Kevin V. Nguyen

In Quentin Tarantino’s “Pulp Fiction,” two characters, faced with cleaning an impossible crime scene, are forced to phone a fixer known as “<a href="https://www.youtube.com/watch?v=ZN12-hJI7ws">The Wolf</a>.”

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<p>In Quentin Tarantino’s “Pulp Fiction,” two characters, faced with cleaning an impossible crime scene, are forced to phone a fixer known as “<a href="https://www.youtube.com/watch?v=ZN12-hJI7ws">The Wolf</a>.”</p>

Similarly, when disasters strike in the world of business, the courts call on their own version. Michele Vives is one of those people, and she has inherited what is arguably San Francisco’s biggest real estate mess: Parkmerced, the 152-acre community in <a href="https://sfstandard.com/2024/09/11/southwest-san-francisco-tale-of-two-cities/">the city’s southwest corner</a>, with capacity for more than 9,000 residents.&nbsp;

In the city&#8217;s southwest corner, real estate is booming and busting at once

<p>Similarly, when disasters strike in the world of business, the courts call on their own version. Michele Vives is one of those people, and she has inherited what is arguably San Francisco’s biggest real estate mess: Parkmerced, the 152-acre community in <a href="https://sfstandard.com/2024/09/11/southwest-san-francisco-tale-of-two-cities/">the city’s southwest corner</a>, with capacity for more than 9,000 residents.&nbsp;</p>

In March, the president of Douglas Wilson Companies, a firm specializing in navigating chaotic business situations, took control of the city’s largest residential complex after its owner, Maximus Real Estate Partners, <a href="https://sfstandard.com/2025/04/18/parkmerced-billion-dollar-housing-project-timeline/">defaulted on $1.8 billion in loans</a> and left the property to languish.&nbsp;

Parkmerced: How a long-promised billion-dollar housing project fell apart

<p>In March, the president of Douglas Wilson Companies, a firm specializing in navigating chaotic business situations, took control of the city’s largest residential complex after its owner, Maximus Real Estate Partners, <a href="https://sfstandard.com/2025/04/18/parkmerced-billion-dollar-housing-project-timeline/">defaulted on $1.8 billion in loans</a> and left the property to languish.&nbsp;</p>

Vives and her colleagues are a part of a niche group of professional problem-solvers in hot demand as the real estate industry <a href="https://sfstandard.com/2025/03/05/paramount-group-san-francisco-big-debts-come-due/">churns through record levels of delinquent debt</a> stemming from the pandemic.&nbsp;

A huge real estate investor declared another SF building worthless. That may be good news

<p>Vives and her colleagues are a part of a niche group of professional problem-solvers in hot demand as the real estate industry <a href="https://sfstandard.com/2025/03/05/paramount-group-san-francisco-big-debts-come-due/">churns through record levels of delinquent debt</a> stemming from the pandemic.&nbsp;</p>

Known as receivers, individuals like Vives parachute in as neutral third parties to take possession of distressed properties and stabilize them so lenders or creditors can recoup as much value as possible. In addition to real estate, Vives’ team was chosen in 2022 to conduct a forensic analysis of a <a href="https://www.newyorker.com/magazine/2024/06/03/master-of-make-believe">$650 million Hollywood Ponzi scheme</a> in an effort to reclaim funds for fraud victims.&nbsp;&nbsp;

<p>Known as receivers, individuals like Vives parachute in as neutral third parties to take possession of distressed properties and stabilize them so lenders or creditors can recoup as much value as possible. In addition to real estate, Vives’ team was chosen in 2022 to conduct a forensic analysis of a <a href="https://www.newyorker.com/magazine/2024/06/03/master-of-make-believe">$650 million Hollywood Ponzi scheme</a> in an effort to reclaim funds for fraud victims.&nbsp;&nbsp;</p>

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Parkmerced housing is seen from a tower on Thursday, June 26.

Vives said her priorities at Parkmerced are to bring the World War II-era complex up to code and attract tenants through capital improvement projects and addressing quality-of-life complaints. The first order of business was replacing all water heaters and boilers in the complex’s 11 apartment towers.&nbsp;

<p>Vives said her priorities at Parkmerced are to bring the World War II-era complex up to code and attract tenants through capital improvement projects and addressing quality-of-life complaints. The first order of business was replacing all water heaters and boilers in the complex’s 11 apartment towers.&nbsp;</p>

“We knew it was going to be bad, but the level of deferred maintenance we inherited, quite frankly, was shocking,” Vives said. Since getting the Parkmerced keys in March, she’s flown to San Francisco nearly every week from Southern California to oversee the turnaround, walking cadres of architects, engineers, and contractors through the property.&nbsp;

<p>“We knew it was going to be bad, but the level of deferred maintenance we inherited, quite frankly, was shocking,” Vives said. Since getting the Parkmerced keys in March, she’s flown to San Francisco nearly every week from Southern California to oversee the turnaround, walking cadres of architects, engineers, and contractors through the property.&nbsp;</p>

Maximus did not respond to a request for comment.&nbsp;

<p>Maximus did not respond to a request for comment.&nbsp;</p>

Water damage has been a killer. The towers at Parkmerced were constructed of concrete, so the exterior paint was the only defense against the elements. Eighty years later, those facades are either chipping off or bubbling up with water, leaving the interiors vulnerable to dry rot.&nbsp;

<p>Water damage has been a killer. The towers at Parkmerced were constructed of concrete, so the exterior paint was the only defense against the elements. Eighty years later, those facades are either chipping off or bubbling up with water, leaving the interiors vulnerable to dry rot.&nbsp;</p>

DWC was approached regarding the project to review their capabilities and resources available to step in. Thereafter, it was selected and appointed in March.

