OCII reports Block 4 development negotiations; Hines requests time to rework deal

Executive Director Thor Kozlowski updated the commission Dec. 6 on negotiations over the Transbay Block 4 project, a 681‑unit development with 45% planned affordable units that the commission approved in June 2022.

Kozlowski said developer Hines informed staff in August it could not progress on Parcel F and cited market conditions — including construction cost escalation and sharply higher interest rates — that have altered the project's feasibility. "They've stated that they've experienced 10% cost escalation in this year compared to nearly 4% in 2020 and 8% in 2021," Kozlowski said.

Hines is negotiating potential changes with OCII that staff described as complex and consequential, including the possibility of phasing the project so the tower proceeds first and the mid‑rise affordable component follows, fixing or capping the gap contribution owed by the developer, shifting some construction responsibility to the affordable developer, and using tax increment to address a roughly $46.7 million funding shortfall tied to Parcel F. Kozlowski said staff have been in discussions with Hines since August and that Hines asked for a six‑month process to explore terms that might make the project feasible.

Staff will return to the commission with an update on discussions between January and March 2023. Kozlowski also used his year‑end report to highlight several OCII milestones in 2022, including park groundbreakings, tax‑credit awards for affordable housing, and new units leased for formerly homeless residents.