A KBS Realty Advisors fund may call it quits for a 252,600 square foot office building in Downtown San Francisco.

The KBS REIT III fund, tied to the Newport Beach-based investment firm, is poised to surrender the 18-story tower at 201 Spear Street in the Financial District to its lender, the San Francisco Business Times reported, citing a regulatory filing.

The office building, home to such firms as WeWork and Google, faces a financial crisis as its occupancy and value plunge ahead of a debt maturity deadline early next year.

The KBS fund bought the Class-A building in 2013 for $121 million, according to its website.

This year, the fund had non-cash impairment charges of $18.5 million and $45.5 million, and had to “write down the carrying value of 201 Spear St. to its estimated fair value,” according to the filing.

As a result, the 39-year-old office building is now worth “substantially less” than the fund’s outstanding mortgage debt of $125 million.

Given the split between its value and debt within the moribund San Francisco office market, where one in three offices stand empty, the fund anticipates surrendering the building through foreclosure.

“We may determine that it is not in our stockholders’ best interest to make significant paydowns on the loan and invest additional funds into this asset in an effort to refinance and extend the loan,” the fund said in its filing. 

KBS blamed the loss in value on market uncertainty caused by rising interest rates and growing vacancy rates tied to a slow return by workers to offices in San Francisco.

It said the asset’s declining value is also based on “additional projected vacancy due to anticipated tenant turnover and further declining values of comparable sales in the market, all of which impacted ongoing cash flow estimates and leasing projections.”

The demise of 201 Spear Street near the Embarcadero reflects the fall of San Francisco’s once robust office market. 

In 2019, the brown accordion-faced tower with waterfront views was 97 percent leased. 

Last March, its occupancy had dropped to 65 percent — half taken up by New York-based WeWork, now headed toward bankruptcy. Google, a WeWork tenant at the building, is slated to pull out next month, the KBS fund said. Should WeWork leave too, occupancy would drop to 30 percent.

When Marc DeLuca was named CEO of KBS Realty Advisors last year, interest rates were low and insiders were still hopeful workers would go back to the office. Since then the tides have turned. 

“Part of the problem is that nobody knows what a building’s worth right now,” DeLuca told the Real Deal in an interview last spring, after cashing out of the 52-story Union Bank Plaza in Downtown Los Angeles. “The lack of trades is something unprecedented.”

— Dana Bartholomew

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CMK Companies is gearing up for its multifamily project in the South Loop, where apartment buildings continue to sprout up.

The Chicago-based firm, headed by Colin Kihnke, has received a permit to build a 13-story, 149-unit complex with ground floor retail and almost 100 parking spaces at 1723 South Michigan Avenue, Bisnow reported. 

The development will stand next to CMK’s existing apartment high-rise at 1720 South Michigan, which rises 33 stories and contains 498 luxury units. The upcoming project marks the firm’s sixth multifamily development in the South Loop, including three on South Wabash Avenue. CMK remains highly active near the south branch of the Chicago River. 

The 1723 South Michigan development will replace the former C.I.T.Y. Club Gymnastics, which has relocated across the street. Obtaining a building permit was a relatively painless process for CMK, as no zoning changes or other requests were needed. 

It’s unclear if the complex will offer any affordable housing units, but it’s unlikely given the firm’s status as a “boutique luxury” developer. But with other affordable projects on the way in the area — such as Mercy Housing’s two-building complex at the corner of South Wabash and Michigan avenues — Ald. Pat Dowell, whose ward encompasses CMK’s development site, isn’t overly concerned.

“I support diverse housing options for all Income levels throughout the 3rd Ward,” Dowell told the outlet. “We need more affordable housing in the city, and I work to ensure all options are available for people who want to live in the ward.” 

—Quinn Donoghue 

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Former Miami Heat star Udonis Haslem and Magellan Housing plan a 200-unit project with affordable apartments and workforce-priced townhouses for sale in North Miami, The Real Deal has learned.

Miami-based Magellan and Haslem, who retired from professional basketball this year, want to develop Catherine Flon Estates, with one building of 174 apartments and several buildings with 26 townhouses, Nick Inamdar, principal of Magellan, told TRD. 

An entity tied to Magellan bought the 6.3-acre development site on the southeast corner of Northeast 139th Street and Northeast Fourth Avenue for $1.5 million this hmonth, according to records and real estate database Vizzda. The city was the seller. 

