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$1.8B Loan On Parkmerced Property In San Francisco Enters Special Servicing

$1.8B Loan On Parkmerced Property In San Francisco Enters Special Servicing
Parkmerced's $1.8B loan has gone to special servicing.

The $1.8B loan on one of the largest multifamily complexes in San Francisco has moved to special servicing, according to a new report by Trepp.

The 3,221-unit Parkmerced hasn’t generated the cash flow to service its debt since the conditions facilitated by the pandemic put its ownership, Maximus Real Estate Partners, at risk of defaulting on its massive loan.

The mortgage is due in December with a 2.725% coupon, a rate that would be “impossible to replicate today,” Trepp reported.

Bisnow reached out to Maximus, but the firm didn't respond to calls or emails by press time.

At the time of the loan origination in 2019, rents at Parkmerced were nearly $2,900 per month. According to Trepp, the rent-controlled property commands rents of roughly $2,700 per month on average, with an occupancy rate of 83%.

Maximus initially planned to use the senior portion of the note, provided by Barclays and Citibank, to expand and renovate the 75-year-old property into a master-planned community of nearly 10,000 homes, 80K SF of office space, 230K SF of retail, a new elementary school and 64K SF of amenities.

The expansion plans had been in the works since at least 2011 when Maximus first started filing entitlements for the land, but it never materialized. 

Denver-based Aimco provided the last tranche of financing, a $275M mezzanine loan. 

Developed on the site of a former military base, Parkmerced is across the street from San Francisco State University in the Lake Merced district, near the Pacific Ocean.

The San Francisco Chronicle reported multifamily property owners such as Veritas and Mosser are walking away from numerous high-profile San Francisco properties due to defaults or foreclosures.

At the end of 2023, San Francisco led the nation in outstanding apartment distress with more than $1.5B, more than all five New York City boroughs' combined $1.3B in multifamily-related distress. 

Distress for all major property types in San Francisco represented 10% of the last five years of sales activity at the end of the year, the highest proportion after Manhattan's 14% and Cleveland's 13%, according to MSCI.