Finance  ·  CMBS

Valuation of San Francisco Luxury Apartment Building Dips 49% From 2018: Trepp


Ongoing distress within San Francisco’s commercial real estate market amid record-high office vacancies has permeated into the Bay Area city’s multifamily sector.

A 754-unit luxury apartment complex owned by Crescent Heights in San Francisco’s Mid-Market neighborhood has lost nearly half its value since the deal priced in 2019, according to a Trepp alert issued Wednesday. 

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The developer’s NEMA San Francisco backs a $384 million commercial mortgage-backed securities (CMBS) loan, and the value of the collateral has fallen 48.7 percent to $279 million compared with $543.6 million in 2018, Trepp data shows. 

The debt package, which was part of a single-asset NCMS 2019-NEMA deal originated by Natixis, transferred to special servicer KeyBank National Association on Aug. 1 due to an “impending default,” according to Harry Blanchard, managing director and head of data and analytics at CRED iQ. Blanchard said the special servicer commentary noted that the property’s cash flow was “insufficient to cover operating expenses and capital expenditures,” when factoring in debt-service requirements.

The Trepp report said that the special servicer is currently holding more than $23 million in collateral reserves on the property. The loan posted a debt service coverage ratio of 0.71 times in 2022 when occupancy was 91 percent, with both numbers inching up slightly during the 2023 first quarter, according to Trepp. 

In addition to the NCMS 2019-NEMA deal, the property also is tied to a $40 million CMBS loan that makes up 4.07 percent of a $1 billion BBCMS 2019-C5 deal, and a $35 million slice that comprises 3.85 percent of BBCMS 2019-C3. A special servicer commentary from August said the borrower was “pursuing a dual-track resolution strategy” involving both initiating foreclosure proceedings and appointing a receiver, according to CRED iQ. 

Officials at Crescent Heights declined to comment. 

The sharp drop in value of a large San Francisco multifamily asset comes the same month that a CBRE report showed that vacant office space in the city’s downtown area reached 34 percent, the highest level since the brokerage firm tracked data going back to 2010. On a positive note, though, the CBRE third-quarter analysis showed the total square footage of tenants in the market reached 5.2 million square feet, its highest level since the first quarter of 2020. 

San Francisco’s CRE struggles have also been felt in retail with a Whole Foods near the NEMA property closing just 13 months after opening, with store officials citing “worker safety.”  

Unibail-Rodamco-Westfield also announced on June 12 that it was handing back the keys to its downtown Westfield San Francisco Centre, citing a 43 percent dip in foot traffic last year compared with 2019. Westfield was financed by a $558 million CMBS loan originating from Deutsche Bank

Andrew Coen can be reached at