Plans for the project are still being finalized, although Inamdar expects the rental building will be eight stories. The number of townhouse buildings isn’t yet known. 

The apartments will target households earning no more than 60 percent of the area median income, which is $74,700 annually. This means that to qualify, the maximum income a one-person household can have is $43,380; $49,560 for a two-person household; and $55,740 for a three-person household, according to the Florida Housing Finance Corporation. 

Monthly rents at Catherine Flon Estates will be $1,161 for one-bedroom units; $1,393 for two-bedroom units; and $1,610 for three-bedroom units, Inamdar said. 

The townhouses will target households earning no more than 120 percent of the AMI, he said. The prices, which will be set based on government guidance for workforce residences, weren’t immediately available. 

Haslem and Magellan’s project has been in the works for about three years. They won a city-issued request for proposals to develop the site. 

The land is a designated brownfield, which means the developers will be focused on an environmental cleanup for about a year, according to Inamdar. Construction is expected to start late next year. 

Haslem and Magellan also plan to apply for 4 percent low-income housing tax credits, Inamdar said. The government program subsidizes 30 percent of a low-income development’s cost, the FHFC’s website says. 

Magellan also scored a $2.3 million loan from Royal American Companies, according to Vizzda. The financing was used for the land purchase, and the balance will be for site preparation, including the environmental remediation, Inamdar said. 

Catherine Flon Estates isn’t the first affordable project by Magellan and Haslem. In Miami’s Wynwood, the pair plan the 12-story Wynwood Works building at 2035-2043 North Miami Avenue with 120 units. The project will target households earning no more than 60 percent of the AMI. 

Even before retiring, the basketballer started Haslem Housing Venture to develop affordable housing in Miami-Dade County. Magellan, whose other principal is Amay Inamdar, has a portfolio of about 17 affordable housing projects with 2,000 units in Florida and Texas, according to its website. 

Developers have increasingly been betting on affordable and workforce housing, both asset classes in high demand. The influx of out-of-staters led to record rent increases that have priced out longtime South Floridians from market-rate apartments. 
In Miami’s Overtown neighborhood, Atlantic Pacific Companies is developing the mixed-use Atlantic Station with 616 apartments, including 360 workforce units, at 152 Northwest Eighth Street.

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Starboard Value owns more than 5% of Bloomin’ Brands.

NexPoint Residential Trust plans to part ways with multifamily holdings in Houston and Dallas, in a move to reshape its portfolio and pay off debt.

The company is selling two apartment complexes: Old Farm Apartments, which has 734 units, at 2500 Old Farm Road; and the 642-unit Silverbrook at 2934 Alouette Drive in Grand Prairie, just southwest of Dallas.

The transactions are expected to net the Dallas-based company between $67 million and $69 million in net proceeds. That works out to about $50,000 per unit, and the sales could close as soon as this winter, according to a news release.

This maneuver comes as the company seeks to recalibrate its market presence, as noted in its second quarter earnings supplement.

The cap rates at which these assets are being divested are below their respective market cap rates, according to the news release.

Old Farm Apartments, built in 1998, and NexPoint bought it in 2016 along with its neighbor, the 190-unit Stone Creek at Old Farm Apartments, for $108 million, or a little over $128,000 per unit. 

The firm also plans to sell the Stone Creek apartments by the end of the year, completely exiting its Houston portfolio.

NexPoint previously sold Houston property Hollister Place, a 260-unit complex off Hollister Street near Fairbanks, in late December, netting $20 million in proceeds, almost $77,000 per unit. 

As the company offloads these properties, it anticipates a significant shift in its financial standing, with plans to extinguish the $57 million balance on its corporate credit facility. 

The sales will further alleviate portfolio-level debt by an estimated $156 million. NexPoint currently holds 40 multifamily properties across the Sun Belt, totaling 15,127 units. 

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The supply of new apartments in King County is down 36% year over year, according to new data.

Amazon has received the same citations for safety violations at facilities in Kent, DuPont and Sumner.

Over 40 U.S. wineries made Wine & Spirits’ annual Top 100 list, including these from Washington.

Providers are boosting tuition as their costs rise and federal aid ends, straining some families’ finances.

A mainstay of British television, he was best known for a long-running BBC program that was called simply “Parkinson.”