Introduction
Periodically a new girl comes to town and causes quite a stir. Last year two new models, One Rincon and The Infinity, graced our stage, imposing their towering heights and artful promotions on San Francisco natives and visitors alike. While The Millennium (301 Mission St.) is statuesque in her own right, she brings some other qualities to the residential party here in San Francisco. It is these qualities that I would like to discuss in this post-subprime mortgage/pre-holiday season.

The Millennium when complete will be 647 feet tall versus 697 feet for the taller of the two One Rincon towers and 400 feet for the taller of the two Infinity towers. Millennium will have a total of 419 condominium units compared to a total of 709 units for the One Rincon complex and 650 units at The Infinity.

Revealing
A classic strip tease artist never reveals everything at once. After all, it is about the dance and the thrill of anticipation. This has been the standard tactic in marketing new hi-rise condominium developments. The normal marketing routine is to release only a portion of the condominiums, evaluate the market’s response, and then release a second, third, and additional phases while incrementing asking prices along the way.

Not so with The Millennium. She is revealing it all. There are three distinct product segments in this development, and all of them are for sale at the outset.  Completion is expected in the spring of 2009.

This difference in marketing tactics is based on Millennium’s differentiation of its product offering - three distinct luxury product types. By doing so they are gambling that they gain more from making all units available at the outset than they would by learning from the market response and incrementing prices over time. My bet is that they know what they are doing. After all, they developed the City’s first mixed-use luxury development – the Four Seasons Hotel and Residences on Market Street in 2001, plus Ritz-Carlton and Four Seasons hotels in other markets including New York, Boston, and Washington D.C. This development just doesn’t have any hotel rooms.

There are also no walk-ins allowed. That’s right, you can’t just drop into the sales office and eat up the time of the small, select sales staff. This may make some prospects unhappy, but I think that it sets a good initial screen for qualifying buyers. This is not a development with low, medium, and high-end units. They are all expensive.

Artist's rendering of The Millenium

Product Segmentation

There are three product segments within The Millennium complex. There is an 11-story podium building with 53 homes called City Residences. They are all one-bedroom units, the smallest being 1,280 square feet and the largest 2,280 square feet. These are very large one-bedroom units. They will catch the eye of the market where the average size of a one-bedroom unit in San Francisco is only 800 square feet!

Then there is the Tower. The 191 units on floors 3 to 25 in the Tower are called the Residences, and there are nine units on each floor. The Grand Residences are on floors 26 to 60 and total 175 units. There are only six units per floor up to the 48^th floor, and then only four units per floor from the 49^th to the 58^th floor. There are two penthouse units each on the 59^th and 60^th floors, which are being sold as shell space.

Each of these three segments has its own lobby, its own Home Owners Association, and its own concierges.   

Amenity Floor (Club Level)

The above rendering depicts the planned 20,000-square foot Club Level that features an owners-only dining room (upper right-hand corner), an owners lounge (to the left of the dining room), adjacent wine cellar and tasting room, a screening room (upper left-hand corner), children’s playroom, an outdoor   terrace and a Sports Club/LA-managed 5,500 square foot fitness center that includes pilates and yoga studios, locker rooms, Jacuzzi and steam rooms, as well as a 75-foot indoor swimming pool. The scope and size of this Club Level dwarfs that of any other condominium or hotel facility in the City. There will also be a Michael Minna wine-themed restaurant located at the corner of Mission and Fremont Streets and open to the public.

View, Location, Service & Amenities
The three largest condominium developments in San Francisco, One Rincon, The Infinity, and The Millennium are all attractive and innovative in different ways. However, as time goes on, I think each will become known in the marketplace by its most distinctive feature. To me, One Rincon, sitting at the highest point of Rincon Hill is principally about views. It sacrifices location to some extent by being on 1^st Street and the entrance to the Bay Bridge.  The Infinity is about location, probably the best of any of the new developments. It is one block from The Embarcadero and sits on Folsom St., which will eventually become a retail/pedestrian boulevard. Although some of the Infinity tower units have great views, they are probably not as good as the views at One Rincon and the upper floors of The Millennium.

The Millennium will be distinguished by its service and extensive amenities, in my opinion. The Club facilities depicted above and the multiple concierges exceed what is found anywhere else in the City. The estimate is for a staff of 45 that includes concierges, parking valets, door attendants, engineers, security and full-time cleaning staff. It is a level of service and amenities normally found in a 5-star hotel. Some of the units will also have great views. By segmenting what is a relatively large complex into three distinct residential properties, The Millennium will ultimately attract buyers who are primarily interested in extensive service and amenities.

Summing Up
The Millennium is making a bold statement: this is where you want to be – for those who can afford it. The Millennium is the new girl in town, and for now, the most elegant. It is hitting the market during a national housing crisis. Because it is aimed at the high-end, it probably won’t even experience a bump in the road. Not so for the 15 or so other new developments now selling or about to come to the market in 2008. I think it is going to be a hard slog in 2008 for certain market segments. As a result of the subprime mess, lenders have tightened their borrower qualification standards, and these standards impact the first time buyer the most. Scrapping together a down payment on a $750,000 condominium has always been difficult. It is now even more difficult when the lender imposes more stringent income requirements on top of insisting that a buyer puts down 10% rather than 5%.

The good news is that with all the new developments south of Market, there are multiple choices. The Millennium is not for everyone, even at the upper end of the market. The Four Seasons, St. Regis, Infinity, One Rincon, Radiance, Ritz-Carlton all have their unique pluses. The bad news is that whether you are at the low end, in the middle, or at the high end, it takes a lot of research and expertise to evaluate the opportunities that exist in the market place, compare their pluses and minuses, and then make an informed decision to suit your current and long-term needs. Let me know if I can be of help.

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