As the value of homes and commercial properties go down in San Fran, so does the property tax revenue. In this case, half of the property tax needs to be cut—with NO replacement for the lost funds.
“NEMA, the glass-covered tower at 8 10th St., has seen its value drop from $543.6 million in 2018 to $279 million. Trepp notes that this decline means the value sits well below the loan balance, making the debt more expensive than the property itself.
The collapse of San Fran has quickened.
Downtown San Francisco Luxury Apartment Tower Loses Half Its Value
Written by Kevin Truong, SF Standard, 10/19/23 https://sfstandard.com/2023/10/19/downtown-san-francisco-luxury-apartment-loses-half-its-value/?utm_campaign=SF%20Standard%20Daily&utm_medium=email&utm_source=SF%20Standard&utm_content=top_stories
NEMA, the glass-covered tower at 8 10th St., has seen its value drop from $543.6 million in 2018 to $279 million. | Source:Google Streetview
The value of one of Downtown San Francisco’s largest luxury apartment buildings has been cut nearly in half, according to commercial real estate data provider Trepp.
NEMA, the glass-covered tower at 8 10th St., has seen its value drop from $543.6 million in 2018 to $279 million. Trepp notes that this decline means the value sits well below the loan balance, making the debt more expensive than the property itself.
The Real Deal first reported the news.
The 754-unit apartment complex on the corner of 10th and Market streets opened in 2013 as a part of the Mid-Market revival kicked off in part by the city’s tech boom and the so-called Twitter tax break. Amenities at the building across the street from Twitter headquarters include multiple public plazas, a fitness center and a 60-foot lap pool.
Then came the pandemic, which hollowed out the neighborhood of major tech tenants like Uber, Block and DoorDash. Concerns about public safety and street conditions led to the closure of the nearby Whole Foods less than a year after opening.
NEMA’s debt-service coverage ratio, which measures the ability of a property’s cash flow to pay its debt, has been below 1 since 2020, a troubling sign for the ability of the developer to control the building.
According to Trepp data, occupancy in the beginning of 2023 was 92%, compared to 90% in 2021 and 72% in 2020. However, revenue has seen a steep decline during the pandemic, from $36.8 million in 2019 to $29.2 million in 2022.
Loan data from Trepp said the main loan on the property is delinquent and that the deal has been transferred to special servicing, which are enlisted to avoid a loan default.
The cause for the transfer into special servicing is “imminent monetary default,” according to Trepp loan documents.
Crescent Heights did not respond to a request for comment.
The property has a bit of a troubled development history. Crescent Heights purchased the site in 2006 and originally intended to build for-sale condos, but switched up their business plan in the wake of the Great Recession.
The difficult economic environment meant that the project didn’t break ground until 2011.
The current challenges in commercial real estate are squeezing many property owners between lower revenues and higher debt payments.
The underwater mortgages are leading an increasing number of property owners to stop debt payments, giving buildings back to their lenders, including Park Hotels and Resorts and a brand-new condo complex in Mission Bay.
The decreased value of homes and Commerical property does not affect the Property tax equation due to Prop 13. While the occupancy in 2023 went up from 90% to 92% the owners are forced to charge lesser rents per sq foot because of the city environment. Until the City cleans up the homeless problem, the druggies on the street problem and the smash and grab problems, nothing will change. No cash bail just added to the Cities headache.
RE; property in CA. These state mandates to build 80,000 new affordable housing units are forcing counties into a rush to develop and build. While commercial real estate is plummeting.
After counties have had their heydays of buildings strip malls, rancho villas and low-end apartments, we thought that was the end. We all could stop development, and the counties could stop planning and building needed infrastructure for water, sewer, roads.
But now the state has opened the borders of California, opened the jobs, welfare, schools, hospitals, jails to a variety of immigrants who, for the most part, add cheap labor but no tax revenues to state government.
And so the result is a Sacramento forced building spree, to accommodate all these newcomers flooding in from all corners of the world.
And just wait because we have no infrastructure to accommodate all these new houses and apartments. That’s really going to cost: new dams, new sewer plants, new schools, hospitals, government buildings and officials.
We are talking about tax, tax, tax and more tax. And soon, Proposition 13 will be gutted because the state wants all this wealth transfer to go to Sacramento, not sons and daughters of boomers.
Now … if homeowners wanted to open their homes, offices, garages, backyards to the masses flooding into California, that would be just swell. Except these friendly Californians who want open immigration for some reason do not open their own homes. They just don’t.
So the option that Sacramento is excited about is forced development. Who voted for this? Well, it must be the dominant political party.
This state-forced development is in overall conflict with the beliefs and dreams of many Californians. Beliefs such as limited growth, limited ecological footprints, limited pollution and crowding are now totally dumped for mass growth.
The whole idea of setting aside agricultural land from development was to prevent the dreaded urban sprawl from sprawling up from the cities. Yet massive urban sprawl is now the order of things.
Now, due to all the above, all thoughts of saving the environment, ecology, limited growth, the peaceful use and enjoyment of one’s land are out the window.
We counties and cities are now forced by Sacramento to build, or else the state will zone land and have it built for us through a “builder’s remedy” process.
When will people realize we cannot flood in the entire world and expect them all to go to Texas. California now must pay the piper for its feigned largess, and it’s a very expensive song.
Thomas Cole
Montecito. https://www.thomascoleforcongress.com/post/how-open-borders-and-high-immigration-rates-are-affecting-california-s-housing-crisis