A 303-unit residential project split into two adjoining buildings has used creative financing and obscure state programs to overcome some funding hurdles, and is on its way to starting construction in SF's Lower Nob Hill.

Developer Patrick McNerney, who has previously defied the odds and done what other builders have failed to do in San Francisco's complex market, and he appears poised to do it again with a bifurcated project at 1101-1123 Sutter Street. As the Chronicle reports, the 303-unit, 22-story complex will be 33% affordable, with 101 units targeting households making between 50% and 75% of area median income.

The project is an exception to the general rule these days, in an era when SF's Board of Supervisors has been granting exemptions to its previously strict and notably large affordable requirements in order to get more housing built. Multiple major development projects have stalled or been abandoned in recent years because of sky-high construction costs and rising interest rates that make unable to "pencil" or reach profitability.

McNerney's project, which is technically two projects in one — a state tax credit program required separating the 101 affordable units into their own building, which is 100% affordable — is moving forward with a tight budget and financing now secured. But it still faced a necessary approval Monday from the supervisors' Land Use and Transportation Committee, which the Chronicle suggests it is likely to get, despite tax-exempt financing that is usually reserved for entirely affordable projects.

The chair of the committee, Supervisor Myrna Melgar, says, "Affordable housing is affordable housing — I don’t care who builds it."

The project also had to get an exception from a city ordinance requiring a gray-water system — a system for collecting shower, laundry, and sink runoff for reuse — for buildings over a certain size. The system, with a $3 million price tag, would have sunk the project, McNerney says.

McNerney's Martin Building Company was founded in 1989 and is responsible for thousands of residential units in the city. Over a decade ago they built three of the residential buildings that ring Mint Plaza — all repurposed from former warehouse and commercial buildings. They build the Arc Light Co. complex behind the restaurant Saison in SoMa, completed in 2012. And they built the 12-story Olume residential tower at 1401 Mission Street, among other projects.