Mid-Market tower faces default on $384M mortgage
The owner of one of San Francisco’s biggest apartment towers, the 754-unit NEMA property, could default on its mortgage as residents and businesses have dwindled in the Mid-Market area.
The tower at 8 10th St., which is next to the headquarters of X, formerly Twitter, is at risk of “imminent default” on its $384 million mortgage, according to a report by real estate data firm Trepp. Miami-based developer Crescent Heights owns the property, which it opened in 2013.
The loan has been transferred to a special servicer, a step typically taken when a default may occur. Crescent Heights told the servicer that cash flow can no longer cover the monthly debt payments, according to Trepp.
The tower was 91% occupied as of 2022, but its current occupancy rate is unclear. Crescent Heights didn’t immediately respond to a request for comment.
Numerous other San Francisco landlords have struggled with mortgage payments amid a sluggish pandemic recovery. Some have stopped payments and surrendered their properties, including at Westfield San Francisco Centre and the Parc 55 and Hilton Union Square hotels.
NEMA sits within the MidMarket and Civic Center area, which has grappled with high crime, homelessness and the departure of tech companies such as Uber and Reddit, which have moved elsewhere in the city. Many government employees are also working remotely at least part time.
San Francisco Business Times first reported news of NEMA’s potential default.
Crescent Heights has city approval for an even larger housing project, with 1,012 units at nearby South Van Ness Avenue, but construction is not expected to start soon. The nearby Hayes Point project at 30 South Van Ness Ave. recently suspended construction.
The foundation for NEMA was excavated in 2007, but construction was put on hold after fallout from the Great Recession. The property was then purchased by Crescent Heights, which broke ground in April 2011, just a few months after Twitter signed a lease next door.
The combination of Twitter’s lease and Crescent Heights’ bullish investment at 10th and Market became an icebreaker for other developers in the neighborhood, including Emerald Fund, which ended up building 1,000 housing units at 100 Van Ness, 150 Van Ness, and 101 Polk St.
“It was the most important project in the neighborhood at the time,” said Oz Erickson, chairman of Emerald Fund. “It was the catalyst for everything that followed.”
Erickson said it has been a struggle to attract tenants to the neighborhood, which has been plagued by open-air drug dealing, homeless encampments and property crime. His portfolio was losing money during the pandemic and only became recently profitable.
“The single biggest issue is the street conditions,” said Erickson. “There has to be some humane solution, sufficient shelter and something that discourages misbehavior. It cannot continue the way it is.”