talking to your buyers and explaining that this is where the market is and there’s still a demand for inventory — if you want to be in the game, this is how you play it.

   Anita: You’re definitely right, Dawn, you have to set the expectations. But I still think the reality is different from what the buyer or seller may see. And the lenders are a bit of a wild card, particularly if you’re not using San Francisco appraisers in San Francisco or Piedmont appraisers in Piedmont, or Marin appraisers in Marin.

  DJ: What’s funny about this is that we’re all sitting here talking as if this is something new and special, when my father taught me how to do this 25 years ago. If you’re in the market over 14 days, you’re headed toward price reduction, right? Then you get another 30 days. And you learned this a long, long time ago. Why we have to suffer this hangover forever is remarkable to me.

   Charlie: Well, maybe we have veteran status at this table. But what qualifies one as a veteran? And how many of our sales people have experienced anything but a prosperity market? So…changing rules, changing styles, rules of engagement — it becomes us educating our own sales force.

   Ray: And with these changes, and new people coming to the city all the time, I’m wondering if some of them come here looking for green facilities. I know the Federal Government is trying to build 80 percent green buildings. Has that caught on in the residential field?

   Dawn: In theory, people love the idea. But we haven’t seen that as a big factor when people are renovating their homes.

   Patrick: In San Francisco, unlike other areas of the country, it is somewhat limited. And yet I deal with several brokers who are now eco-brokers. In the wine country, we have more green because of the ability to build from scratch on more land. In the city, as mentioned, renovations are mostly rebuilding, so there’s less opportunity to go green.

   Lois: I know that my building at 1201 California is going greenish. When an owner insisted our garbage should be gift-wrapped (Laughter) the board said that all 72 units had to use biodegradable bags. It’s a good start. Other buildings should do it.

   Dawn: I think people would embrace it if it existed. We just haven’t seen it.

   Steve Pugh: I’ve listened to all your comments about the residential market as it is right now, and hopefully it won’t be for long. We’re seeing a slowing of the market, but I think the biggest factor is perception. A buyer’s perception and a seller’s perception are a little too far apart to create the sales we’re used to. But the fundamentals haven’t changed. The properties are still well-located, the rental market is strong, so there’s no reason for the market not to be active, except for the misconceptions people get from the media.

   But as Dawn said earlier, education’s a big part of it, and savvy investors are the ones trying to make the deals now. They’re the ones who’ve made their fortunes in real estate, and maybe they were on the sidelines during the go-go years and now they’re ready to jump in.

   In my 20 years, I’ve never seen supply outweigh demand. I’d say there’s never been a better time to buy or sell.

   DJ: As money gets less expensive, we’re going to see the market open up.

   Sharon: I may be the senior at this table…31 years in the business, full time, every day, and I think it’s a great market.

   Charlie: Everybody at this table has heard some variation of the line, “I wish I’d bought back when….” So what happens to the bottom-feeding herd mentality is that they wait for the market to drop, always wanting to buy at the bottom. But the market’s more resilient, the market goes up again, and they end up being sideliners. So here’s the advice: If you’re buying for the long haul, there’s no bad time to buy. If you compare real estate against any other investment, over time, there’s nothing better.

   Steve Pugh: Some of the best deals made in the city were during the recession years of the early ’90s.

   Ray: Several of you keep saying that the buyer has to be educated. How would you do that?

   Jay: I think the problem comes from the media. I don’t think they ever broadcast anything that’s good news. Piedmont, Tiburon, Pacific Heights, Mill Valley, Presidio Heights, Seacliff, Russian Hill, Nob Hill, might be fabulous marketplaces, but the media are broadcasting to millions of people so they say that nationwide we have a down market. Yet we’re very local. So we in the industry need to educate our buyers and sellers one on one.

   Stephen Gomez: A savvy buyer is on the Internet and knows that compared to the world market, we’re really a bargain. And with the weak dollar, an even better bargain.

   Charlie: We come across as self-serving every time we attempt to educate the press. It doesn’t mean we should quit, but it would be easier to climb the Himalayas. I always think of Dianne Feinstein’s quote in response to an anti-growth trend: “You have to stop looking at San Francisco as a little Italian fishing village.” (Laughter)

   Patrick: Certainly there’s a lot of bad news out there. The economy as a whole is not doing well. It’s a difficult time for America. But we’re on one coast. We’re the center of this engine that drives a lot of America. It’s so geographically desirable here, there’s so much industry, two of the largest garment manufacturers, the Gap and Levi’s, all the biotech, there’s just so much here, and that isn’t going to change. They’re not making any more San Francisco.

    Ray: With all the new buildings going up, improvements in health care, the police, new social programs…I have every hope that we’re going to see San Francisco not only as a great, shining light on the hill, but also as a metropolitan area that’s very, very special. I really appreciate being here, and I thank you all very much. (Applause.)

    Ray then drew Charlie Moore’s name out of a box, Lois presented him with dinner-for-two at Tommy Toy’s, and 10 wise and witty power brokers went back to their offices, hoping that their quotes would not be totally mangled. We hope so, too.

     Merla Zellerbach is the author of 11 books. She was a TV panelist, and an NHG editor for 12 years. Now she's happily back to writing — being the slashEE instead of the slashER.

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