Mission Rock: Phase 1 Delivers, Phase 2 Stalls—A Cautionary Tale

Here's a question for you. What happens when you get everything right — the approvals, the brand-name developers, the anchor tenants — and you still can't build?

Yeah, we're talking about Mission Rock. Twenty-eight acres on the San Francisco waterfront. The Giants, Tishman Speyer, a billion-dollar-plus vision. Phase 1 is done. People are living there. Nvidia just signed a lease. And Phase 2?

Phase 2 has been sitting in limbo since December 2022. The Port's own disclosure documents say they're — and I'm quoting here — "monitoring market and financing conditions to assess a feasible second phase."

Monitoring. That's the word that keeps you up at night if you're a developer.

This is a fully entitled project. No permitting drama. No neighborhood opposition holding it up. The entitlements are locked in from 2018. The problem is math. A hundred and fifty million in infrastructure costs, rising interest rates, and a city where thirty percent of offices are still empty. [SFX: DRAMATIC_STING]

So today we're using Mission Rock as a lens — why even San Francisco's best-case megaproject can't escape the financing reality every developer in this city is facing right now.

Let's get into it.

Good morning, I'm Holden Carter.

And I'm Naomi Zhao. Welcome to the show.

So today we're talking about a project that, on paper, has everything going for it. Brand-name developers. Full entitlements. A gorgeous waterfront location right next to Oracle Park in San Francisco. And yet — it still can't get out of its own way.

We're talking about Mission Rock. Seawall Lot 337. Twenty-eight acres on the San Francisco waterfront being developed by the Giants and Tishman Speyer, with Mitsui Fudosan also in the mix. This is supposed to be a whole new neighborhood — three and a half million square feet of housing, offices, retail, parks.

And here's the thing — Phase 1 actually delivered. Broke ground in 2020, first residents moved in by June 2023, Visa's in the office space, Nvidia just leased forty-five thousand square feet there. There's a beautiful five-acre park, China Basin Park, that opened last year.

Real buildings. Real tenants. Real people living there. This is not vaporware.

But Phase 2? That's where our story gets interesting. Because the developer submitted that application back in December 2022, and since then? The Port's own disclosure documents say they are — and I'm quoting here — "monitoring market and financing conditions to assess a feasible second phase."

Which is the polite way of saying: we can't make the numbers work right now.

Exactly. And today we're using Mission Rock as a lens to understand something bigger. Why even the best-positioned megaprojects in San Francisco — fully entitled, politically supported, partially built — still slam into the same wall of construction costs, interest rates, and lender skepticism.

We'll walk through the money. The infrastructure burden — we're talking a hundred and fifty million dollars just for the next round of horizontal work. The creative financing tools the city uses — tax increment districts, Mello-Roos bonds — and why those tools help but don't solve the fundamental problem.

And we'll look at what Phase 1's success actually tells us about Phase 2's chances. Spoiler: less than you'd think.

It's a story about timing, about risk, and about the gap between getting permission to build and actually being able to build.

Let's get into it.

Okay, so let's rewind and set the stage here, because Mission Rock has a backstory that actually matters. This is Seawall Lot 337 — twenty-eight acres of Port-owned land right next to Oracle Park, home of the Giants. And the development team? It's basically a dream roster. The San Francisco Giants partnered with Tishman Speyer, one of the biggest real estate firms on the planet. Mitsui Fudosan America is also in the mix. This is not some scrappy startup trying to build condos.

So we're talking serious institutional muscle behind this project.

Massive. And the vision is equally massive — three and a half million square feet of mixed-use development. Housing, office space, lab flexibility, retail, the rehabilitation of historic Pier 48, and a gorgeous five-acre waterfront park. The master plan entitlements were locked down in 2018. Environmental review, transaction documents, the whole package — approved. And Phase 1 broke ground in 2020.

Okay, so right at the start of the pandemic. That's bold timing.

It was. But here's the thing — the financing for Phase 1 was largely baked before the world fell apart. Pre-pandemic assumptions on interest rates, pre-pandemic construction cost estimates, and critically, they had an anchor office tenant. Visa signed on. That's the kind of credit tenant that makes a lender pick up the phone.

And Phase 1 actually delivered, right? This isn't vaporware.

