SF’s biggest residential landlord Veritas Investments reportedly has $1 billion in delinquent loans that the company is trying to sell off, and could lose about a third of its properties across town.
We hate to see misfortune befall any business in San Francisco. Well, except for maybe on certain occasions, when the misfortune is befalling a company whose profitability depends on evicting rent-controlled tenants while racking up record numbers of code violations. We’re referring to Veritas Investments, who apparently have $1 billion in delinquent loans, according to a Thursday report in the Chronicle. That follows a January report in the Chronicle that Veritas had defaulted on a $448 million loan, and the company could end up losing up to a third of its inventory in the city over this accumulated debt.
In real estate and banking industry lingo, these defaulted loans are referred to as “nonperforming” loans, and a third-party brokerage called Eastdil Secured is trying to sell off these loans. The Chronicle obtained the marketing materials Eastdil is using to market these loans, and they use corporate marketing-speak that would make Kendall Roy proud.
The brochures call these loans “an irreplaceable aggregation of high-quality assets at a highly opportune time in the San Francisco market” and “an exceptional opportunity to achieve immediate scale with tremendous downside risk protection and a compelling growth trajectory,” per the Chronicle.
But the San Francisco Business Times summarizes in plain English what this means for Veritas. “The latest move appears to indicate that the lenders would prefer to sell the loans to another entity that would likely foreclose and take ownership of the properties,” according to the Business Times.
There are two portfolios of loans Veritas is trying to unload. The first is a collection of 75 buildings with 45 commercial spaces (generally ground-floor retail on apartment buildings) that has defaulted to the tune of $802 million. The second consists of 20 buildings and defaulted in January on $138 million.
There may be more to the strategic story here, when it comes to these properties. Veritas said in a statement to the Chronicle that they are “continuing to work with our partners and lenders toward a resolution on a portfolio owned by institutional investors,” and that “one of the parties in the lending and ownership structure has taken another step in the special-servicing process previously reported, and the loan-note may be sold to other parties, or may continue to involve Veritas.”
You may recall that Veritas tenants formed a union and some even went on a rent strike, alleging a pattern of illegal evictions and unaddressed code violations. One such code violation, according to Housing Rights Committee of SF organizer Brad Hirn, is a Mission District building that hasn’t yet had its required soft-story retrofit — something the city required all buildings to complete by 2021 out of earthquake safety concerns.
Hirn told the Chronicle, "The tenants have been told that Veritas isn’t doing the soft-story work because they are in debt."
Image: Veritas via Facebook