<p>DWC was approached regarding the project to review their capabilities and resources available to step in. Thereafter, it was selected and appointed in March.</p>

A Standard reporter tours a Parkmerced townhouse with Douglas Wilson Companies President Michelle Vives on Thursday, June 26.

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In recent years, Maximus presided over <a href="https://www.sfchronicle.com/bayarea/article/parkmerced-apartments-problems-19423636.php">a litany of property and personal-safety issues,</a> and Parkmerced’s occupancy rate plummeted to less than 70%; it is now at 80%.

<p>In recent years, Maximus presided over <a href="https://www.sfchronicle.com/bayarea/article/parkmerced-apartments-problems-19423636.php">a litany of property and personal-safety issues,</a> and Parkmerced’s occupancy rate plummeted to less than 70%; it is now at 80%.</p>

One way DWC aims to win back residents’ confidence — and get that number north of 90% — is to hire more than 70 property managers from Brick + Timber, <a href="https://sfstandard.com/2024/01/05/brookfield-ballast-residential-landlord-in-sf-apartment-veritas/">an affiliate of Ballast Investments</a>, who will live on-site so that issues are identified faster. Another operational tweak is buying spare elevator parts in bulk so technicians don’t have to wait for products to arrive in order to make repairs.

This real estate company dumped its downtown San Francisco mall. Now it&#8217;s gobbling up apartments

<p>One way DWC aims to win back residents’ confidence — and get that number north of 90% — is to hire more than 70 property managers from Brick + Timber, <a href="https://sfstandard.com/2024/01/05/brookfield-ballast-residential-landlord-in-sf-apartment-veritas/">an affiliate of Ballast Investments</a>, who will live on-site so that issues are identified faster. Another operational tweak is buying spare elevator parts in bulk so technicians don’t have to wait for products to arrive in order to make repairs.</p>

“We just need to start doing stuff, period,” Vives said. “There’s a bunch of low-hanging [fruit] that we can deal with today that will immediately make people’s lives better.”&nbsp;

<p>“We just need to start doing stuff, period,” Vives said. “There’s a bunch of low-hanging [fruit] that we can deal with today that will immediately make people’s lives better.”&nbsp;</p>

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To pay for improvements, receivers like DWC are granted access to a limited cash reserve set aside by the lender exclusively for maintaining a property. Any positive cash flow DWC can drum up will be routed back into improvements. In total, Vives said, the receiver plans to invest more than $70 million in Parkmerced.

<p>To pay for improvements, receivers like DWC are granted access to a limited cash reserve set aside by the lender exclusively for maintaining a property. Any positive cash flow DWC can drum up will be routed back into improvements. In total, Vives said, the receiver plans to invest more than $70 million in Parkmerced.</p>

“We are at a pivotal moment with Parkmerced to steer the ship in the right direction,” said Supervisor Myrna Melgar, whose staff has fielded the brunt of resident complaints in recent years. “I am relieved that the court-assigned receiver recognizes the needs of our existing tenants and is willing to invest in improving the property.”

<p>“We are at a pivotal moment with Parkmerced to steer the ship in the right direction,” said Supervisor Myrna Melgar, whose staff has fielded the brunt of resident complaints in recent years. “I am relieved that the court-assigned receiver recognizes the needs of our existing tenants and is willing to invest in improving the property.”</p>

Maximus, which is led by New York developer Robert Rosania, acquired control of Parkmerced 20 years ago. After nearly defaulting on the original mortgage, the group <a href="https://sfplanning.org/project/parkmerced#about">entitled a redevelopment plan</a> that proposed replacing 1,500 rent-controlled townhomes with 7,200 new units over a span of 20 to 30 years, as well as public infrastructure enhancements such as realigning the Muni M line.&nbsp;

<p>Maximus, which is led by New York developer Robert Rosania, acquired control of Parkmerced 20 years ago. After nearly defaulting on the original mortgage, the group <a href="https://sfplanning.org/project/parkmerced#about">entitled a redevelopment plan</a> that proposed replacing 1,500 rent-controlled townhomes with 7,200 new units over a span of 20 to 30 years, as well as public infrastructure enhancements such as realigning the Muni M line.&nbsp;</p>

A Parkmerced map hangs inside a Parkmerced tower on Thursday, June 26.

Couches sit in the living room of a model Parkmerced tower unit on Thursday, June 26.

But 14 years since those city approvals, the project has yet to break ground. Additionally, there are residents who have failed to pay rent since state lawmakers put a pandemic-era moratorium, since lifted, on evictions. Vives estimated the amount of defaulted rent at nearly $8 million.&nbsp;

<p>But 14 years since those city approvals, the project has yet to break ground. Additionally, there are residents who have failed to pay rent since state lawmakers put a pandemic-era moratorium, since lifted, on evictions. Vives estimated the amount of defaulted rent at nearly $8 million.&nbsp;</p>

“When [Rosania] thinks he’s about to tear buildings down, he’s probably thinking, why spend on them?” she said.&nbsp;

<p>“When [Rosania] thinks he’s about to tear buildings down, he’s probably thinking, why spend on them?” she said.&nbsp;</p>

Vives said DWC hopes to renovate more than 400 units in order to attract residents. A one-bedroom apartment at Parkmerced is larger than the city’s average, at around 900 square feet; a two-bedroom townhome averages 1,100 square feet.&nbsp;