Not even close. Parcel G got its temporary certificate of occupancy in January 2023. First residents moved into Parcel A — that's the building called The Canyon — by June 2023. Two office buildings, two residential towers, ground-floor retail, all coming online through 2023 and 2024. And then in April 2024, China Basin Park opens. Five acres of public waterfront park, grand opening April 25th. It's real. You can walk through it right now.

So if Phase 1 is this success story, what's the holdup with Phase 2?

And that is the question. Because here's what people need to understand about a project like Mission Rock. This is fundamentally an infrastructure project wrapped in vertical development. Before you build a single apartment tower in Phase 2, you need new streets, new utilities, new grading, flood protection, sea-level-rise adaptation measures. The city's own capital planning documents from March of this year peg the Phase 2 and Phase 3 horizontal infrastructure at roughly a hundred and fifty million dollars. And that work stretches into the early 2030s.

Wait — a hundred and fifty million just for the horizontal stuff? The streets and pipes and seawalls? Before a single building goes up?

Before a single building goes up. And the total vertical costs across the full buildout? One planning snapshot had that at around one point seven billion. Now, the financing structure is genuinely sophisticated. The Port contributes land value through prepaid ground leases. There's an Infrastructure Financing District that captures tax increment. There's a Mello-Roos Community Facilities District for special tax bonds. Certificates of Participation. It's a real capital stack.

That sounds like it should work, though. If you've got all those tools in the toolbox?

It should work — if. If assessed values grow on schedule. If bond markets are receptive. If leasing absorption hits projections. If interest rates cooperate. And since 2022, almost none of those ifs have cooperated. [PAUSE: 2s]

The Port's own disclosure document says it plainly. Quote: "The developer submitted the Phase 2 project application to the Port in December 2022 and, along with the Port, are monitoring market and financing conditions to assess a feasible second phase." End quote. That's official language for — we're waiting.

And this is a fully entitled project! They don't need more approvals. The entitlement framework from 2018 covers future phases through an administrative consistency review. The red tape is handled.

Exactly. And that's the crucial insight here. The obstacle for Phase 2 is not "can we entitle it." It's "can we finance it right now." There is some good news — Nvidia leased about forty-five thousand square feet at Mission Rock in late 2025, their first San Francisco office. AI-driven leasing is picking up in that submarket. But a few leases, even splashy ones, don't automatically translate into a construction lender saying yes to a billion-dollar mixed-use phase when the city still has thirty-plus percent office vacancy.

And you mentioned the sea-level-rise costs. Those don't go away just because the market is soft, right?

They do not. Those are non-discretionary. You're building on bayfront fill. The grading, the shoreline adaptation, the flood measures — that money gets spent regardless of whether office rents justify the next tower. And the project carries significant affordability obligations too, often cited at forty percent across the full master plan. When market-rate revenues soften, that cross-subsidy math gets really, really tight.

So we've got the best possible team, full entitlements, a delivered Phase 1 — and Phase 2 is still stuck in limbo.

And that's exactly why we're using it as our lens today.

Okay, so let's get into it. Mission Rock. Seawall Lot 337. Twenty-eight acres of Port-owned waterfront right next to Oracle Park. This is the San Francisco Giants plus Tishman Speyer plus Mitsui Fudosan America. Three-and-a-half million square feet of mixed-use development. We're talking housing, office, lab space, retail, a rehabilitated historic pier, and a gorgeous five-acre waterfront park. On paper, this is the dream project.

And here's what makes it such a perfect case study, Holden. This project did everything right. Entitlements approved in 2018. Environmental review done. Development agreement locked in. Phase 1 broke ground in 2020. They delivered. Parcel G got its temporary certificate of occupancy in January 2023. First residents moved into The Canyon in June 2023. Visa anchored the office space. China Basin Park had its grand opening April 25th, 2024. This is not renderings on a website. This is a real neighborhood that exists right now.

Real buildings, real tenants, real people walking their dogs in a brand-new park. And Tishman Speyer's own project updates confirm it — Phase 1 delivered throughout 2023 and 2024. Four buildings plus that five-acre park. The placemaking strategy worked. Build the park, build the first wave, create the neighborhood, then let the value you've created pull the next phases forward.

And it did start pulling. Nvidia leased about 45,000 square feet at Mission Rock — the Chronicle reported that in December 2025. That's Nvidia's first San Francisco office. The AI leasing wave that was mostly concentrated downtown started washing into this submarket too. So you've got momentum. You've got brand-name tenants. You've got a delivered Phase 1 that people can see and touch.

