Dive Brief:
- A $384 million loan backed by NEMA San Francisco, a 754-unit residential tower in San Francisco next to the headquarters of social media giant X (formerly known as Twitter), has been sent to special servicing, according to a report from real estate data firm Trepp.
- The property — developed, owned and operated by Miami-based real estate firm Crescent Heights — began struggling financially around the time of the COVID-19 shutdowns, according to Trepp. The loan’s debt service coverage ratio level has posted below 1.0x since 2020, and its net cash flow has come in below 1.0x since late July.
- The loan faces imminent default, according to Trepp, and the borrower has stated in writing that it can no longer cover the monthly debt service.
Dive Insight:
In 2022, the NEMA San Francisco loan posted a DSCR of 0.71x and a 91% occupancy rate, according to Trepp. Both of these numbers rose slightly in Q1 2023.
Originally constructed in 2013, NEMA San Francisco is one of a series of luxury urban apartment towers operated by Crescent Heights, with sister properties in Boston, Miami and Chicago. The company also owns a number of other multifamily high-rises in San Francisco, including Jasper in Rincon Hill. The firm did not respond to Multifamily Dive’s request for comment.
The NEMA building, located in San Francisco’s Mid-Market neighborhood, stands 37 stories tall with 9,416 square feet of retail space and 30,000 square feet of indoor and outdoor amenities.
In addition to X, NEMA San Francisco is also within a short distance of the offices of payment software firm Square, audiovisual tech firm Dolby Labs and Uber. Rents for available units start at $2,918, according to the property’s website.
The ongoing impact of the COVID-19 pandemic has radically changed San Francisco’s office and tech employment culture. In particular, the shift to working from home has made proximity to workplaces less important.
Zeroing in on NEMA San Francisco’s local tech employers, Square and Dolby Labs have implemented a full-time remote-work policy, while Uber is on a hybrid schedule. X implemented a return-to-office mandate shortly after Elon Musk acquired the company in November 2022.
The city’s office vacancy rate stands at 31.6%, according to CBRE, and weekday ridership on the Bay Area Rapid Transit System is down by more than half from pre-COVID averages.
A number of large tech employers have either downsized or announced plans to vacate their San Francisco office space. Block, parent company of Square, will not be renewing its lease near NEMA San Francisco, and the social media platform Yammer, a one-time neighbor, was discontinued by parent company Microsoft earlier this year.
In July, X came under fire from residents of neighboring buildings for its new rooftop sign, which flashed bright strobing lights directly into their windows. The sign was removed shortly afterward as it had been installed without a permit.