<p>Vives said DWC hopes to renovate more than 400 units in order to attract residents. A one-bedroom apartment at Parkmerced is larger than the city’s average, at around 900 square feet; a two-bedroom townhome averages 1,100 square feet.&nbsp;</p>

The receiver is also hoping to reopen the complex’s Montessori school, which closed a year and a half ago.&nbsp;

<p>The receiver is also hoping to reopen the complex’s Montessori school, which closed a year and a half ago.&nbsp;</p>

But not everything can be fixed by the receiver. The playgrounds, for example, won’t be replaced because of liability concerns, and the sidewalks, which are undergoing accessibility renovations, must be handled by the city.&nbsp;

<p>But not everything can be fixed by the receiver. The playgrounds, for example, won’t be replaced because of liability concerns, and the sidewalks, which are undergoing accessibility renovations, must be handled by the city.&nbsp;</p>

Vives said that while Parkmerced is not the most complex receivership she has handled, it’s the largest.&nbsp;

<p>Vives said that while Parkmerced is not the most complex receivership she has handled, it’s the largest.&nbsp;</p>

“We understand that real estate tends to work in cycles,” she said. “What do you do when you can’t build new buildings? You find problems to solve. There’s always a business for that.”&nbsp;

<p>“We understand that real estate tends to work in cycles,” she said. “What do you do when you can’t build new buildings? You find problems to solve. There’s always a business for that.”&nbsp;</p>

San Francisco’s largest housing complex was left to rot. Her job is to fix it up

Frank Zhou

Kevin Truong

City officials have pitched students, soccer stadiums and safe streets as possible solutions to <a href="https://sfstandard.com/2023/04/05/downtown-san-francisco-vacancies-hit-record-high-as-city-nears-breaking-point/">a vacancy crisis</a> sweeping downtown San Francisco.

Downtown San Francisco vacancies hit record high as city nears breaking point

<p>City officials have pitched students, soccer stadiums and safe streets as possible solutions to <a href="https://sfstandard.com/2023/04/05/downtown-san-francisco-vacancies-hit-record-high-as-city-nears-breaking-point/">a vacancy crisis</a> sweeping downtown San Francisco.</p>

But in the case of 1155 Market St.—which sits directly across from U.N. Plaza and near City Hall—the city itself is causing woes by planning to pull out of its lease in the building.

<p>But in the case of 1155 Market St.—which sits directly across from U.N. Plaza and near City Hall—the city itself is causing woes by planning to pull out of its lease in the building.</p>

The 11-story building, owned by the nonprofit LightHouse for the Blind and Visually Impaired, was initially leased to the City and County of San Francisco in 1999 as an office space for the San Francisco Public Utilities Commission.

<p>The 11-story building, owned by the nonprofit LightHouse for the Blind and Visually Impaired, was initially leased to the City and County of San Francisco in 1999 as an office space for the San Francisco Public Utilities Commission.</p>

Over the years, it has served as a space for a number of city departments including currently the Office of the Treasurer &amp; Tax Collector, the Mayor’s Office of Disability and the Department of the Environment.

<p>Over the years, it has served as a space for a number of city departments including currently the Office of the Treasurer &amp; Tax Collector, the Mayor’s Office of Disability and the Department of the Environment.</p>

Citing high rents against a rapidly declining real estate market, the Board of Supervisors rejected the option to approve a five-year lease renewal at the property last year.

<p>Citing high rents against a rapidly declining real estate market, the Board of Supervisors rejected the option to approve a five-year lease renewal at the property last year.</p>

Now the building, which also serves as the headquarters for LightHouse for the Blind, has been put into special servicing—a process to determine whether a property holder can pay its debt—because of concerns of a default on a $48 million mortgage scheduled to come due January 2025, according to real estate data company Trepp.

<p>Now the building, which also serves as the headquarters for LightHouse for the Blind, has been put into special servicing—a process to determine whether a property holder can pay its debt—because of concerns of a default on a $48 million mortgage scheduled to come due January 2025, according to real estate data company Trepp.</p>

“Losing the City as a tenant would create a great financial hardship for the Lighthouse for the Blind,” LightHouse CEO Sharon Giovinazzo said in an email to The Standard.

<p>“Losing the City as a tenant would create a great financial hardship for the Lighthouse for the Blind,” LightHouse CEO Sharon Giovinazzo said in an email to The Standard.</p>

Jeff Cretan, a spokesman for the mayor, said the city remains committed to keeping its footprint in downtown or the Market Street area. He positioned the lease rejection as part of a strategy to consolidate office space in fewer buildings and take advantage of the current downturn in the real estate market.

<p>Jeff Cretan, a spokesman for the mayor, said the city remains committed to keeping its footprint in downtown or the Market Street area. He positioned the lease rejection as part of a strategy to consolidate office space in fewer buildings and take advantage of the current downturn in the real estate market.</p>

&#8220;We are being responsible with tax payer funds and looking for the best opportunities to continue to have a strong presence our Downtown and Market Street area,&#8221; Cretan said. &#8220;The isn’t about quitting downtown — it’s about finding a new building.&#8221;

<p>"We are being responsible with tax payer funds and looking for the best opportunities to continue to have a strong presence our Downtown and Market Street area," Cretan said. "The isn’t about quitting downtown — it’s about finding a new building."</p>

<p>&#8220;We are being responsible with tax payer funds and looking for the best opportunities to continue to have a strong presence our Downtown and Market Street area,&#8221; Cretan said. &#8220;The isn’t about quitting downtown — it’s about finding a new building.&#8221;</p>

To work out a deal, the nonprofit said it has made several proposals to renew the lease at lower costs. The city has not responded to the latest proposal from LightHouse, which included an additional discount on rental costs, including two years of free rent, according to Giovinazzo.

