Ballast Wins Veritas Multifamily Portfolio at Auction

Veritas, the largest residential landlord in San Francisco, has lost more than a quarter of its portfolio to another local firm in an auction of $800M in distressed loans backed by 75 apartment buildings.

San Francisco-based Ballast Investments has purchased the delinquent loans, which are tied to buildings encompassing 2,149 units, in an auction conducted by Eastdil Secured on behalf of lenders who foreclosed on the debt, according to a report in the San Francisco Chronicle. 

In May, Eastdil began marketing delinquent loans divided into two portfolios backed by 95 apartment buildings encompassing 2,452 and 45 ground-floor storefronts, describing them as “trophy buildings in the city’s most coveted neighborhoods.”

Ballast won the auction for the largest portfolio. A second portfolio with $140M in debt backed by 20 San Francisco apartment properties was not part of the bid. The 20 buildings encompass 303 rent-controlled apartments.

In November, Veritas defaulted on a $688M CMBS loan secured by 61 properties in the city. A joint venture of Veritas and hedge fund Baupost Group, based in Boston, failed to repay the loan—a cross-collateralized, SASB package known as the Veritas Multifamily Portfolio Pool—when it matured on Nov. 15.

Baupost sponsored 90% of the non-performing loan and Veritas the other 10%, according to a KBRA report. The two-year floating-rate loan was structured with a $16.6M debt-service reserve, the equivalent of six months of payment.

According to the report, as of November, the reserve account had been depleted. A $30M capital reserve budget that had been earmarked for renovations also had zeroed out, the report said.

The loan was transferred into special servicing and was reported in December as a non-performing matured balloon loan, according to Fitch Ratings. Veritas declined to exercise a one-year extension option on the loan, Fitch said.

Veritas said it remains committed to its portfolio in San Francisco, saying it believes “in the long-term attraction of living in the city and in our character-rich properties.”

Veritas became the largest landlord in San Francisco in 2011 when it bought the Lembi family’s 2,000-unit CitiApartments in a $500M transaction in a venture funded by Baupost.

In October, Veritas made the priciest multifamily acquisition in San Francisco in 2022, a 42-unit Russian Hill property that it bought for more than $33M.