The economic mess that has crippled the nation's banking institutions is claiming another victim: residential development projects near San Francisco's gay Castro District.

Up to a dozen parcels along upper Market Street are slated for new housing construction in the city's LGBT neighborhood. The mixture of market-rate condos, rental units, and affordable housing is desperately needed by residents currently priced out of the area and business owners anxious to see an influx of shoppers to help offset a drop-off in sales.

The projects have been stalled for nearly three years as planning officials adopted new zoning and design guidelines for the area. Now that those plans have been finalized, developers are confronted with a new hurdle; they cannot find banks willing to finance their projects.

"From a financial standpoint, things have changed dramatically," said Brian Spears, who three years ago hired Miami-based firm Arquitectonica to draw up plans for a 113-condo unit building at the 76 gas station on Market Street at Buchanan.

The project has the potential to be a new gateway to the Castro and upper Market area for drivers exiting Highway 101. But nearby residents had already expressed concerns about Spears's plans before he had to shelve his design as city officials completed their zoning plans.

Due to a family emergency last week, Spears was unable to discuss at length when he would be able to move forward again with his project. Neighborhood leaders said they had not heard of any movement on the project in months.

Just down the street from the site is another long-stalled project. Adjacent to the LGBT Community Center lies the vacant parcel that formerly housed the Sue Mills building. In early 2006 the city had approved construction of a 113-unit condo project with a rooftop pool and spa at the site.

Demolished two years ago to make way for construction of the new residential building over ground-floor retail, the project puttered out shortly thereafter. Last December local developer Joe Cassidy bought the project from Emeryville-based BayRock Residential for $12.5 million.

He has spent the last 12 months battling a nearby neighbor who unsuccessfully sued the city over zoning in the area, working out an agreement with BART whose underground tunnels sit nearby, and finalizing an agreement with the next door LGBT center. He also had to shore up another building next to the site after its owner complained about structural damage after the Sue Mills building had been razed.

"It took a while to get all the entitlements. Then we had the downfall of the economy and the banks stopped financing," said Cassidy.

He told the Bay Area Reporter last week that he expects to line up a financial backer within the next month. Once he does, Cassidy is ready to begin work.

"I am very close right now

The Thai Corner Restaurant, at Market and 15th streets, is slated for a housing and retail development. Photo: Rick Gerharter

The project will be eight stories, with 13 affordable units on-site and an underground garage for 85 vehicles. Cassidy hopes to rent out the units, and he said prospective tenants have already been calling. The high demand for the Castro and upper Market area among people moving to San Francisco is a main factor for why he bought the project.

"This area is always going to be good. There is a lot of interest; a lot of people already contacted me. They don't want to go downtown," he said. "The building will have fantastic views. It will be a fantastic addition to that area."

Once he can proceed with construction, Cassidy expects to complete the work within 18 months.

"As soon as the loan is dotted, I am ready to go," said Cassidy. "The finances is the killer for all of us."

Alan Mark, the openly gay president of the Mark Company, a residential research and marketing firm based in San Francisco, said many developers are in the same boat as Cassidy. Even if they have projects approved by the city, they are unable to find a bank willing to help provide financing to build them.

"If someone has not started construction or closed a loan, they are not going to get construction financing this year, probably," said Mark. "Unfortunately, no one will be starting construction, I think, in the next couple of years."

Supervisor Bevan Dufty, whose district covers the Castro, helped push through the community-created design plan for the upper Market area in response to the prospect of having so many sites redeveloped. He said he is now eager to see those projects that meet what nearby residents want come online.

"If there are projects that can move forward, I think that is good for the economy and the city. The projects that do the best job in matching up with what the neighborhood wants, as expressed in the upper Market plan, hopefully will move quickly," said Dufty, who is trying to connect developers with local bankers willing to fund projects. "I want to see more people living and shopping in the district."

He said since the design plan was adopted this fall, he has heard little from several developers who had been working on projects along Market Street, foremost among them, Angus McCarthy.

The local developer had bought the "hole-in-the-ground" lot at the intersection of Market, 16th, and Noe streets. McCarthy had been in talks to include a new home for the GLBT Historical Society's museum and archives in his project, but those talks broke down.

McCarthy did not respond to an interview request last week, and Dufty said it appears that the project has been put on hold.

"I have not heard anything lately there with Angus. I think the economy is hurting him," said Dufty. "I don't sense movement in that project right now."

The Duboce Triangle Neighborhood Association has assigned its members to be project leaders for the developments it is tracking. DTNA President Dennis Richards said his group also had not seen any progress at the long dormant site.

He also said another project slated to replace the gas station next door to the Walgreens and 24 Hour Fitness building on Market Street had stalled.

"They approached us. They had plans drawn up, then the project got pulled. I think it lost financing," said Richards. "They are starting to come off the assembly line but because the economy is not so great, that one fell out."

Moving forward

Several projects have begun to move forward. The Planning Commission this month signed off on a new residential building for the corner of Market and 15th streets where the Thai Corner restaurant currently sits. Owner Leticia Luna plans to build a 22-unit building over retail spaces and an underground garage with 12 spaces.

Prior to the start of construction, Luna's architects must finalize their design plans for the building's frontage on 15th Street. DTNA had raised objections to the current plan, and planning staff is working with the architects and residents on a compromise.

Architect Reza Koshnevisan, with Sia Consulting, did not respond to a call seeking comment.

DTNA's Richards said he expects the redesign to be finished by February and construction to start soon thereafter.

"In early 2009, we expect construction to begin," he said.

The Prado Group's plans for the former S&C Ford dealership at the corner of Market and Dolores streets may be the next project to come on board. As the B.A.R.'s online Political Notes column reported Monday, November 6, the developers have already signed a lease deal with grocer Whole Foods to open at the site.

They have been meeting with community groups ever since to detail their plans and hear feedback to fine-tune the design. Due to their agreement with Whole Foods, the developers contend they should have an easier time securing financing for their project.

Whole Foods would occupy the entire ground floor of 29,715 square feet and approximately 80 residential units will be built above the store. They expect to begin the city approval process in mid-2009, with the retail portion completed in mid-2011 and tenants moving in by 2012.

The design, as envisioned, is "a contemporary interpretation of a flatiron building, since this is a triangular site," said Dan Safier, a principal with the Prado Group. "We have an ability to be an important corner and gateway not only into the upper Market and Castro areas but also the Mission-Dolores area."