By Jon Peterson
Denver-based Apartment Investment and Management Company has approved a $275 million mezzanine loan for the Parkmerced Apartments complex in San Francisco, according to information provided by the public real estate investment trust.
The loan provided by AIMCO is a five-year mortgage written at an annual rate of 10 percent to the partnership owing Parkmerced; the ownership venture is led by San Francisco-based Maximus Real Estate Partners. A company representative for the firm did not return several phone calls seeking comment for this story.
The mortgage provided by AIMCO also includes and option for the partnership to extend it for a second five-year term and is secured by a pledge of the ownership. AIMCO also has an option to acquire a 30 percent interest in the partnership for 10 years at an exercise price of $1 million, increased by 30 percent of future capital spending to progress development and redevelopment of the property, according to the information the trust provided.
AIMCO funded the loan by borrowing on its bank line. The public REIT expects the bank borrowing will be repaid by the second quarter of this year from $275 million in proceeds from sales of apartment communities in California. This will allow AIMCO to maintain a roughly 40 percent allocation of the REIT’s capital to the state and make the transaction with Parkmerced leverage neutral.
Situated on 150 acres on the west side of San Francisco, Parkmerced is the largest urban multifamily development in North America, projecting to deliver 8,9000 units, according to the project’s web site. This includes the obligation to protect 3,221 rent-controlled apartment homes and the vested right to develop 5,679 new market rate units and more than 300,000 square feet for neighborhood commercial uses.
Over the next 20 years, Parkmerced is looking to transform into a vibrant neighborhood with eco-friendly, low- and mid-rise buildings designed by leading architects. The vision for Parkmerced received the prestigious American Institute of Architecture (AIA) Urban Design award in 2013 for its innovative, long-term development design to create the largest carbon net-neutral neighborhood, the company stated.
The existing apartment homes at Parkmerced are subject to the City of San Francisco rent control, limiting annual rental rate increases to 60 percent of the consumer price index for continuing occupancy. Upon vacancy, the rents are allowed to reset to market level rates.