Brookfield Partners with Ballast to Buy Veritas Portfolio Loans

Canadian real estate giant Brookfield—which earlier this year handed back to lenders the keys for San Francisco’s largest downtown mall—now is making a huge bet on the city’s multifamily sector.

Brookfield is partnering with San Francisco-based Ballast Investments to complete Ballast’s purchase last month of $800M in distressed loans backed by 75 San Francisco apartment buildings that were part of the portfolio of Veritas Investments, the city’s largest residential landlord, according to a report in the San Francisco Chronicle.

The delinquent loans, which are tied to buildings encompassing 2,149 units, were acquired in an auction conducted by Eastdil Secured on behalf of lenders who foreclosed on the debt.

In May, Eastdil began marketing delinquent loans divided into two Veritas 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.

Toronto-based Brookfield owns and manages more than $850B in assets. Last year, the company raised $17B from investors for a real estate fund.

Brookfield’s investment in the Veritas portfolio was greeted as a vote of confidence in San Francisco’s recovery outlook and the indication of a market for distressed properties—as well as a turnaround for Brookfield.

In June, the company’s Brookfield Properties unit and Paris-based Unibail-Rodamco-Westfield stopped making payments on a $558M loan backed by the Westfield San Francisco Centre, a half-empty downtown mall.

The company said the 1.2M SF mall at 865 Market Street near Union Square was transferring to receivership. The Westfield Centre is jointly owned by URW and Brookfield Properties, which acquired a stake through its acquisition of Forest City.

Deutsche Bank originated the loan for the mall in 2016. Midland Loan Services was designated as the special servicer.

Brookfield paused construction last year on the $3.5B Pier 70 mega-project near the neighborhood known as Dogpatch.

Ballast has been building a multifamily portfolio in the Bay Area, with recent deals for apartments on Russian Hill, Nob Hill and in Pacific Heights.