So Phase 2 should be a layup, right?

You would think.

It is not a layup.

It is very much not a layup. And the Port's own financial disclosure document — this is the FY2023 continuing disclosure — says it plainly. Quote: "The developer submitted the Phase 2 project application to the Port in December 2022 and, along with the Port, are monitoring market and financing conditions to assess a feasible second phase." End quote. [PAUSE: 2s]

"Monitoring market and financing conditions." That is bond-document language for "we cannot make the numbers work right now." And remember, that application went in December 2022. We are sitting here in March 2026. More than three years later.

And this is the core lesson. The entitlements are not the problem. Mission Rock has one of the most robust entitlement frameworks in the city. Subsequent buildings go through an administrative consistency review — Planning Code Section 249.80 — not a full new approval process. The question is not "can we entitle it." The question is "can we finance it." And that question has a very different answer right now.

So let's unpack why. Because this gets into the structural anatomy of a waterfront megaproject. People hear "development" and they think about buildings going up. But Mission Rock is fundamentally an infrastructure project wrapped in vertical development.

Exactly. New streets, new utilities, new grading, flood protection, sea-level-rise adaptation — all of that has to happen before or alongside the buildings. And it's not optional. These are waterfront requirements. You're building on bayfront fill. The climate resilience costs alone are enormous, and they are non-discretionary. You can't value-engineer your way out of raising the grade to handle rising sea levels.

And the numbers tell the story. The Port's ten-year capital planning documents describe total vertical costs for the full buildout at around $1.7 billion. Horizontal infrastructure costs — streets, utilities, grading, all of it — over $100 million. And the city's March 2026 capital plan pegs the Stage 2 and Stage 3 horizontal infrastructure specifically at roughly $150 million, with delivery stretching into the early 2030s.

Now, the financing stack they designed for this is genuinely sophisticated. You've got Port land value through prepaid ground leases. You've got an Infrastructure Financing District — that's a tax-increment tool that captures rising property taxes to pay for infrastructure. You've got a Community Facilities District — Mello-Roos special-tax bonds. You've got Certificates of Participation. This is a real capital stack.

And it can work! It's designed to work. But every single piece of that stack depends on something going right in the future. The IFD needs assessed values to grow, which means buildings need to get built and leased at strong rents. The CFD bonds need the bond market to be receptive. The ground lease revenue needs absorption to happen on schedule. [SFX: DRAMATIC_STING]

And here's where San Francisco's broader reality crashes into even the best-designed project. Construction costs have inflated dramatically since these financing assumptions were first modeled. Interest rates are elevated compared to the 2010s when this deal was structured. Office valuations have reset across the city — we're still in a thirty-plus percent vacancy environment. And lenders are conservative. Even when you show them an Nvidia lease and a Visa anchor, getting a construction loan for a large mixed-use waterfront start in this environment? The underwriting is brutal.

And there's another pressure point that doesn't get enough attention. Mission Rock's affordability commitment is often cited at forty percent across the full master plan. That is an extraordinary public benefit. But when market-rate revenues soften — when your office rents are lower than projected, when your condo pricing is uncertain — the cross-subsidy math gets really strained. The affordable units don't pay for themselves. They need the market-rate side to carry them.

So you end up in this structural trap. The horizontal costs don't scale down just because demand softens. You still need $150 million in infrastructure whether you're building two towers or six. The affordability obligations don't shrink. The sea-level-rise work doesn't get cheaper. But the revenue side — the rents, the sale prices, the assessed values that power your tax-increment financing — all of that is under pressure.

And the timing mismatch is brutal. You get your entitlements in 2018 when the world looks one way. You break ground in 2020 — right before a pandemic reshapes how people use offices. By the time you're ready for Phase 2, the capital markets have completely shifted underneath you. Your entitlements are still valid. Your design is still approved. But the spreadsheet doesn't pencil.

This is what we mean when we say entitlement certainty does not equal financial certainty. Mission Rock has the entitlements. It has the Giants, Tishman Speyer, and Mitsui behind it. It has a delivered Phase 1 that proves the concept. It has Nvidia as a tenant. And Phase 2 is still in a holding pattern because the gap between what the project costs and what the capital markets will fund has not closed.

Now — and I want to be clear about this — the positive signals are real. The AI-led leasing rebound is real. Tenants are showing up at Mission Rock specifically. The placemaking bet paid off. But leasing activity and construction financing are two very different conversations. A signed lease does not automatically become a construction loan at terms that make a project feasible.

