SF Apartment : July 2017


What’s Shakin’?

by Matthew C. Sheridan

San Francisco’s Mandatory Soft Story Retrofit Program was launched in 2013 after years of community-based planning and input by stakeholders. With a critical deadline for many apartment buildings nearing, it’s appropriate to take heed of the law’s purpose and implementation so far. The focus of the program was the city’s old, wood-frame apartment houses that had a soft-story condition—typically found in structures with several floors of residential housing above garages, storefronts or large, open basements. These buildings (five or more units; two or more stories over the soft story, wood frame and built prior to 1978) are at a high risk of catastrophic failure in a good-size earthquake; their collapse will result in immense loss of life, profound housing shortage and considerable economic devastation to the region.

The program classified structures into four different tiers with varying deadlines for submission of permits and for completion of required seismic work. Buildings in the highest risk category, such as those containing daycares or senior centers, had the earliest deadlines, while those with stores and shops had the longest. Most wood-frame buildings fall under Tier 2 (15 or more units) and Tier 3 (5-14 units). Screening forms for all tiers were due September 15, 2014 and required a licensed architect or civil or structural engineer to review whether a building fell under the ordinance. The deadline for permits for Tier 2 buildings were due last year, with completion of work and certificate of final-completion due by September 15, 2018. Some 509 buildings are in Tier 2, and to date only 12 have yet to submit permits—an impressive compliance rate of 98%.

Signs so far point to a successful roll-out of the program, with overall compliance by building owners at 99%. Thanks in large part to a strong partnership between the Department of Building Inspection and organizations like the San Francisco Apartment Association, outreach to owners have been comprehensive—unless you’ve been living under a rock—folks know the purpose, scope and consequences of compliance (the threat of a large red sign adorning your building and a Director’s Hearing motivates many).

Looming around the corner is the fast-approaching deadline to submit permits for Tier-3 buildings—a much larger pool of structures, some 3,513. So far, only 54% of Tier-3 building owners have submitted plans, leaving some 1,630 owners to scramble to get it done over the next 10 weeks. Those who have waited until the last minute now face a dearth of competent engineers and contractors, but on the flipside—with experience on their side—a pool of seasoned vendors and an extremely proficient bureaucracy down at DBI.

“We’re nervous—we’ve got a whole bunch of buildings between now and September that need permits,” remarked Brian Strong, San Francisco’s chief resilience officer who oversees implementation of the city’s Earthquake Safety Programs. To date, San Francisco has accomplished much according to Strong, who pointed out the city’s 99% rate of compliance to date and permits pulled for buildings totaling almost 48,000 units, affecting some 110,000 tenants. “The rate of compliance is an exciting thing—it’s ahead of time and that means we’re addressing and approving the safety of a large number units,” said Strong.

Another benefit of the seismic program is the opportunity of owners to add additional units under San Francisco’s ADU law, added Strong, and it is scheduled so far to add almost 500 units in the actual buildings affected by the seismic ordinance.

The biggest challenge facing owners under the Retrofit Program is the cost to complete the work and finding well-qualified engineers and contractors. “It can be difficult for owners to do— it’s expensive—and we know the city’s permitting process requires hiring contractors and engineers and it’s not always easy to find firms that can do work,” added Strong. While various financing programs for retrofit work are available through traditional lenders, the city recently launched the AllianceNRG Program, which provide low-interest, fixed-rate loans that are paid through property taxes (see article on page 28). For mandatory soft-story seismic petitions, owners can passthrough 100% of the cost to the tenants. Amortized over 20 years, increases cannot exceed 10% of the base rent in one year, but the full amount of the passthrough can be imposed in subsequent years.Amortized over 20 years, increases cannot exceed $30.00 or 10% of the base rent, whichever is greater.

“Most of these jobs are between $130,000 and $250,000, but the upshot is you get a lot for your money—it is basically asset preservation” said Robert Link, an apartment house owner who also runs S & L Realty in San Francisco. The average job takes about eight to ten weeks. “There are easy ones and hard ones,” cautioned Link, who warns a lot of the cost is in the engineering. He advises owners to let their vendors know they’re getting multiple bids—competition is good.

