Maximus Real Estate Partners is in default on about $1.8 billion in loans tied to San Francisco’s largest apartment community, according to new servicer commentary reported by ratings agency Morningstar.
The 152-acre, 3,200-unit multifamily complex known as Parkmerced was recently appraised at $1.4 billion, about $400 million less than the amount owed and down $700 million from 2019, the servicer said.
Maximus refinanced the property in 2019 with $1.5 billion in senior financing from Barclays and Citi — packaged into commercial mortgage-backed securities deals — and a $275 million mezzanine loan from Aimco, which has since been sold at a loss.
TRD reported in April that the loans went into special servicing with SL Green’s Green Loan Services. The special servicing came at Maximus’ request, given the nearly 20 percent vacancy rate and the loans’ upcoming maturity at the end of this year.
The most recent servicer comments say that the loans are now in default, noting “discovery of extensive open AP” and that the servicer has begun making “property protective advances.”
However, the loan is still current, according to Morningstar, meaning Maximus is making payments.
Given that these are advances to preserve and protect the collateral, plus recent reporting on deteriorating maintenance conditions at the complex, “AP” likely stands for accounts payable, according to Morningstar analyst David Putro.
“We have no background on why the servicer had to make such advances, but it is cause for alarm,” he said.
Putro said it’s difficult to predict the outcome on the loan, given that there has been no insight into the discussions thus far between the borrower and the servicer and that Maximus is still current on its loan payments.
Green Loan Services did not immediately respond to a request for more information about the “extensive open AP.” Maximus also did not immediately respond to a request for comment.
A lawsuit filed in April by maintenance firm Planned Building Services said it was owed $2.9 million by Parkmerced’s owners, court records show. The contract entered into in 2016 was for a little over $185,000 a month to clean and maintain common areas, including the lobbies of all 11 towers, plus fitness centers and other amenities.
“PBS has repeatedly demanded payment under the terms of the written agreement, but Parkmerced has failed to make payment, forcing PBS to bring this action,” the lawsuit states. “Parkmerced repeatedly promised to pay the sums due only to fail to perform on those promises.”
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According to PBS executive Vice President John Fahmy, Parkmerced is now current on all past due invoices and the company continues to provide services for the complex.
“They were honorable and paid everything fully owed,” he said. “We are grateful and moving forward.”
The story has been updated with new information from PBS.