By Geoff Page
Those of us raised in the television generation grew up with images for stories. The generation before TV listened to radio programs with as much enthusiasm, it seems, as the TV generation did to TV. We have images that are inseparable from horror stories we know. It was a wonder to us how the radio generation could be as scared as we were, without pictures.
This writer does not wonder any more after listening to a podcast by two developers, Shawn DiMartile and Mike Tighe, talking about their ADU project in Ocean Beach. It is possible to horrify a person with only words.
This was a psychological horror podcast. What was horrible about it was the complete lack of morality and the nonchalance. Clearly, the only goal is money, nothing else matters.
This appears to be a second ADU Complete Communities project in OB, a third project is just outside the OB boundary. No idea if these are connected in any way. The podcast did not give the address.
These two developers bought a property that consists of a two-bedroom, one bath house on a 7,000 square foot lot. They plan to add 12 more living units for a total of 13. They will remodel the existing house, expanding it for two new units. There will be a new three-story building with 10 units in it. One more unit will be over the garage.
The new building will have four studios on the first floor and four on the second. The third floor will have two two-bedroom units. There will be a rooftop deck.
They plan to have six parking spots but residents will have to pay extra to rent one of those. The speaker said parking was not needed anyway because there are a “kajillian” places to park on the surrounding streets. No hint of sympathy at all for the people this would affect.
The developers also plan to have storage on site but, that too, is only for rent. The podcasters nonchalantly discussed this saying that naturally, people will need space to store things because these studios will be very small. So, they are providing it, for extra rent.
What this really means is that a person’s “rent” for a studio will be higher than advertised as residents will need to “rent” more space to live.
Then, the story got really bad. These two are planning to remodel the front house, taking care to only remove 50% of the structure to avoid a coastal permit. Once done, they will turn the existing house into a short-term vacation rental in order to cash flow the project. They said they already had the vacation rental permit.
It does not take a genius to see what a really bad precedent these two developers could be setting. Cash flowing a construction project using STVR income is an obscene idea. It is a double whammy to wherever these things pop up. Ruining a neighborhood with overly dense projects with no parking is egregious enough but adding a vacation rental to the cacophony is just an insult.
Sadly, a former resident of OB is responsible for a big part of this. Apparently, a man owned this property and a few others in OB at one time. The podcasters said he sold everything and moved to Texas and bought a ranch but still owned the one house.
The two developers talked the property owner into owner-financing the purchase saving them money. And, they talked him into interest-only payments for a period while the place was being built. They said without this deal with the owner they could not have gone forward with the project. The owner will make a lot of money on the deal at the expense of his old neighborhood, but he lives in Texas now so he apparently does not care.
There was a long discussion about how they decided on how many studios or two-bedrooms should be in the project. They said they wanted the mix that they could sell for the highest dollar. They said that studios have a high transiency rate, which provided opportunities to raise rents frequently.
The plan is to lease the units and then sell the whole development. According to the podcasters, the eventual return on this project for investors would be 20%.
They are confident they can rent the units easily because each unit will have an ocean view, which will enable them to charge more for rent. They said they do not plan to offer any rent concessions, expecting the units will be so popular.
They said that they packed as much on this lot as humanly possible. The only desire, expressed throughout this podcast, was to make as much money as possible. There was not a hint of human emotion at all.
They saved the scariest for last. They said they are going to target this zip code for more projects.
This is not what the mayor’s Complete Communities Housing Solution was meant to produce. These two developers never mentioned affordable housing and were in fact, blatantly appealing to a high-end market. How will this kind of thing help the housing problem? It will not, but it will allow developers with no conscience to make money and that makes the mayor happy.
Listen for yourselves folks. Here.
https://podcasts.apple.com/us/podcast/the-real-estate-takeoff/id1490657109?i=1000612525110