<p>To work out a deal, the nonprofit said it has made several proposals to renew the lease at lower costs. The city has not responded to the latest proposal from LightHouse, which included an additional discount on rental costs, including two years of free rent, according to Giovinazzo.</p>

The city is still occupying the space at a holdover rent. Although it has not officially notified LightHouse that it intends to leave, signs are pointing in that direction.

<p>The city is still occupying the space at a holdover rent. Although it has not officially notified LightHouse that it intends to leave, signs are pointing in that direction.</p>

Giovinazzo said the city is likely to “abandon the building that literally sits in the shadows of City Hall.”

<p>Giovinazzo said the city is likely to “abandon the building that literally sits in the shadows of City Hall.”</p>

Initially, the city signed a five-year renewal to extend its tenancy in the property until Jan. 31, 2028. Annual rent for the roughly 103,000 square feet of office space would be around $6.68 million with a 3% increase each year for a total of $35.5 million in rent over five years.

<p>Initially, the city signed a five-year renewal to extend its tenancy in the property until Jan. 31, 2028. Annual rent for the roughly 103,000 square feet of office space would be around $6.68 million with a 3% increase each year for a total of $35.5 million in rent over five years.</p>

However, as city staffers noted in their analysis last year, the proposed costs were higher than appraised fair market rents, which have only continued a downward slide. LightHouse for the Blind purchased the building for $70.2 million in 2015, according to property records.

<p>However, as city staffers noted in their analysis last year, the proposed costs were higher than appraised fair market rents, which have only continued a downward slide. LightHouse for the Blind purchased the building for $70.2 million in 2015, according to property records.</p>

“I think it’s important for the City and County of San Francisco as a very active market participant to send a message that we can talk with our feet,” Supervisor Aaron Peskin said in a committee meeting last year. “I think we should just buckle up, reject it and be ready to put up the dollars to move somewhere else.”

<p>“I think it’s important for the City and County of San Francisco as a very active market participant to send a message that we can talk with our feet,” Supervisor Aaron Peskin said in a committee meeting last year. “I think we should just buckle up, reject it and be ready to put up the dollars to move somewhere else.”</p>

Adding to the challenge for the property owner is the hurdle of leasing a large section of space to tenants in the Mid-Market neighborhood because of the <a href="https://sfstandard.com/2022/10/24/as-twitter-goes-so-goes-a-revival-of-the-neighborhood-it-helped-transform/">well-publicized challenges</a> around street conditions and drug use in the area.

As Twitter goes, so goes a revival of the neighborhood it helped transform

<p>Adding to the challenge for the property owner is the hurdle of leasing a large section of space to tenants in the Mid-Market neighborhood because of the <a href="https://sfstandard.com/2022/10/24/as-twitter-goes-so-goes-a-revival-of-the-neighborhood-it-helped-transform/">well-publicized challenges</a> around street conditions and drug use in the area.</p>

The neighborhood is seeing nearly 40% of its office space available for lease or sublease, according to data from real estate firm Avison Young.

<p>The neighborhood is seeing nearly 40% of its office space available for lease or sublease, according to data from real estate firm Avison Young.</p>

The latest tenant likely to quit its downtown San Francisco lease? The city itself

A decade ago, the real estate firm owned by billionaire Ben Ashkenazy—perhaps best known for <a href="https://www.tmz.com/2016/02/22/drake-bat-mitzvah-hotline-bling/">hiring Drake to perform at his daughter’s bat mitzvah</a>—made a major move into San Francisco’s Union Square.&nbsp;

<p>A decade ago, the real estate firm owned by billionaire Ben Ashkenazy—perhaps best known for <a href="https://www.tmz.com/2016/02/22/drake-bat-mitzvah-hotline-bling/">hiring Drake to perform at his daughter’s bat mitzvah</a>—made a major move into San Francisco’s Union Square.&nbsp;</p>

His company purchased 1 Stockton St., which previously housed San Francisco’s Apple Store, for $42 million. The $3,000 per square foot price set a then-record for properties in the city’s premier shopping district.

<p>His company purchased 1 Stockton St., which previously housed San Francisco’s Apple Store, for $42 million. The $3,000 per square foot price set a then-record for properties in the city’s premier shopping district.</p>

Now, 1 Stockton St. sits conspicuously vacant on a prominent corner after San Francisco’s flagship T-Mobile store closed last May. According to information from real estate data company Trepp, a $66 million loan tied to the building has gone delinquent.

<p>Now, 1 Stockton St. sits conspicuously vacant on a prominent corner after San Francisco’s flagship T-Mobile store closed last May. According to information from real estate data company Trepp, a $66 million loan tied to the building has gone delinquent.</p>

Also in 2013, in partnership with General Growth Properties, Ashkenazy purchased One Union Square for $95.8 million. A $50 million loan connected to that building— which has housed luxury brands like Bulgari, Moncler and Lacoste, as well as a now-defunct WeWork location—is now in special servicing after the borrowers defaulted on the debt.

<p>Also in 2013, in partnership with General Growth Properties, Ashkenazy purchased One Union Square for $95.8 million. A $50 million loan connected to that building— which has housed luxury brands like Bulgari, Moncler and Lacoste, as well as a now-defunct WeWork location—is now in special servicing after the borrowers defaulted on the debt.</p>

A pedestrian walks an empty storefront at 1 Stockton St. in downtown San Francisco on Thursday, Jan. 11, 2024. The building used to be a T-Mobile store which closed down last year. The owners are now defaulting on loan.


