Dive Brief:
- Parkmerced, a 3,221-unit apartment complex in San Francisco, is in special servicing, according to information shared with Multifamily Dive from data firm Morningstar Credit.
- Parkmerced’s debt package includes $1.5 billion of securitized debt and $275 million of mezzanine debt. Maximus Real Estate Partners, the San Francisco-based borrower, requested the transfer into special servicing due to the property's high vacancy rate and a looming loan maturity in December 2024, according to Morningstar.
- In September 2023, Parkmerced’s occupancy rate was 83%, and its debt service coverage ratio was below break-even at 0.47x. The loan had been current, but its status is now less than one month delinquent, according to information shared with Multifamily Dive from data firm Trepp.
Dive Insight:
The 3 million-square-foot complex was built in 1944 and renovated in 2009. The asset was appraised at $2.11 billion at securitization in 2019, according to Trepp.
Monthly rents at the property range from $2,500 to $7,276 for one- to three-bedroom units, which are 691 to 1,519 square feet, according to Apartments.com. The property sits on 152 acres of outdoor space and parkland and is adjacent to beaches, coastal trails, lakes and golf courses.
Despite that advantageous setting, the property still struggled with many of the same issues facing other multifamily buildings in San Francisco.
In late 2022, San Francisco-based Veritas began defaulting on $1 billion worth of loans backed by more than 2,450 apartments across the city. Its lenders sold the loans, allowing buyers to foreclose and take ownership of the properties. In March, 23 of those buildings holding 762 rent-controlled apartments hit the market, according to the San Francisco Chronicle.
Last July, a $384 million loan backed by NEMA San Francisco, a 754-unit residential tower in San Francisco next to the headquarters of social media giant X (formerly known as Twitter), was sent to special servicing, according to Trepp.
A rebound?
San Francisco may have suffered more than any other metro area in the country after the 2020 COVID-19 shutdowns as workers left the city for more affordable areas. In 2021, occupancy fell to as low as 92.2% in the city, according to software and data provider RealPage.
However, there are signs of improvement. In January, apartment occupancy climbed 40 basis points year-over-year to land at 95.4%, according to RealPage. The only cities with better performance were New York City; Newark, New Jersey; Anaheim, California; and Milwaukee, Wisconsin.
While demand wasn’t as strong as other markets or even enough to match San Francisco’s pre-2020 performance, supply was relatively muted in the market, with only 1,687 deliveries in 2023, according to RealPage.
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