Millenium Tower
© David Paul Morris/BloombergMillenium Tower
Nina Agabian, a retired director of research in global health science at the University of California, bought a 29th-floor apartment in San Francisco's Millennium Tower in 2010. "It was supposed to be a wonderful building," she said in January, sitting in a leather chair in the building's vast, low-lit, owner's-club level. "For many of us, who left our business lives to start our older years, this had become a nice, comfortable place."

The building, which opened in 2008 and was touted as the most luxurious tower in San Francisco, became a beacon of the city's burgeoning wealth, attracting tech millionaires, venture capitalists, and even the San Francisco 49ers retired quarterback Joe Montana.

The 58-story tower's shine faded on May 10, 2016, when Agabian attended a homeowners association meeting and was informed that the building had sunk 16 inches into the earth and tilted over 15 inches at its tip and 2 inches at the base, according to suits filed by residents and the city of San Francisco. "You can imagine how distressed we were to know that, for one, our lifetime investment and savings are at risk," she said. "And we have no idea whether or not there's a fix to it, and if there is a fix to it, what it will entail."

The building, meanwhile, continues to sink.

As Agabian and more than 20 other residents file multiple lawsuits against the building's developer, the city of San Francisco, and the Transbay Joint Powers Authority, another, potentially more ominous development has emerged. Two people with knowledge of Millennium Partners' liability policy say the developer is insured to cover some $100 million in damages caused by settlement or construction defects; the policy is split among several insurers. Ancillary policies held by the building's architect, structural engineer, and general contractor are worth another $50 million to $100 million, according to one of the people. Any legal fees incurred by the policyholders could be deducted from their policies. But according to experts, fixing whatever is causing the building to tilt could cost far more than that amount.

Further adding to residents' woes is that it's not even clear if coverage will be available under the liability policy: It might have been voided by the flaws in the building.

"I don't foresee a scenario where anyone writes a check under any policy," said Sarah Sherman, the U.S. property practice leader at JLT Specialty USA, an insurance broker in San Francisco. "There's no way to avoid litigation at this point."

It's possible, in other words, that homeowners already under water on their damaged real estate investments may have to cover millions in costs to repair the building. And that's not even the nightmare-case scenario. If the sinking remains unaddressed, the $750 million building could potentially collapse, with little clarity as to who would pay for the damage.

"Let's say there's an earthquake and there's major damage, the insurer will fight like hell not to pay the claim," Sherman said. "I would not be pleased if I was in that building."

Surrounding the building is the $1.1 billion new Salesforce Tower, the new condominium tower 181 Fremont, and a neighborhood bar.

While the best method of fixing the building's tilt won't be known until an engineering firm hired by the developer completes its investigation— and perhaps not even then— the cost is certain to be millions, and perhaps hundreds of millions, of dollars. Conservatively, "I think it's fair to say that you're at least in the tens of millions of dollars," said Joe Maffei, who noted that his San-Francisco-based structural engineering firm is not associated with project. Stopping the settling would be very expensive, he explained, and then you have the added expense of actually evening out the building's base.

Beyond their lawsuits, the residents can't hope for recourse from the developer.

"Millennium Partners doesn't own the building," said P.J. Johnston, a spokesman for the developer. "Even if there was an immediate and agreed upon measure to take, the building is owned by homeowners. Millennium Partners cannot just move forward with any set of measures" to fix the building, he said.

"We can't sell, we can't rent, we can't move," Agabian said. "I'd sell it in a second if I got fair market value for it." She corrected herself: "Well, there's not a fair market for it, because now the fair market for it is zero."

Castle in the Sand

Since the mid-19th century, the city of San Francisco has expanded its shoreline by dumping debris into its coastal marshlands and transferring sand and clay from the ocean bed onto land. Much of downtown San Francisco, including parts of Mission Street, where Millennium Tower was built, is constructed on this loose, wet soil. But the city's proximity to two major faults—the San Andreas and the Hayward—could render that same ground unstable in an earthquake, said Keith Knudsen, the deputy director of the U.S. Geological Survey's Earthquake Science Center. "The soft material tends to amplify the parts of the shaking—the earthquake's wavelengths—which are damaging to buildings," he said.
Millennium Tower
© David Paul Morris/BloombergThe crumbling garage wall in Millennium Tower
The engineers who designed Millennium Tower were aware that the building sat on unstable soil and constructed the 645-foot tower's base so it would behave "dynamically" in the event of an earthquake, at least partially withstanding the shocks on the unstable ground. To achieve this effect, they chose a support known as "friction piles," a series of rods bored into the ground that would help stabilize the building as the earth rocked. While other buildings in the area were built with similar foundations (and still others use pilings drilled all the way down to firmer bedrock), the majority of the skyscrapers in downtown San Francisco are built with steel frames. Millennium Tower, in contrast, is made of vastly heavier concrete.
Millennium Tower
© David Paul Morris/BloombergWorkers repair crumbling walls that have been the result of leaking water in the garage of the Millennium Tower
A decade after the first piles were drilled, walls in the underground parking garage have begun to crack due to the shifting, marble floors in the lobby have begun to buckle, and residents have complained that the ventilation units have begun to fail, raising questions about when the tilt will stop, or if it will stop at all.

Problems Emerge

No one is quite sure why the building began to sink and tilt. It could be a flaw in the structure, which would make it Millennium Partners' responsibility, according to the building residents, or the result of the nearby construction of a major transit station, which would make it at least partially the responsibility of the station's builder. Possibly, it could be some combination of the two.

A class-action by 20 building residents, led by their fellow resident, patent litigator Jerry Dodson, alleges that Millennium Partners knew the building had sunk 8.3 inches into the ground by 2009, the year after it was completed.

"There's the possibility that when they poured [the concrete base] in 2006-07, that it immediately sank," Dodson said in an interview in his living room in the tower, which is filled with art-deco vases and sculptures and overlooks San Francisco Bay. "It's extremely unlikely in my mind that as we began 2009 that it immediately tilted 6 inches to the northwest. What's more likely is they poured the [slab] on unstable soil."

Millennium Partners denies responsibility for the tilting. "At the time of its completion in 2008 and throughout its entire sales process, [Millennium Tower] had settled within predicted, safe ranges," said Johnston, the developer's spokesman.

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