Dive Brief:

• New York City-based global banking and investment management firm Goldman Sachs and San Francisco-based multifamily owner and operator Ballast Investments handed over 82 apartment buildings with approximately 1,211 units in three portfolios to affiliates of the Royal Bank of Canada on July 17, according to the San Francisco Business Times.
• RBC plans to have San Francisco-based apartment owner and manager Hamilton Zanze operate the three portfolios while they are under the bank’s control. The firm’s management arm, Denver-based Mission Rock Residential, has begun receiving tax statements for the portfolios, according to the San Francisco Business Times.
• Los Angeles-based Wald Realty Advisors was appointed receiver for two of the portfolios on July 11. The San Francisco Business Times said it was not clear whether Wald would work alongside Mission Rock Residential or hand off management of the assets to the firm.

Dive Insight:

RBC originated $687.5 million of loans between 2020 and 2021 for three residential portfolios totaling 82 properties owned by Goldman Sachs and Ballast. The owners spent $704.5 million to build the portfolios between 2017 and 2020.

Goldman Sachs and Ballast Investments had more than $729.8 million in unpaid debt on the 82 properties as of July 17, according to the San Francisco Business Times.

Multifamily Dive reached out to Hamilton Zanze’s representatives, Goldman Sachs and Ballast Investments for comments but didn’t receive a response.

The three Goldman Sachs and Ballast portfolios aren’t the only high-profile San Francisco apartment loans with problems. In April, Parkmerced, a 3,221-unit apartment complex in San Francisco, went into special servicing, according to information shared with Multifamily Dive from data firm Morningstar Credit.

Parkmerced’s debt package included $1.5 billion of securitized debt and $275 million of mezzanine debt. Maximus Real Estate Partners, the San Francisco-based borrower, requested the transfer into special servicing due to the property’s high vacancy rate and a looming loan maturity in December 2024, according to Morningstar.

In late 2022, Veritas began defaulting on $1 billion worth of loans that were backed by more than 2,450 apartments across the city, according to the San Francisco Chronicle. Its lenders sold the loans, allowing buyers to foreclose and take ownership of the properties.

In November 2023, San Francisco-based Prado Group took over loans backed by 20 properties in San Francisco from Veritas, according to the San Francisco Chronicle. In February, New York City-based Brookfield Properties and Ballast Investments acquired notes and then foreclosed on other Veritas buildings, encompassing 2,165 units, according to The Real Deal.

Positive outcome

However, the news hasn’t been all bad for apartment owners in San Francisco.

Earlier this month, Crescent Heights retained control of the 754-unit NEMA San Francisco apartment complex after paying its lenders $10.5 million, according to the San Francisco Business Times. 

The Miami-based developer will retain control of NEMA if it does not default on debt connected to the property, according to a modification agreement in February.

In August 2023, the loan backing NEMA was sent to special servicing, according to Trepp. 

Wells Fargo, the loan trustee, filed suit against an affiliate of Crescent Heights last January in an attempt to move NEMA into a receiver’s control. After the suit was filed, the developer agreed to a framework for a loan modification, according to the San Francisco Chronicle.

While San Francisco may have suffered more than any other metro area in the country after the 2020 COVID-19 shutdowns as workers left the city for more affordable areas, there are signs of an improving rental market.

“In San Francisco, demand feels good right now, and we are seeing some of the best weeks in terms of traffic and application volume,” said Michael Manelis, chief operating officer at Chicago-based Equity Residential, on the REIT’s second-quarter earnings call earlier this week. “We continue to see really positive signs in the downtown submarket. In regards to the quality-of-life issues, property crime is down and the city's nightlife scene is thriving.”

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