And that's the story of so many big San Francisco projects right now. The demand signals are improving. The entitlement barriers, in this case, are basically gone. But the cost-of-capital reality, the construction-cost reality, and the infrastructure burden reality — those are the binding constraints. And they don't care how famous your development team is.

Okay, so let's pull this apart. Because I think Mission Rock is actually the most instructive project in San Francisco right now. Not because it's failing — it's not — but because it's succeeding in Phase 1 and *still* can't get Phase 2 off the ground. And that tells you everything.

Right, and I want to start with what I think is the most underappreciated dynamic here. People hear "fully entitled" and they think that means "ready to build." And Mission Rock got its entitlements in 2018. The EIR is done. The development agreement is locked. Subsequent buildings just go through an administrative consistency review. This is as close to a green light as San Francisco ever gives anybody.

And the developer team is not exactly a bunch of amateurs. You've got Tishman Speyer, the San Francisco Giants, Mitsui Fudosan. These are organizations with deep capital relationships, institutional credibility, decades of experience. If *they* can't pencil Phase 2 right now, that's not a management problem. That's a market problem.

It's a structural problem. And here's where I think the Mission Rock lens gets really sharp. This project — at its core — is an infrastructure project dressed up as a real estate development. You're building new streets, new utilities, new grading for sea-level rise, shoreline adaptation. The city's own capital planning documents from March 2026 put Stage 2 and 3 horizontal infrastructure at roughly 150 million dollars. And those costs don't care whether the office market is hot or cold.

That's the killer insight. The horizontal costs are fixed. They're non-discretionary. You can't say, "Well, the Bay isn't going to rise for a few years, let's skip the flood adaptation." No. If you build, you build to code, you build to climate spec, and you write that check regardless of what rents look like upstairs.

And this is where the funding stack gets fascinating but also fragile. The Port designed this really sophisticated financial architecture — ground leases from Port-owned land, an Infrastructure Financing District that captures tax increment, a Mello-Roos Community Facilities District for special taxes and bond proceeds, even Certificates of Participation. On paper? Elegant. In practice?

Every single one of those mechanisms depends on future assessed values going up, on tenants actually absorbing space, on the bond market being receptive. And when you're sitting in a city with thirty-plus percent office vacancy —

— the assessed values aren't there yet. The absorption isn't there yet. And lenders are looking at these numbers and saying, "We love the site, we love the team, but the math doesn't work at today's rates."

Now here's where I want to push back a little, Naomi, because there IS a bull case. Nvidia leased 45,000 square feet at Mission Rock in late 2025. Their first San Francisco office. Visa is already anchoring the Phase 1 office space. The AI-led leasing rebound is real and it's spreading beyond just the traditional downtown core.

Absolutely. And the "place-first" strategy — build the park, build the first wave, create a neighborhood that feels alive — that's working. China Basin Park opened April 2024, five acres, gorgeous waterfront. Residents moved into The Canyon in mid-2023. There's retail activating. You can walk around Mission Rock today and feel a neighborhood happening.

So what's the disconnect? If the neighborhood is proving itself, why can't Phase 2 move? [SFX: DRAMATIC_STING]

Because leasing and construction financing are two completely different conversations. A signed lease from Nvidia is a demand signal. It is not a construction loan. A lender underwriting a new vertical start at Mission Rock needs to see stabilized rents, proven absorption across multiple buildings, and an interest rate environment where the return on a billion-plus dollars of remaining development actually pencils against the cost of capital. And we're not there.

And here's the affordability layer that makes it even harder. Mission Rock's master plan calls for approximately 40 percent affordable housing across the full buildout. That's a huge public benefit. It's also a massive cross-subsidy requirement. Every market-rate unit and every square foot of office space is carrying part of that obligation.

So when market-rate rents soften or office valuations reset — which is exactly what's happened since 2022 — the cross-subsidy math gets brutal. The affordable units still need to be built. The public benefits don't shrink. But the revenue side of the equation just got smaller.

Which brings us to the quote that I think perfectly captures where Phase 2 sits. Straight from the Port's own disclosure document: "The developer submitted the Phase 2 project application to the Port in December 2022 and, along with the Port, are monitoring market and financing conditions to assess a feasible second phase."

