Loan for 754

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A luxury apartment tower in San Francisco's mid-Market neighborhood has been struggling to fill vacancies in the wake of the pandemic.

This month, a $384 million loan for the property, known as NEMA San Francisco, was sent into special servicing, according to a report by Trepp, which provides data on structured finance and commercial real estate.

The loan for the 37-story tower at 8 10th St. has been in trouble for some time, posting a debt service coverage ratio (DSCR) level below 1 since 2020, which denotes a negative cash flow.

According to Trepp, the special servicer's report for the loan notes that it is facing "imminent default," and that the borrower — Miami-based developer Crescent Heights —has "stated in writing that the property’s cash flow no longer can cover the monthly debt service." Per the report, the servicer is holding more than $23 million in collateral reserves.

It is unclear how many of the apartments at NEMA are currently sitting vacant. Almost two years ago, in the summer of 2021, Crescent Heights sought the city's approval to designate nearly a third of the tower's units — up to 200 — as corporate rentals in an effort to fill vacancies. According to the special servicer's report, Crescent Heights more recently has been giving one-month free rent concessions to lure tenants to the building.

I've reached out to Crescent Heights for comment on next steps for leasing up the building and addressing its outstanding loan payments, and will update this story once I hear back.

When NEMA opened in 2013, it was heralded as the crown jewel of the mid-Market neighborhood, which soon after became home to tech giants such as Uber, Zendesk and Twitter (now X Corp.), which opened its headquarters a block over at 1355 Market St.

The futuristic building, designed by Handel Architects, pioneered a luxury lifestyle in the city's rental market with its amenities and hospitality-style services and in a way symbolized Mid-Market's transformation. It drew a commitment from New York-based celebrity chef Suvir Saran to become its first retail tenant early on, as well as a rush of residential leases within its first year of operation.

But Saran's restaurant never opened, and a decade later, the vision of roughly 1,000 residents that were expected to call NEMA home and help energize the neighborhood never materialized. Meanwhile, tech has largely pulled out of the neighborhood, in large part due to a shift to remote work that was ushered in by the pandemic and has seen office vacancy in the city's downtown surpass 30% this year.

Across the street from NEMA, construction on the only mixed-use tower to break ground in San Francisco in the wake of the pandemic at 30 Van Ness Ave. ground to a halt this week, with the developer of the $1 billion project citing continued uncertainty in the market.

And earlier this year, the developer of One Oak, a 40-story residential tower long planned a block over from NEMA at 1500 Market St., surrendered the stalled project to its lender without having broken ground.