One of S.F.’s biggest apartment buildings reportedly loses half its value

SF Chronicle ^ | 10-19-23 | Roland Li

[dynachrome]

NEMA, one of San Francisco’s largest apartment buildings, has lost almost half its value in five years as it faces an “imminent default” risk on its mortgage, according to a new report.

The 754-unit apartment tower was valued at $543.6 million in 2018 but is now valued at $279 million by real estate data firm Trepp. That’s below the value of owner Crescent Heights’ $384 million mortgage, an ominous sign indicative of the Mid-Market area’s struggles.

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Crescent Heights didn’t immediately respond to a request for comment, but said in August that “the property’s cash flow can no longer cover the monthly debt service,” according to Trepp. The developer could lose control of the property if it becomes late on mortgage payments and lenders seek to foreclose.

San Francisco landlords have struggled with mortgage payments or given up properties around downtown, including at the San Francisco Centre mall; the Parc 55 and Hilton Union Square hotels; and a huge portfolio of apartments owned by Veritas.

NEMA, at 8 10th St., is next to two major office buildings that have emptied during the pandemic: 1355 Market St., where X (formerly Twitter) slashed most of its staff following Elon Musk’s acquisition; and, to the west, 1455 Market St., which lost its two anchor tenants, Uber and Block.

[Reverend Wright]

I’m not an expert on residential multi financing but that apartment with 754 units at peak had a valuation of ~700K per unit.

Even a 5 percent return on capital above costs would be ~$3000 per month ??

What kind of rents was this place charging ?

There is no way to me that the financing works. Is it all based on hoped for future price gains.

[cba123]

“The Chinese” are several things.

First of all, they are the PRC.

(Huge)

Then there is the (also huge) Chinese diaspora which is not directly controlled by Beijing, is very powerful globally, and owns a LOT of companies and will not do things opposed by Beijing. Lots of Taiwan interests in this bunch.

Then finally you have American influence, which is slowly being elbowed aside.

There are not lots of Chinese not somewhere in one of these.

[buwaya]

Most of them are NOT in one of these things.
Chinese guys with money are not good at being centrally organised this way.

Especially not the sorts who want to make real estate investments in San Francisco. This is capital flight. They are doing things Beijing doesn’t want them to do.

[catnipman]

yeah, something doesn’t seem right to me if the claimed 92% current occupancy rate is insufficient for positive cash flow ... if true, sounds like the whole deal was shaky from the git go ...

[Ex-Con777]

Kick out all of the current tenants and fill it with illegals. The government rate will be well in excess of what the owners are now collecting in rent.

EC

[Albion Wilde]

The 754-unit apartment tower was valued at $543.6 million in 2018 but is now valued at $279 million by real estate data firm Trepp.

But hey, it's still worth $261 million more than Mar-a-Lago.

[Cen-Tejas]

.....me too, but any factor that hurts the economy hurts us all.