Loan Modification Keeps NEMA San Francisco in Owner's Hands

The owner of a high-profile luxury apartment complex in San Francisco has avoided a foreclosure sale of the 754-unit property by renegotiating loan terms with the lender.

Crescent Heights will remain the owner of NEMA San Francisco, located across the street from X Corp.’s San Francisco headquarters, according to a report in the San Francisco Chronicle.

NEMA (the acronym stands for New Market), which opened its futuristic-looking luxury complex in 2013, has been an icon in the neighborhood. The complex pioneered a luxury residence with hospitality-style amenities and became a magnet for tech companies including Uber and Twitter, the latter now known as X.

Crescent Heights began missing payments on its $384M loan on the property in the fall after the debt package, which originated in 2019, went into special servicing.

On January 2, Wells Fargo Bank, acting as the trustee for the loan on behalf of the lenders, filed a lawsuit in San Francisco Superior Court notifying the court that the lenders planned to begin a non-judicial foreclosure proceeding for the property.

A non-judicial foreclosure is much faster that the judicial process, allowing for a quick sale of the property. The non-judicial process does not require the parties to go to court.

Wells Fargo asked the court last week to appoint Chris Neilson, managing partner of San Diego-based property management firm Trigild, as a receiver to “manage, operate and preserve” the NEMA complex.

In a deal announced on Tuesday, Crescent Heights said the lenders had agreed to modify the loan agreement, ensuring that the company will retain control of NEMA. The loan modifications were not disclosed, but Crescent Heights indicated that the firm will infuse more capital into the loan, the Chronicle reported.

The company’s statement referred to the receivership filing as a “servicing procedure.”

“Crescent Heights is pleased to confirm it has agreed in principle to a loan modification with its lenders, and that this filing is a servicing procedure while loan documentation is finalized,” a Crescent Heights spokesperson said, in a statement on Tuesday.

“We are grateful to our lenders and the servicer for working with us to put in place a long-term plan that ensures NEMA San Francisco will continue to maintain its position as one of the city’s preeminent residential rental buildings,” the statement continued.

According to Morningstar Credit, the loan on NEMA became delinquent when Crescent Heights was unable to pay operating expenses after payment of debt service. A 2018 appraisal valued NEMA at $543M, but the most recent appraisal, in September, cut that value in half.

The building is 100% occupied, Crescent Heights said.