Goldman Sachs and Ballast ready to surrender SF apartments to lender

Joint venture defaults on $688M in loans tied to 82 multifamily properties

Goldman Sachs and Ballast to Give SF Apartments to Lender
Goldman Sachs' David Solomon and Ballast Investments' Greg MacDonald with 1935 Franklin Street (Getty, Ballast Investments, Google Maps)

Goldman Sachs and Ballast Investments are poised to surrender 82 apartment buildings in San Francisco to their lenders after defaulting on loans totalling $687.5 million.

The New York- and locally based investors are expected to give three portfolios containing around 1,200 apartments to lender RBC Real Estate Capital in a deed-in-lieu of foreclosure transaction, the San Francisco Business Times reported, citing an unidentified source.

The surrender could happen by next month. RBC seeks an operator to manage the buildings, suggesting it wants to keep them. RBC is the parent corporation for Royal Bank of Canada.

Goldman and Ballast bought the three multifamily portfolios between 2017 and 2020 for about $704.5 million.

Between 2020 and 2021, RBC loaned Goldman Sachs and Ballast $687.5 million backed by the three portfolios, which include about 1,200 apartments in 82 buildings that mirror the description of those expected to be handed to the lender, according to the newspaper.

RBC’s pending portfolio takeover comes a year after Goldman and Ballast defaulted on the mortgage debt, two unidentified sources told the Business Times. It wasn’t clear what might have prompted the default.

While Ballast had skirted its financial obligations to RBC, it teamed up with New York-based Brookfield Properties on one of the largest apartment acquisitions in the city.

In January, Ballast and Brookfield bought $915 million in troubled mortgages tied to 2,165 apartments owned by Veritas in San Francisco, making them one of the biggest landlords in the city. The $615 million purchase allowed them to foreclose on 76 apartment buildings.

Sign Up for the undefined Newsletter

At the same time, Goldman and Ballast had sidestepped mortgage payments for 82 apartment buildings. 

Local market conditions could have prompted the value of the apartments to fall below the value of the debt originated by RBC — which would have stripped the equity in the portfolios, an unidentified source familiar with the city’s multifamily landscape told the Business Times.

That, in turn, may have prompted Goldman and Ballast to decide to abandon their investment, the source said.

Goldman and RBC declined to comment to the Business Times, while Ballast didn’t respond to a request for comment.

The pending deed-in-lieu transaction between Goldman, Ballast and RBC would mark the latest pile of apartment properties in San Francisco to be turned over because of loan trouble.

Last summer, San Francisco’s Mosser Companies defaulted on an $88 million loan linked to 459 apartments, according to the San Francisco Chronicle. In February, Mosser’s lender was seeking to sell the troubled loan.

Goldman and Ballast now own 106 apartment properties in San Francisco, according to a Business Times analysis, including the 82 that would go back to RBC. Together, they spent $1.1 billion between 2017 and 2020 acquiring the 100 buildings, which include about 2,100 units.

— Dana Bartholomew

Read more