Dive Brief:
- Despite a parade of bad news about multifamily loans, there appears to be a favorable resolution for the owner of one high-profile distressed property in San Francisco.
- Crescent Heights will retain control of the 754-unit NEMA San Francisco apartment complex after paying its lenders $10.5 million, according to the San Francisco Business Times. The Miami-based developer will retain control of NEMA if it does not default on debt connected to the property, according to a modification agreement in February.
- After the capital infusion, lenders reduced the interest rate of a $60 million note, which is part of a $384 million loan backed by the complex, according to the San Francisco Business Times. A second $50 million note’s interest was reduced to 0%, and lenders agreed to waive payments on it until the debt on the building matures in February 2029.
Dive Insight:
Originally constructed in 2013, NEMA San Francisco stands 37 stories tall with 9,416 square feet of retail space and has 30,000 square feet of indoor and outdoor amenities. Rents range from $2,614 to $6,230, according to Apartments.com. It is one of a series of luxury urban apartment towers operated by Crescent Heights, with sister properties in Boston, Miami and Chicago. The company didn’t reply to a request for comment from Multifamily Dive.
In 2018, the collateral behind the apartment complex was valued at $543.6 million. It was lowered to $279 million last year, according to a report from real estate data firm Trepp.
Like many properties in downtown San Francisco, NEMA has been struggling financially since COVID-19 shutdowns, when workers stopped coming to the office and crime reportedly increased.
In August 2023, the loan backing NEMA was sent to special servicing, according to Trepp.
Wells Fargo, the trustee for the loan, filed suit against an affiliate of Crescent Heights last January in an attempt to move NEMA into a receiver’s control. After the suit was filed, the developer agreed to a framework for a loan modification, according to the San Francisco Chronicle.
Working through problems
NEMA’s loan will now move back to the master servicer, according to the San Francisco Business Times.
While there are high-profile examples of buildings being foreclosed upon around the country, a number of apartment executives contend that many lenders would prefer to leave apartment ownership and management to specialists.
“For the most part, the banks don’t want the apartments back,” said Tony Julianelle, CEO of Atlas Real Estate.
With that stance, lenders are more likely to work with troubled borrowers instead of foreclosing on them, according to some observers.
“We’ve definitely been seeing lenders who would rather kick the can down the road, give it some time, and see if interest rates can come down a little bit so they can work with that sponsor,” said Jamison Manwaring, the CEO and co-founder of Phoenix-based real estate crowdfunding company Neighborhood Ventures.
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