<figure class="wp-block-image size-large"><img height="1668" width="2500" src="https://content.sfstandard.com/wp-content/uploads/2024/01/20240111_mortgagescomingdueinsf-25.jpg?w=2500" alt="person walks in front of a building" class="wp-image-239082"/><figcaption class="wp-element-caption">A pedestrian walks past an empty storefront at 1 Stockton St. in Downtown San Francisco on Thursday. The building used to be a T-Mobile store; it closed last year.</figcaption></figure>


<figure class="wp-block-image size-large"><img src="https://content.sfstandard.com/wp-content/uploads/2024/01/20240111_mortgagescomingdueinsf-25.jpg?w=2500" alt="person walks in front of a building" class="wp-image-239082"/><figcaption class="wp-element-caption">A pedestrian walks past an empty storefront at 1 Stockton St. in Downtown San Francisco on Thursday. The building used to be a T-Mobile store; it closed last year.</figcaption></figure>

Ashkenazy Acquisition Corporation did not respond to a request for comment on the properties.&nbsp; But both are examples of a wave of distress cresting in San Francisco’s commercial real estate market. While the real estate market reset is <a href="https://sfstandard.com/2023/12/22/downtown-san-francisco-commecial-real-estate-new-era-2024/">firmly underway</a> in San Francisco, billions of dollars worth of commercial debt are still coming due this year as building owners struggle to refinance loans that were taken out before the pandemic.&nbsp;

The next era of San Francisco commercial real estate will begin in 2024

<p>Ashkenazy Acquisition Corporation did not respond to a request for comment on the properties.&nbsp; But both are examples of a wave of distress cresting in San Francisco’s commercial real estate market. While the real estate market reset is <a href="https://sfstandard.com/2023/12/22/downtown-san-francisco-commecial-real-estate-new-era-2024/">firmly underway</a> in San Francisco, billions of dollars worth of commercial debt are still coming due this year as building owners struggle to refinance loans that were taken out before the pandemic.&nbsp;</p>

There is currently <a href="https://www.ft.com/content/4ed9e5b0-f3de-422a-9a07-a328ebf2340c">$3.5 billion in commercial mortgage-backed security debt</a> in San Francisco that is coming due by the end of this year, according to Securities and Exchange Commission filings gathered by Bloomberg. Importantly, this is just a fraction of the larger commercial mortgage market, as much of the debt is directly held on bank balance sheets.

<p>There is currently <a href="https://www.ft.com/content/4ed9e5b0-f3de-422a-9a07-a328ebf2340c">$3.5 billion in commercial mortgage-backed security debt</a> in San Francisco that is coming due by the end of this year, according to Securities and Exchange Commission filings gathered by Bloomberg. Importantly, this is just a fraction of the larger commercial mortgage market, as much of the debt is directly held on bank balance sheets.</p>

Unlike residential home loans, owners of commercial mortgages pay mostly only interest until near the end of the loan term, when a large payment, usually equal to the original loan amount, comes due.&nbsp;

<p>Unlike residential home loans, owners of commercial mortgages pay mostly only interest until near the end of the loan term, when a large payment, usually equal to the original loan amount, comes due.&nbsp;</p>


<h2 class="wp-block-heading" id="h-getting-to-acceptance">Getting to ‘Acceptance’</h2>


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<h2 class="wp-block-heading" id="h-getting-to-acceptance">Getting to ‘Acceptance’</h2>

While the looming mortgage debt fallout is not expected to be as bad for the overall economy as it was during the Great Recession, experts say the risk of these debts not being settled in time could lead to some developers getting wiped out, more forced sales of buildings and potentially billions in losses for investors.&nbsp;

<p>While the looming mortgage debt fallout is not expected to be as bad for the overall economy as it was during the Great Recession, experts say the risk of these debts not being settled in time could lead to some developers getting wiped out, more forced sales of buildings and potentially billions in losses for investors.&nbsp;</p>

“We’re definitely more in the acceptance phase of it now,” said Kurt Altvater, who heads West Coast commercial mortgage sales at CBRE real estate company. “Things are being informed by actual sales comps—which as painful as that is—is what is needed to move forward.”

<p>“We’re definitely more in the acceptance phase of it now,” said Kurt Altvater, who heads West Coast commercial mortgage sales at CBRE real estate company. “Things are being informed by actual sales comps—which as painful as that is—is what is needed to move forward.”</p>

The buildings that have been trading are being priced as mass reductions, some up to 50% of previous purchase prices. Some owners are willing to walk away entirely from their properties, handing the keys back to their lenders.&nbsp;

<p>The buildings that have been trading are being priced as mass reductions, some up to 50% of previous purchase prices. Some owners are willing to walk away entirely from their properties, handing the keys back to their lenders.&nbsp;</p>

