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Downtown San Francisco Luxury Apartment Tower Loses Half Its Value

sfstandard.com

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Re: Downtown San Francisco Luxury Apartment Tower Loses Half Its Value

#11

Post by JumpCrisscross »

adamredwoods wrote: post #8
iancmceachern wrote: post #6

Check out this building in SOMA, it was finished, sat empty waiting for permits for 2 years because the City sucks, and during that time the condo market crashed and so now the builder had to hand it back to the lender. Full brand new condo building one block from Oracle Park with like 24 luxury condos in it for 16 mil now: https://sfstandard.com/2023/08/16/brand-new-san-francisco-co...

By now I would think most builders can expect 1-2 years for obtaining permits. Not ideal, but it's similar in other large metros.

> By now I would think most builders can expect 1-2 years for obtaining permits

It takes 6 to 12 months in New York [1]. In the meantime, 90-day temporary COIs are issued.

Permitting hell is a California specialty.

[1] https://propertyclub.nyc/article/certificate-of-occupancy-ny...

Re: Downtown San Francisco Luxury Apartment Tower Loses Half Its Value

#12

Post by kelseyfrog »

uoaei wrote: post #3

Lost valuation , which is a distinct concept from value.

Please. If we accept the validity of use-value separate from exchange-value there is an entire dialectical chain of consequences we have to contend with. It's much easier to conclude that its value is equivalent to its price.

Re: Downtown San Francisco Luxury Apartment Tower Loses Half Its Value

#13

Post by potatopatch »

lacker wrote: post #10

According to Zillow, rent in SF is about flat over the past year and a half, so it's not like all SF real estate across the board is getting twice as cheap. I kinda like the NEMA building itself, but the location near Civic Center is right in the middle of the fentanylpocalypse. Of all the places to lose value, this one doesn't surprise me much.

Interest rates have doubled in the last 2 years, so rents being flat roughly corresponds to asking price of about half..

Re: Downtown San Francisco Luxury Apartment Tower Loses Half Its Value

#14

Post by anm89 »

tempsy wrote: post #7
johnloeber wrote: post #4

Earlier quoted context omitted.

Correct. NEMA was always kind of ill-conceived.

Current vacancy rate is still less than 10%, so unsure what makes it ill-conceived. There is/was a lack of amenity-rich rentals targeted to young professional types in SF like you’d see in NYC and it fills a certain niche. Main issue is rental market in SF is still soft so they can’t charge what they did pre-pandemic, and the location doesn’t help.

"so unsure what makes it ill-conceived"

The headline of the article is that it has lost 50% of it's value. During that same multi year period we have had well over 10% inflation.

So Maybe that part. Yeah I'm gonna go with that part.

Or maybe the investors just hate money and were going for -60% ROI. Who knows.

Re: Downtown San Francisco Luxury Apartment Tower Loses Half Its Value

#16

Post by anm89 »

1-6 wrote: post #9

When property like this goes underwater, it starts the clock for how long people can wait things out while staying solvent. The exponential rise in property prices have helped people stay calm but I think there’s a lot more pain ahead.

good to see a single person in this thread understanding the problem in a sea of the willfully ignorant

Re: Downtown San Francisco Luxury Apartment Tower Loses Half Its Value

#17

Post by bequanna »

potatopatch wrote: post #13
lacker wrote: post #10

According to Zillow, rent in SF is about flat over the past year and a half, so it's not like all SF real estate across the board is getting twice as cheap. I kinda like the NEMA building itself, but the location near Civic Center is right in the middle of the fentanylpocalypse. Of all the places to lose value, this one doesn't surprise me much.

Interest rates have doubled in the last 2 years, so rents being flat roughly corresponds to asking price of about half..

I don’t follow.

There isn’t a perfect relationship between cap rates and interest rates, especially during this cycle cap rates haven’t fallen as quickly as expected.

Re: Downtown San Francisco Luxury Apartment Tower Loses Half Its Value

#19

Post by potatopatch »

bequanna wrote: post #17
potatopatch wrote: post #13

Earlier quoted context omitted.

Interest rates have doubled in the last 2 years, so rents being flat roughly corresponds to asking price of about half..

I don’t follow. There isn’t a perfect relationship between cap rates and interest rates, especially during this cycle cap rates haven’t fallen as quickly as expected.

> 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.

The cap calculation on the property has also been fixed by cutting the price in half, but more importantly a new commercial owner would at least be able to service a loan based on the new value.. While the cap rate could be such that expectations are insufficient for debt service, I think that means there are no realistic buyers.

Re: Downtown San Francisco Luxury Apartment Tower Loses Half Its Value

#20

Post by tempsy »

anm89 wrote: post #14
tempsy wrote: post #7

Earlier quoted context omitted.

Current vacancy rate is still less than 10%, so unsure what makes it ill-conceived. There is/was a lack of amenity-rich rentals targeted to young professional types in SF like you’d see in NYC and it fills a certain niche. Main issue is rental market in SF is still soft so they can’t charge what they did pre-pandemic, and the location doesn’t help.

"so unsure what makes it ill-conceived" The headline of the article is that it has lost 50% of it's value. During that same multi year period we have had well over 10% inflation. So Maybe that part. Yeah I'm gonna go with that part. Or maybe the investors just hate money and were going for -60% ROI. Who knows.

This is a really uncalled for response. The original comment pointed to the ostentatiousness of a luxury rental building, as if there is no place for it in SF.

It lost value because of a global pandemic years after it launched that has caused rents to fall, but has still managed to keep vacancy rates below 10%. Obviously it could not have planned for something completely outside of its control.

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