Maximus Real Estate Partners is in default on about $1.8 billion in loans tied to San Francisco's largest apartment community, according to a new servicer commentary reported by ratings firm Morningstar.
The 152-acre, 3,200-unit apartment complex known as Park Merced was recently valued at $1.4 billion, about $400 million less than the debt amount and $700 million less than in 2019, according to the real estate services firm.
Maximus refinanced the property in 2019 with $1.5 billion in senior financing from Barclays and Citi (packaged into a commercial mortgage-backed securities transaction) and a $275 million mezzanine loan from Aimco, but it was subsequently sold at a loss.
TRD reported in April that the loan had gone into special administration by SL Green's Green Loan Services, at the request of Maximus in light of a vacancy rate of almost 20 percent and the loan maturing at the end of this year.
The latest servicer comments state that the loans are now in default and that “extensive outstanding APs have been discovered” and that the servicer has begun “progress towards asset protection.”
But Morningstar said the loan payments remain current and Maximus continues to make payments.
Morningstar analyst David Putro said these are advance payments for collateral security and protection, and given recent reports of poor maintenance at the complex, “AP” likely stands for accounts payable.
“I don't know the reasons why the service companies had to make these advance payments, but it's alarming,” he said.
Putro said it was difficult to predict the outcome of the loan given that nothing had been disclosed about discussions between the borrower and the servicing company so far and that Maximus was still on track with its loan payments.
Green Loan Services did not immediately respond to a request for more information about “Broad Open AP.” Maximus did not immediately respond to a request for comment.
A lawsuit filed in April by maintenance company Planned Building Services alleges it is owed $2.9 million by Parkmerced's owners, according to court records. A contract signed in 2016 called for the company to pay just over $185,000 a month for cleaning and maintenance of common areas, including lobbies, fitness centers and other amenities in all 11 buildings.
“PBS was forced to file this lawsuit because Parkmerced failed to make payments despite repeated demands for payment under the terms of the written agreement,” the complaint states. “Parkmerced repeatedly promised to pay when due but failed to follow through on those promises.”
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PBS Vice President John Fahmy said Parkmerced is currently current on all past due bills and continues to provide service to the complex.
“They were honest and paid off the debt in full,” he said. “We're grateful and we're moving forward.”
This story has been updated with new information from PBS.