San Francisco’s Looming Commercial Property Debt Crisis

The commercial real estate market faces a critical juncture with billions in mortgage-backed security debt coming due in 2024

San Francisco's Looming Commercial Property Debt Crisis

The commercial real estate market faces a critical juncture with billions in mortgage-backed security debt coming due in 2024

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Good morning. San Francisco's commercial real estate market faces a critical juncture with billions in mortgage-backed security debt coming due in 2024. Plus, the latest MBA survey foresees a positive shift in commercial and multifamily mortgage markets.

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Addressing San Francisco's Looming Commercial Property Debt Crisis

San Francisco's commercial real estate is in a bind with looming billions in debt for 2024, highlighted by properties like 1 Stockton St. and One Union Square facing loan defaults and delinquencies.

Market reset: The commercial mortgage market in San Francisco is under strain as building owners grapple with refinancing loans taken out before the pandemic. The pressure is mounting, with $3.5 billion in debt maturing by year-end and a high proportion of interest-only payments. This financial challenge reflects a broader market reset, affecting even the prime properties in the city.

Trending: There is an emerging trend of distressed sales and significant price reductions in the commercial property market. Some owners are opting to surrender their properties to lenders, while others are engaging in tough negotiations to retain them. The high office vacancies and interest rates are complicating these discussions as properties struggle to generate sufficient cash flow to cover interest payments.

Zoom in: Positive cases like One Market Plaza, which secured an extension on its $975 million loan, show that successful negotiations are possible for properties with low vacancy rates and solid tenants. However, the overall trend points towards a year of restructuring as property owners and lenders navigate a challenging financial landscape.


Zoom out: San Francisco ranks fourth among U.S. cities in the number of commercial loans up for refinancing this year, indicating a widespread challenge. Experts like Ken Rosen from the University of California Berkeley suggest that 2024 will be a year marked by significant restructuring in the real estate sector, reflecting the broader difficulties faced in refinancing commercial properties.


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✍️ Editor’s Picks

  • Economic optimism: Brian Coulton of Fitch Ratings, along with other experts, now sees a lower than 50% chance of a recession in 2024, citing economic resilience.

  • Insurance costs: CRE professionals are grappling with higher interest rates and soaring insurance costs, up 73% since 2017, complicating the maintenance of a reasonable NOI.

  • Back on the block: Blackstone aims to sell about $1.8 billion in CRE loans acquired from Signature Bank's asset auction just a month after securing a 20% stake in a $17 billion loan pool.

  • Luxury development: Related Companies advances its plan for a 26-story, 140-unit luxury condo tower on Temple Israel's waterfront site in West Palm Beach.

  • Startup struggles: Adam Neumann's apartment startup Flow, yet to officially launch, is already experiencing cash flow issues with its initial acquisitions, seeking new investors for resolution.

  • Hotel deal: Noble Investment Group secures its largest fund yet, raising $1 billion to invest in distressed hotels across the Sun Belt, with a diverse investor base including pensions and endowments.

  • Shifting focus: BlackRock, the global investment giant, has acquired Global Infrastructure Partners (GIP) for $12.5 billion in a striking shift towards infrastructure.


  • Declining sales: 2022 saw a 17% drop in apartment sales, and MSCI anticipates even lower figures for 2023, following consistent monthly decreases in transaction volume.

  • Rent trends: National average multifamily rent dipped to $1,709 in December, with YoY rent growth stable at 0.3%, marking the lowest increase since 2010, excluding the pandemic slowdown.

  • Market shift: Once thriving with high sales and rent growth, the DFW multifamily sector has experienced a notable turnaround from its peak occupancy of over 97% in early 2022.

  • Cooling down: NYC's residential rental sector is seeing more inventory and a higher vacancy rate in Manhattan, reaching 3.4% last month, the highest since July 2021.


  • Strategic launch: Atlas Holdings forms Atlas Properties, a new industrial real estate platform, debuting with a $300 million acquisition of a 23-property portfolio.

  • Market resilience: Despite high interest rates and reduced construction, Greater Cincinnati's industrial real estate remains a strong opportunity area after a significant boom.

  • Beefing up: Texas Teachers enhances its industrial portfolio with new commitments totaling $350 million, including $250 million for the BDP Investment Vehicles Master Commitment.


Despite recent challenges, the Mortgage Bankers Association (MBA) forecasts a potential stabilization in the commercial and multifamily mortgage sectors for 2024. Over 90% of survey respondents perceive the market as unsettled, citing concerns about capitalization rates, baseline interest rates, and their volatility as key factors affecting the financing landscape.

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