Default Imminent on $384M Loan for NEMA San Francisco Tower
The loan, which is backed by 754-unit luxury multifamily, transfers to special service.
A $384M loan backed by a luxury apartment tower next door to the San Francisco headquarters of the company formerly known as Twitter has been sent to special servicing.
Crescent Heights is facing imminent monetary default on the debt package for its 754-unit apartment tower at 8 10th Street, known as NEMA San Francisco, Trepp reported.
The loan for the 37-story tower has been posting a debt service coverage ratio (DSCR) level below 1 since 2020, indicating a negative cash flow. Servicer comments indicate the DSCR on the loan languished at 0.6 at the end of 2021, increasing slightly to 0.71 at the end of 2022.
The luxury apartment complex has been struggling to fill vacancies. Miami-based Crescent Heights has “stated in writing the property’s cash flow no longer can cover the monthly debt service,” according to Trepp’s report, which said the servicer is holding more than $23M in collateral reserves on the property.
In the summer of 2021, Crescent Heights sought the city’s approval to designate about 200 units in the tower as corporate rentals in an effort to fill vacancies during the pandemic, according to a report in the San Francisco Business Times.
More recently Crescent Heights has been giving one-month free rent concessions to attract tenants to the building, which is located in San Francisco’s mid-Market neighborhood.
A futuristic building designed by Handel Architects, NEMA initially was a magnet for tech giants who located nearby, including Uber, Zendesk and the company now known as X. NEMA was unable to regain its footing as remote work took hold at tech giants, pushing San Francisco’s office vacancy rate over 30%.
Development has stalled on two other mixed-projects in the vicinity of NEMA. Earlier this month, Australia-based developer Lendlease confirmed that its pause on construction at Hayes Point, a $1.2B, 47-story mixed-use tower in located at 30 Van Ness Avenue, will continue.
In an earnings call, Lendlease CEO Tony Lombardo told investors that the Hayes Point project—the company’s largest US investment—would remain on hold, a decision that Lendlease originally announced in March.
The project, which originally was supposed to be delivered in 2026, was planned to encompass 300 condos and more than 300K SF of office space.
Another stalled project is One Oak, a 40-story residential tower planned a block away from NEMA at 1500 Market Street. According to the Business Times report, the developer surrendered the project to the lender without having broken ground.