April 13, 2024
Loans

Real estate giant poised to become S.F.’s largest residential landlord


A building at 755 O’Farrell St. in San Francisco is part of a massive portfolio of 62 apartment buildings that has been purchased after landlord Veritas defaulted on $766.8 million in loans.

A building at 755 O’Farrell St. in San Francisco is part of a massive portfolio of 62 apartment buildings that has been purchased after landlord Veritas defaulted on $766.8 million in loans.

Scott Strazzante/The Chronicle

Real estate giant Brookfield has purchased a massive portfolio of loans tied to 76 San Francisco apartment buildings following one of the biggest mortgage defaults of the pandemic.

The Canadian conglomerate bought troubled loans previously valued at $915 million after major landlord Veritas defaulted about a year ago on them, though it wasn’t clear how much Brookfield paid, according to property records filed on Dec. 29.

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Brookfield couldn’t immediately be reached for comment and Veritas declined to comment on the sale. The mortgages were originated by Goldman Sachs, which declined to comment.

The acquisition came a week before a filing that indicated that a public auction for 62 of the properties was set to take place on Jan. 18. It’s unclear whether the auction will still happen. It’s scheduled to take place on Van Ness Avenue outside the gate of the city’s War Memorial and Performing Arts Center, just west of City Hall. Prestige Default Services LLC is handling the auction.

Multiple sources previously told the Chronicle that Brookfield and local landlord Ballast Investments had been selected as the buyers of the portfolio. Ballast’s role in the deal wasn’t immediately clear. San Francisco Business Times first reported the deal’s closing.

The reasoning behind the plans to hold a public auction at the same time that Brookfield was pursuing the mortgage portfolio wasn’t clear.

David Putro, head of commercial real estate analytics at Morningstar Credit, speculated that the public auction could be an alternative if the Brookfield deal hadn’t been consummated.

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“Servicers will typically dual-track resolution strategies, so they’ll make a foreclosure filing … even as they pursue other options,” said Putro, who isn’t involved in the properties.

Putro said there wasn’t any recent data on the apartments, such as their occupancy rate or rents. “There has been a relative dearth of information given the size of this loan and how long it’s been in special servicing. Some of this is likely due to confidentiality, but we usually see a bit more transparency on commercial mortgage-backed security loans, especially if a resolution or sale is imminent,” he said.

Though the residential sector hasn’t seen as much pain as remote work-burdened commercial real estate, Veritas’ struggles underscore San Francisco’s pandemic rental market slump following a decade of booming prices — which coincided with the company’s major growth.

A Veritas spokesperson previously said in November that it “remains one of the most active managers of small unit-count multifamily on the West Coast, and we continue to be a leading firm with many thousands of apartments under management in major West Coast metro areas, even after this portfolio’s ownership is transferred.”

“Despite the current headwinds facing the real estate markets, we remain as committed as ever to San Francisco, to our residents and our properties, and see tremendous opportunities ahead,” the spokesperson said.

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Veritas’ empire had already shrunk: Another developer, Prado Group, bought loans tied to 20 different San Francisco apartment buildings owned by Veritas in September, after Veritas defaulted on $124 million in debt.

Chronicle staff writer Laura Waxmann contributed to this report.

Reach Roland Li: roland.li@sfchronicle.com; Twitter: @rolandlisf



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