In other cases, like the recent change of ownership at <a href="https://www.bizjournals.com/sanfrancisco/news/2024/01/10/strada-201-spear-kbs.html">201 Spear St.</a> and <a href="https://www.google.com/search?q=Brookfield%E2%80%99s+Veritas+kevin+nguyen&amp;sca_esv=597880846&amp;rlz=1C5GCEM_en&amp;ei=TaGhZe3KG9_9kPIPi56wyAI&amp;ved=0ahUKEwitpaC82NiDAxXfPkQIHQsPDCkQ4dUDCBA&amp;uact=5&amp;oq=Brookfield%E2%80%99s+Veritas+kevin+nguyen&amp;gs_lp=Egxnd3Mtd2l6LXNlcnAiI0Jyb29rZmllbGTigJlzIFZlcml0YXMga2V2aW4gbmd1eWVuMggQABiABBiiBDIIEAAYgAQYogQyCBAAGIAEGKIESJEXUABYAHAAeAGQAQCYAXOgAdcBqgEDMC4yuAEDyAEA-AEB4gMEGAAgQQ&amp;sclient=gws-wiz-serp">Brookfield’s takeover of some 2,100 residential units</a> from Veritas, well-capitalized firms can purchase existing debt at a discount.&nbsp;

<p>In other cases, like the recent change of ownership at <a href="https://www.bizjournals.com/sanfrancisco/news/2024/01/10/strada-201-spear-kbs.html">201 Spear St.</a> and <a href="https://www.google.com/search?q=Brookfield%E2%80%99s+Veritas+kevin+nguyen&amp;sca_esv=597880846&amp;rlz=1C5GCEM_en&amp;ei=TaGhZe3KG9_9kPIPi56wyAI&amp;ved=0ahUKEwitpaC82NiDAxXfPkQIHQsPDCkQ4dUDCBA&amp;uact=5&amp;oq=Brookfield%E2%80%99s+Veritas+kevin+nguyen&amp;gs_lp=Egxnd3Mtd2l6LXNlcnAiI0Jyb29rZmllbGTigJlzIFZlcml0YXMga2V2aW4gbmd1eWVuMggQABiABBiiBDIIEAAYgAQYogQyCBAAGIAEGKIESJEXUABYAHAAeAGQAQCYAXOgAdcBqgEDMC4yuAEDyAEA-AEB4gMEGAAgQQ&amp;sclient=gws-wiz-serp">Brookfield’s takeover of some 2,100 residential units</a> from Veritas, well-capitalized firms can purchase existing debt at a discount.&nbsp;</p>

Distressed owners trying to hold onto their properties are in the midst of some tough conversations with their lenders. The biggest hitch this time around, though, is that <a href="https://sfstandard.com/2023/12/18/san-francisco-office-real-estate-vacancy-salesforce-tower/">office vacancies</a> and <a href="https://sfstandard.com/2024/01/06/2023-san-francisco-bay-area-home-prices-recap/">interest rates are abnormally high</a>, which means the appetite to continue operating those properties has significantly decreased.&nbsp;

More than a third of San Francisco&#8217;s office space is currently vacant

San Francisco home prices have fallen to pre-pandemic levels. Will they drop further in 2024?

<p>Distressed owners trying to hold onto their properties are in the midst of some tough conversations with their lenders. The biggest hitch this time around, though, is that <a href="https://sfstandard.com/2023/12/18/san-francisco-office-real-estate-vacancy-salesforce-tower/">office vacancies</a> and <a href="https://sfstandard.com/2024/01/06/2023-san-francisco-bay-area-home-prices-recap/">interest rates are abnormally high</a>, which means the appetite to continue operating those properties has significantly decreased.&nbsp;</p>

Altvater, who spent years as a banker specializing in commercial real estate loans, also provides advisory services to financial institutions. When navigating these conversations, he said there are two main things to watch for.&nbsp;

<p>Altvater, who spent years as a banker specializing in commercial real estate loans, also provides advisory services to financial institutions. When navigating these conversations, he said there are two main things to watch for.&nbsp;</p>

“It’s going to center on the borrower’s cash flow and the debt service based on where the interest rates are,” Altvater said. Essentially, as long as the borrower’s property is generating enough money to cover the interest payments, then it will generally be an easier conversation.&nbsp;

<p>“It’s going to center on the borrower’s cash flow and the debt service based on where the interest rates are,” Altvater said. Essentially, as long as the borrower’s property is generating enough money to cover the interest payments, then it will generally be an easier conversation.&nbsp;</p>

However, if cash flow doesn’t cover those payments, that will require the lender or investor to cover the remainder out of pocket, in addition to reducing the outstanding loan amount, Altvater explained.&nbsp;

<p>However, if cash flow doesn’t cover those payments, that will require the lender or investor to cover the remainder out of pocket, in addition to reducing the outstanding loan amount, Altvater explained.&nbsp;</p>

One Market Street is seen on Wednesday, April 3, 2019 in San Francisco, Calif. (Photo By Lea Suzuki/The San Francisco Chronicle via Getty Images)


<figure class="wp-block-image size-large is-resized"><img height="1667" width="2500" src="https://content.sfstandard.com/wp-content/uploads/2024/01/gettyimages-1322367535.jpg?w=2500" alt="people walk in front of a building and a bus" class="wp-image-239288" style="width:670px;height:auto"/><figcaption class="wp-element-caption">The 1.6 million-square-foot office complex known as One Market Plaza offers sweeping views of San Francisco&#8217;s waterfront. Its prime location played a major role in its owner&#8217;s ability to get an extension on its mortgage.</figcaption></figure>


<figure class="wp-block-image size-large is-resized"><img src="https://content.sfstandard.com/wp-content/uploads/2024/01/gettyimages-1322367535.jpg?w=2500" alt="people walk in front of a building and a bus" class="wp-image-239288" style="width:670px;height:auto"/><figcaption class="wp-element-caption">The 1.6 million-square-foot office complex known as One Market Plaza offers sweeping views of San Francisco's waterfront. Its prime location played a major role in its owner's ability to get an extension on its mortgage.</figcaption></figure>

