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Public Assistance, for a Mission Condo Project 

Wednesday, Dec 23 2015

At night, the heart of the "Mission Miracle Mile" between 21st and 22nd streets is awash in green light. The marquee of the New Mission Theater, rechristened as a location of national brew-and-movie chain Alamo Drafthouse, which reopened on Dec. 17 for sold-out screenings of Star Wars: The Force Awakens, is lit up for the first time since 1993.

As if written to script, the New Mission's surroundings are a perfect microcosm of the new Mission District. Instead of furniture stores, cheap burrito joints and corner bodegas, there are hip bars and restaurants — Foreign Cinema and El Techo de Lolinda, the former location of mid-2000s rooftop hotspot Medjool — and a medical cannabis dispensary. Next door to the theater is Vida, where there are 114 brand-new market-rate condominiums (which were priced at $644,000 to $1.8 million and sold out, mostly to tech buyers, well before the movie house's opening night).

The extra housing is welcome and sorely needed in the Mission, a corridor for the Bay Area's billion-dollar tech firms' infamous shuttles and one of America's hottest neighborhoods for real estate, which added only 75 units of housing in all of 2014, according to the Planning Department.

But it wasn't supposed to be this way. For a time, those condos were supposed to be a part of City College's planned expansion — and, later, affordable housing.

Instead, the once-public property was flipped to the condo's eventual developer after the former owner, a well-known restaurateur with political connections, whose purchase was partially financed with public money, stiffed his creditors.

City College purchased the theater and the land where the condos now sit in 1998. Then in a period of expansion under former Chancellor Philip R. Day — who in 2011 pleaded guilty to three felonies for diverting college money to political campaigns — the school intended to transform the empty theater and the adjacent Giant Value thrift store into the school's Mission campus.

After a combination of neighborhood disdain and a classic NIMBY move — movie-house buffs had the New Mission property listed as an historic resource, with the caveat that it must remain a theater — felled plans for classrooms, the school put the property for sale.

In December 2003, three buyers put in bids, including a $4.7 million bid from developer firm Cullinane and Long, and a $3.3 million bid from an assisted-living facility.

But the winner was a $4.5 million offer from restaurant owner and then-Small Business Commissioner Gus Murad, a friend and political donor of former Mayor Gavin Newsom who already owned a building on the block — the five-story structure that housed Medjool, well-known as a hangout for city planning officials and political types (and that had somehow been able to build its rooftop deck higher than city zoning code allowed).

For some reason, Murad's bid also including financing from City College — a tool known in real estate as "seller financing" (but one almost never used by public sellers). The school agreed to act as junior lender and finance $1.8 million worth of the purchase in 2005, according to property records.

The public investment did not end there. Workers hired by City College also performed at least two improvements on the property, in 2007 and in 2009, according to records.

Five years after his purchase, however — after the real estate market had crashed during the Great Recession — Murad had not paid a dime. Records show that the City College loan was in default and, with interest, Murad owed $2 million to CCSF.

By then, Murad had announced plans to turn the site into affordable housing, but begged for more time to put the financing together. (City Hall insiders today question if there were ever serious plans to build affordable housing).

After more than a year of promises that a deal to do just that was in the works — and after pressure on trustees from political players close to Newsom — City College trustees were persuaded in 2010 to delay foreclosure proceedings long enough for Murad to resell the property in 2011, after the market had recovered — to condo developer Oyster Development "for at least $10 million," The Wall Street Journal reported.

This unorthodox arrangement — seller financing, in the Mission District, from a public entity kind enough to wait until a market recovery — sounds odd today. Odder still is that Murad scored his public loan with almost no public scrutiny.

"The Board, even while I was there until January 2009, was not informed about the financing arrangements with Gus Murad," said former CCSF trustee Rodel Rodis, one of the four trustees who voted in favor of Murad's bid (which won by a single vote). "I do not recall a single Board meeting where this topic was ever on the agenda."

It's unclear how much cash — if any — Murad walked away with after the deal, or how much weight his political connections had in securing financing from City College.

A request for comment sent via email through Murad's longtime spokesman, P.J. Johnston — who served former mayor Willie Brown as well as current Mayor Ed Lee as press secretary — was not returned.

Jeff Hamilton, a spokesman for City College, told SF Weekly last week the school would not be able to comment in time for press deadline.

None of the real estate experts or affordable housing activists contacted by SF Weekly could think of a similar deal, in which a public entity assists a private developer in securing a sale.

"I know we look at [seller financing] if it's a private seller to a public potential purchaser," said one Mission District affordable housing developer, speaking on background, "but from a public entity to a private purchaser? That's definitely a total shift of the parameters."

Other bidders on the property were shocked to hear that seller financing was an option.

"That's only something you do when the property has issues. This property didn't have any issues," says Nader Shabahangi, CEO of assisted-living company AgeSong, who put in the $3.3 million bid for the property that was not accepted — and who was also not aware of the City College-provided financing.

"We had investors, and we were going to get a real [private loan]," he said. "This is totally underhanded."

"I don't know how he [Murad] could get the property," said Supervisor David Campos, who represented the area in 2010, as now. "The idea that City College, an institution that is more cash-strapped than the city, could essentially subsidize someone's real estate investment is crazy. It just doesn't make any sense. It strikes me as a gift of public funds."

Which, in fairness, City College was known for at the time.

"It was one of several funny real estate deals," says John Rizzo, a City College trustee first elected to the board in 2006. "It was a very odd deal among many odd deals Philip Day did."

Before Day, then CCSF's Chancellor, was indicted and pleaded guilty to funneling City College money to political campaigns — that, in fairness, benefited City College — he purchased land in North Beach as well as the Mission District to build new campuses. The North Beach sale was also a little odd: It included buying a small strip of land that, at Day's request, was re-assessed at a higher value, apparently to benefit to the seller, observers recall.

Day could not be located for comment. Rizzo recalled that delaying the foreclosure on City College's loan to Murad was seen as the college's best move, fiscally. "We did that because we were attempting to collect" from Murad, he said recently. "We wanted to get our money back. It was get a deal together or get nothing."

"It was dumb," Rizzo said of the New Mission real estate deal. "A bad move."

On a recent Monday evening, just before the theater reopened, a line of well-dressed men and women in business wear lined up outside Lolinda, the bar in the bottom floor of Murad's building. Today, the building is home to one of the most unique land-use combinations in San Francisco: bars upstairs and downstairs, a medical cannabis dispensary owned by Murad in the ground floor, and above in a former hostel, federally subsidized housing for former veterans.

Later that night, Murad was seen outside the building in a dark suit and no tie, smiling at guests as they entered and exited the restaurant. After all, it is the holidays, and in the new Mission, there is much to celebrate.


About The Author

Chris Roberts

Chris Roberts has spent most of his adult life working in San Francisco news media, which is to say he's still a teenager in Middle American years. He has covered marijuana, drug policy, and politics for SF Weekly since 2009.


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