Academy of Art University Sells 153-Unit Da Vinci Villa for $16.5M

Key Takeaway

• Academy of Art University sold its 153-unit Da Vinci Villa student housing in Russian Hill for $16.5 million, equating to less than $108,000 per unit.
• The buyer is local hotelier Natverbhai Patel, known for previous controversial rent hikes and evictions.
• This sale follows a $58 million settlement with San Francisco over code violations, with funds allocated for affordable housing development.

Academy of Art University Sells Da Vinci Villa

The Academy of Art University has sold its 153-unit student housing complex, Da Vinci Villa, located in the Russian Hill neighborhood of San Francisco, for $16.5 million. This transaction marks a significant shift for the university, which has owned the property since 2010. The sale price translates to less than $108,000 per unit, a stark contrast to the average San Francisco multifamily unit price of around $370,000, as reported by Marcus & Millichap in their second-quarter report. The buyer, local hotelier Natverbhai Patel, is known for his controversial real estate dealings, including a notable rent hike and eviction of a Catholic soup kitchen in the Tenderloin.

Details of the Transaction

The Da Vinci Villa, located at 2550 Van Ness Avenue, has served as housing for the university’s freshman and sophomore students, offering a mix of single, double, and triple occupancy rooms. The sale price of $16.5 million is significantly lower than the average market rate for similar properties in San Francisco, highlighting the unique nature of this transaction. Patel's acquisition of the property adds to his portfolio of real estate assets in the city, which includes a combination hotel and SRO at 50 Turk Street. The university's decision to sell comes on the heels of another reported sale of the Commodore student dorm building at 825 Sutter Street, which is expected to be restored as a tourist hotel.

Historical Context and Legal Challenges

The Academy of Art University has faced significant legal challenges in recent years, particularly concerning compliance code violations. The City of San Francisco sued the university, alleging that it had converted properties to student housing without proper authorization. This lawsuit culminated in a $58 million settlement in 2020, with $37.6 million allocated for building affordable housing units. As part of this settlement, the Da Vinci Villa was reclassified as student housing. This legal backdrop provides context for the university's recent property sales, as it seeks to navigate and resolve its compliance issues.

Broader Implications for San Francisco's Real Estate Market

The sale of Da Vinci Villa at a price significantly below the market average raises questions about the current state of San Francisco's real estate market, particularly in the multifamily sector. The transaction reflects broader trends and challenges in the market, including the impact of legal and regulatory issues on property values. Additionally, the involvement of a buyer like Natverbhai Patel, known for his aggressive real estate strategies, underscores the competitive and often contentious nature of the market. This sale may signal a shift in how educational institutions manage their real estate assets, particularly in high-value urban areas.