RBC Capital is expected to take over a portfolio of approximately 1,200 apartment units owned by Ballast Investments and Goldman Sachs & Co. as early as June. San Francisco-based Ballast and Goldman Sachs defaulted on $687.5M in multifamily loans a year ago, according to the San Francisco Business Times.
In all, 82 properties across San Francisco could be surrendered to lenders. According to The Real Deal, Ballast and Goldman Sachs may be giving back the units to RBC Capital in a deed-in-lieu of foreclosure as early as June.
Published reports said that RBC, the parent corporation for Royal Bank of Canada, seeks an operator to manage the buildings. David Putro, a senior vice president of Morningstar Credit Analytics based in San Francisco, said the tenants will likely not have to worry about the loan defaults. “It’s in the lender’s best interest to keep the buildings occupied and services uninterrupted,” he told Bisnow.
Ballast and Goldman acquired the properties for $704.5M from 2017 to 2020.
In recent weeks, local multifamily developers and analysts have warned of a “wave” of multifamily loans defaulting in the Bay Area. “There’s a lot of chatter in the market that multifamily may start to become a bigger issue nationally,” Putro said. Ballast partnered with Brookfield Properties in January to purchase $915M in distressed loans tied to 2,165 apartment units in the Bay Area owned by Veritas. Ballast and Brookfield are the largest multifamily landlord in San Francisco as a result of the deal.
In spite of the potential wave of multifamily loan defaults predicted by some San Francisco owners and analysts, multifamily market conditions strengthened in the first quarter. Apartment vacancy declined slightly to 5.9% from the previous quarter, marking the city’s lowest vacancy rate since Q1 2020. It marks “a continuation of a trend of positive net absorption that has been a characteristic of the market’s slow recovery following the pandemic,” according to an April Q1 NAI NorCal report.