<figure class="wp-block-image size-large is-resized"><img src="https://content.sfstandard.com/wp-content/uploads/2024/01/gettyimages-1322367535.jpg?w=2500" alt="people walk in front of a building and a bus" class="wp-image-239288" style="width:670px;height:auto"/><figcaption class="wp-element-caption">The 1.6 million-square-foot office complex known as One Market Plaza offers sweeping views of San Francisco&#8217;s waterfront. Its prime location played a major role in its owner&#8217;s ability to get an extension on its mortgage.</figcaption></figure>

One recent positive example of a successful negotiation between a lender and a property owner was in the case of One Market Plaza.&nbsp;

<p>One recent positive example of a successful negotiation between a lender and a property owner was in the case of One Market Plaza.&nbsp;</p>

The 1.6-million-square-foot office complex, considered a trophy property in a prime location by real estate brokers, received an extension on its $975 million loan set to mature next month.&nbsp;

<p>The 1.6-million-square-foot office complex, considered a trophy property in a prime location by real estate brokers, received an extension on its $975 million loan set to mature next month.&nbsp;</p>

Although the property was on real estate industry watchlists, it also had points in its favor, including a low vacancy rate and top-tier tenants like Google, Autodesk and Visa.

<p>Although the property was on real estate industry watchlists, it also had points in its favor, including a low vacancy rate and top-tier tenants like Google, Autodesk and Visa.</p>


<h2 class="wp-block-heading" id="h-a-year-of-restructuring-nbsp">A Year of Restructuring&nbsp;</h2>


Once a borrower misses or stops making payments, their loan goes into default, which can be the start of a painful foreclosure process that would see the property handed back to the lender, who can then put it up for auction if they do not want to hold onto it.&nbsp;

<p>Once a borrower misses or stops making payments, their loan goes into default, which can be the start of a painful foreclosure process that would see the property handed back to the lender, who can then put it up for auction if they do not want to hold onto it.&nbsp;</p>

A notable example is Brookfield Properties and Westfield America&#8217;s decision to <a href="https://sfstandard.com/2024/01/05/brookfield-ballast-residential-landlord-in-sf-apartment-veritas/">give up the San Francisco Centre mall</a>. Shortly after, the courts appointed Trident Pacific Real Estate Group <a href="https://sfstandard.com/2023/10/10/downtown-san-francisco-centre-receiver/">to manage the property</a> after the lenders, Wilmington Trust and Wells Fargo, sued Westfield for violating loan terms.&nbsp;

New development could lead to sale of struggling downtown San Francisco mall

<p>A notable example is Brookfield Properties and Westfield America's decision to <a href="https://sfstandard.com/2024/01/05/brookfield-ballast-residential-landlord-in-sf-apartment-veritas/">give up the San Francisco Centre mall</a>. Shortly after, the courts appointed Trident Pacific Real Estate Group <a href="https://sfstandard.com/2023/10/10/downtown-san-francisco-centre-receiver/">to manage the property</a> after the lenders, Wilmington Trust and Wells Fargo, sued Westfield for violating loan terms.&nbsp;</p>

<p>A notable example is Brookfield Properties and Westfield America&#8217;s decision to <a href="https://sfstandard.com/2024/01/05/brookfield-ballast-residential-landlord-in-sf-apartment-veritas/">give up the San Francisco Centre mall</a>. Shortly after, the courts appointed Trident Pacific Real Estate Group <a href="https://sfstandard.com/2023/10/10/downtown-san-francisco-centre-receiver/">to manage the property</a> after the lenders, Wilmington Trust and Wells Fargo, sued Westfield for violating loan terms.&nbsp;</p>

More recently, the Kivelstadt Group, headed by the husband-and-wife pair behind Sonoma’s Kivelstadt Cellars, has reportedly missed more than three months of payments on a $19.6 million loan tied to a Downtown office building they own at 140 Second St., just south of Salesforce Tower.&nbsp;

<p>More recently, the Kivelstadt Group, headed by the husband-and-wife pair behind Sonoma’s Kivelstadt Cellars, has reportedly missed more than three months of payments on a $19.6 million loan tied to a Downtown office building they own at 140 Second St., just south of Salesforce Tower.&nbsp;</p>

The Kivelstadt Group purchased the then-fully leased building for $28.3 million in 2014. By the end of September 2023, the building’s occupancy reportedly dropped to 32%, <a href="https://www.bizjournals.com/sanfrancisco/news/2024/01/10/140-second-loan-deliquency-tkg-kivelstadt-group.html" target="_blank" rel="noreferrer noopener">the San Francisco Business Times</a> reported.

<p>The Kivelstadt Group purchased the then-fully leased building for $28.3 million in 2014. By the end of September 2023, the building’s occupancy reportedly dropped to 32%, <a href="https://www.bizjournals.com/sanfrancisco/news/2024/01/10/140-second-loan-deliquency-tkg-kivelstadt-group.html" target="_blank" rel="noreferrer noopener">the San Francisco Business Times</a> reported.</p>

Altvater said most commercial property owners usually reach a tipping point when the property’s net operating income does not cover the mortgage bill. He added that even though property owners generally have liability limited to a specific property, it can be a bad look for future credit decisions if they just skip out on agreed-upon deals.&nbsp;

<p>Altvater said most commercial property owners usually reach a tipping point when the property’s net operating income does not cover the mortgage bill. He added that even though property owners generally have liability limited to a specific property, it can be a bad look for future credit decisions if they just skip out on agreed-upon deals.&nbsp;</p>