"Monitoring." That's been the word for over three years now. And look — monitoring is the rational thing to do. Nobody wants to break ground on a billion-dollar phase into a headwind. But it underscores this fundamental timing gap between when you get your entitlements and when the capital markets actually let you use them.

And that gap is the story of San Francisco development right now. It doesn't matter how good your entitlements are. It doesn't matter how famous your partners are. The market has veto power, and it's exercising it.

The optimistic read is that Mission Rock Phase 1 created exactly the conditions that will eventually unlock Phase 2 — the tenants, the neighborhood identity, the proven demand. The realistic read is that "eventually" might be a very long time, and every year of delay means those 150 million dollars in infrastructure costs aren't getting cheaper. [PAUSE: 2s]

So the takeaway from the Mission Rock lens is this: San Francisco's problem isn't just approvals. It isn't just NIMBYism. It's that even when you solve for every political and regulatory obstacle, you still have to solve for the financial one. And right now, that's the hardest equation in the city.

Okay, so what does all of this actually mean for you? Whether you're a developer, an investor, a policymaker, or honestly just someone who lives in San Francisco and wonders why that big empty lot near the ballpark still looks the way it does.

Takeaway number one — and I really want people to hear this — entitlements are not the finish line. Mission Rock has had full approvals since 2018. The master plan is locked. New buildings go through an administrative consistency review, not some multi-year permitting gauntlet. And Phase 2 is *still* waiting. The bottleneck is capital, not red tape.

So if you're looking at any large project in San Francisco and thinking "once they get approvals, they're golden" —

Think again. The gap between entitlement and groundbreaking can be years. And that gap is where projects live or die right now.

Takeaway number two — infrastructure costs don't wait for the market to recover. Mission Rock sits on bayfront land. Sea-level-rise adaptation, new streets, grading, utilities — that's roughly a hundred fifty million dollars just for the next stages of horizontal work. You can't defer that. You can't value-engineer the ocean away.

And those costs are baked into the public-benefit obligations. Forty percent affordable housing across the master plan. A Port that needs long-term revenue. Climate resilience that's non-negotiable. When market-rate rents soften, the cross-subsidy math gets brutal.

Takeaway number three — watch the leasing, but don't confuse it with construction starts. Nvidia signing forty-five thousand square feet at Mission Rock in 2025? Fantastic signal. But a lease doesn't equal a construction loan for the *next* building.

Lenders are still underwriting conservatively. You need pre-leasing, you need equity, you need rates that make the pro forma work. We're not there yet for most large mixed-use starts. [PAUSE: 2s]

So the practical bottom line — if you care about San Francisco's growth, don't just track what gets approved. Track what gets *financed*. That's the real tell.

And for anyone in real estate or public finance — Mission Rock is your case study. Sophisticated tools like IFDs and Mello-Roos bonds help, but they don't replace the need for private capital willing to accept long payback timelines in an uncertain market. The toolkit matters. The timing matters more.

Alright, rapid fire — let's run through the Mission Rock numbers. Phase 1 broke ground 2020, first residents moved into The Canyon by June 2023, and China Basin Park opened April 2024 — that is real, delivered neighborhood.

Nvidia leased 45,000 square feet at Mission Rock in late 2025 — their first San Francisco office ever — riding that AI leasing wave we keep talking about.

Phase 2 application hit the Port's desk back in December 2022, and as of right now, they are still, quote, "monitoring market and financing conditions." Three-plus years of monitoring.

The price tag on Stage 2 and 3 horizontal infrastructure alone — just the streets, utilities, sea-level-rise work — roughly 150 million dollars.

Total vertical costs across the full 3.5-million-square-foot master plan were pegged at 1.7 billion in one planning snapshot. Before rate hikes.

And the affordability mandate is 40 percent across the project — which is ambitious and important, but that cross-subsidy math gets brutal when market-rate revenues are compressed.

Bottom line: fully entitled since 2018, brand-name sponsors, real tenants — and Phase 2 still can't pencil. That tells you everything about where SF development stands right now.

That is going to do it for today's show.

If you take one thing from this episode — entitlements are not the finish line. They're the starting gun.

And the race after that? It's all about capital markets, construction costs, and timing.

Mission Rock proves both sides — you *can* deliver in San Francisco, and you *can* get stuck waiting even when everything on paper says go.

We'll keep watching Phase 2. Thanks for spending your morning with us.

See you next time.