Owners seeking to passthrough seismic costs can expect to wait over a year for a hearing at the rent board once the required materials are submitted. Link cautions owners to secure as detailed an account as possible from their contractors when submitting progress reports on anything related to seismic—making life much easier down the road by putting owners in a better position to submit their paperwork to the board. To learn how to passthrough the costs of mandatory seismic retrofitting, see page 24.

Finding the right contractor or engineer for the job at the right price has become a struggle for many. “A lot of people are not getting returned calls,” commented John Pollard, who runs both Mercury Engineering Group and SF Garage Co. “There’s going to be a mad rush the last three months—July, August and September will be very busy.”

Sean Prichard, whose family owns several buildings, has not pulled the trigger to begin the work. “I’ve gotten several bids, but they’re all over place,” he commented. He believes the key to the process is the engineer. “They know what you want: simple; costs down; easiest method—you could go way overboard.” He was surprised recently, when a design-build outfit came back six months after submitting an initial bid requesting to re-inspect the property, asserting that a few rules had been changed. The damage: doubling of the price—more framing, more bracing.

Pollard, the engineer and contractor, cautions folks not to over-shop. “Concrete, steel, rebar, healthcare and labor have all risen between 15-30% since 2014—even planning department fees have gone up,” he warned. Working with established engineering firms and contractors will help avoid serious pitfalls during the process, he says. Pollard praises DBI for running a clean and efficient process—even sponsoring a number of educational fairs on the seismic ordinance. “From my perspective, this is the most efficient program DBI has ever done.”

“I just submitted plans a couple of weeks ago on one project and I have another set of plans in the back of the car right now,” exclaimed Tim Carrico, a seasoned owner and retired property manager. He believed it was better to wait until any bugs got worked out by contractors and the city. For Carrico, the key again is the engineering. “I’ve known my engineer for many years and am loyal to people I have worked with in the past—they have value,” said Carrico. “The projects’ designs were complicated and expensive, but my engineering firm saved me close to $100,000 (Murphy Burr Curry is the firm).

Two relatively new engineering standards are slowly percolating up through mainstream firms in the San Francisco. According to Homayoun Sikaroudi, engineer, contractor and owner of West Coast Premier Construction, both FEMA’s P-807 guideline and ASCE- 41 standard are new techniques or criteria now acceptable at DBI (to properly define these standards is beyond the scope of this article.) “It’s state-of-the-art technology that is being used, but you have to know how to use it,” warns Sikaroudi. Written specifically for soft-story buildings, “they’re a performance-based design magic tool that works by analyzing the building.” But he cautions that the profession is not ready.

“The techniques have been propagating among the elite engineers in Northern California, but can be a challenge in hands of the inexperienced.” The cost is also a factor and there could be big differences in numbers in the end.

Sikaroudi believes that DBI is doing a very good job. “We’re getting plans checked 80% of the time over the counter,” he commented. “From the ground floor to fifth floor, DBI is turning around the projects fast.” However, recent additional requirements have sprung up from other departments. Specific types of seismic work can now trigger a permit from DPW’s Street Use and Mapping division for sidewalk inspection and repairs, which add to costs and can cause delays. On top of that, the new fire department regulations now require an upgrade to fire alarm alarms when work goes over $50,000.

Compared to other recent city-mandated programs, San Francisco’s Mandatory Soft Story Retrofit Program appears to be a success so far, albeit one that is costly, time consuming and scary. “If I was past a certain age and sick of regulation, with a building that was not cash-flowing, and looking down the barrel of a huge capital expense, I would say ‘get me out of here,’” owner Robert Link wans. But on the other hand, in the calm words of John Pollard: “Relax, find a good established engineering firm, don’t stress about it—all you need is the engineering and a permit.”

Matthew C. Sheridan is the publisher of SF Apartment Magazine and a realtor with ARA Newmark, where he helps clients with the acquisition and disposition of apartment buildings in San Francisco. He can be reached at msheridan@aranewmark.com or 415-273-2197.