San Francisco has the fourth-highest number of commercial loans—18—up for refinancing this year among major U.S. cities, according to Bloomberg data. Only Manhattan, Houston and Los Angeles have more. Nearby Sunnyvale, home to some of Silicon Valley’s biggest companies, ranks fifth, with an estimated 10 loans coming due.&nbsp;

<p>San Francisco has the fourth-highest number of commercial loans—18—up for refinancing this year among major U.S. cities, according to Bloomberg data. Only Manhattan, Houston and Los Angeles have more. Nearby Sunnyvale, home to some of Silicon Valley’s biggest companies, ranks fifth, with an estimated 10 loans coming due.&nbsp;</p>

“All of real estate has got a problem of refinancing risk,” said Ken Rosen, chairman of the Center for Real Estate and Urban Economics at the University of California Berkeley. “The business of 2024 will be one of restructuring.”&nbsp;

<p>“All of real estate has got a problem of refinancing risk,” said Ken Rosen, chairman of the Center for Real Estate and Urban Economics at the University of California Berkeley. “The business of 2024 will be one of restructuring.”&nbsp;</p>

San Francisco commercial property owners have billions in debt coming due. What’s next?

<a href="https://youtu.be/jjt9Qx9MBPk?si=0sm5uw_XI5S5j9KU&amp;t=23">Stop trying to make “Emporium” happen</a>! A few months after the temporary stewards of San Francisco’s struggling downtown mall attempted to <a href="https://sfstandard.com/2024/02/29/san-francisco-centre-mall-rebrand-emporium/">rename</a> the place, the San Francisco Centre is again the San Francisco Centre this week, they announced.

Mostly vacant downtown San Francisco mall gets a retro rebrand

<p><a href="https://youtu.be/jjt9Qx9MBPk?si=0sm5uw_XI5S5j9KU&amp;t=23">Stop trying to make “Emporium” happen</a>! A few months after the temporary stewards of San Francisco’s struggling downtown mall attempted to <a href="https://sfstandard.com/2024/02/29/san-francisco-centre-mall-rebrand-emporium/">rename</a> the place, the San Francisco Centre is again the San Francisco Centre this week, they announced.</p>

It’s been just over a year since the mall’s previous owners, Unibail-Rodamco-Westfield and Brookfield Properties, <a href="https://sfstandard.com/2023/10/10/downtown-san-francisco-centre-receiver/">defaulted on a $558 million loan</a> and chose to abandon the 800,000 square foot property. Now, it’s headed to a public auction on the steps of the Memorial Court on Van Ness Avenue on Nov. 14.

<p>It’s been just over a year since the mall’s previous owners, Unibail-Rodamco-Westfield and Brookfield Properties, <a href="https://sfstandard.com/2023/10/10/downtown-san-francisco-centre-receiver/">defaulted on a $558 million loan</a> and chose to abandon the 800,000 square foot property. Now, it’s headed to a public auction on the steps of the Memorial Court on Van Ness Avenue on Nov. 14.</p>

Technically, the property will change hands that day to the highest bidder. And it’s true that anyone could go up and put in a winning offer for the mall. But don’t expect a dramatic tussle between real estate interests looking to buy a slice of San Francisco, says Joel Zeldin, an attorney at law firm Shartsis Friese specializing in sophisticated business litigation.

<p>Technically, the property will change hands that day to the highest bidder. And it’s true that anyone could go up and put in a winning offer for the mall. But don’t expect a dramatic tussle between real estate interests looking to buy a slice of San Francisco, says Joel Zeldin, an attorney at law firm Shartsis Friese specializing in sophisticated business litigation.</p>

The Market Street entrance at San Francisco Centre on Thursday, Oct. 24, 2024. The mall, which has been under receivership, is up for auction next month.


<figure class="wp-block-image size-large"><img height="1667" width="2500" src="https://content.sfstandard.com/wp-content/uploads/2024/10/20241027-potentialmallbuyers-es-25.jpg?w=2500" alt="The image shows the exterior of a building with the name &quot;San Francisco Centre&quot; beneath a circular architectural feature on a tiled wall." class="wp-image-325120"/><figcaption class="wp-element-caption">The San Francisco Centre Mall, which has been under receivership, will be put up for auction next month.</figcaption></figure>


<figure class="wp-block-image size-large"><img src="https://content.sfstandard.com/wp-content/uploads/2024/10/20241027-potentialmallbuyers-es-25.jpg?w=2500" alt="The image shows the exterior of a building with the name &quot;San Francisco Centre&quot; beneath a circular architectural feature on a tiled wall." class="wp-image-325120"/><figcaption class="wp-element-caption">The San Francisco Centre Mall, which has been under receivership, will be put up for auction next month.</figcaption></figure>

San Francisco’s largest housing complex was left to rot. Her job is to fix it up

The latest tenant likely to quit its downtown San Francisco lease? The city itself

San Francisco commercial property owners have billions in debt coming due. What’s next?

Who wants to own a dead mall? The San Francisco Centre heads to auction

Real estate made this prominent San Francisco family rich. Now, it’s tearing them apart

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San Francisco’s largest housing complex was left to rot. Her job is to fix it up

The latest tenant likely to quit its downtown San Francisco lease? The city itself

San Francisco commercial property owners have billions in debt coming due. What’s next?

Who wants to own a dead mall? The San Francisco Centre heads to auction

Real estate made this prominent San Francisco family rich. Now, it’s tearing them apart