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According to Zillow, rent in SF is about flat over the past year and a half, so it's not like all SF real estate across the board is getting twice as cheap. I

by lacker 3y ago

According to Zillow, rent in SF is about flat over the past year and a half, so it's not like all SF real estate across the board is getting twice as cheap. I kinda like the NEMA building itself, but the location near Civic Center is right in the middle of the fentanylpocalypse. Of all the places to lose value, this one doesn't surprise me much.

potatopatch 3y ago
Interest rates have doubled in the last 2 years, so rents being flat roughly corresponds to asking price of about half..
- bequanna 3y ago
  I don’t follow. There isn’t a perfect relationship between cap rates and interest rates, especially during this cycle cap rates haven’t fallen as quickly as expected.
  - potatopatch 3y ago
    > NEMA’s debt-service coverage ratio, which measures the ability of a property’s cash flow to pay its debt, has been below 1 since 2020, a troubling sign for the ability of the developer to control the building. The cap calculation on the property has also been fixed by cutting the price in half, but more importantly a new commercial owner would at least be able to service a loan based on the new value.. While the cap rate could be such that expectations are insufficient for debt service, I think that means there are no realistic buyers.
tempsy 3y ago
It's not that rents are declining, it's that interest rates keep going up.
olliej 3y ago
Why do you need new buildings? This article is literally about the value of a building declining. The problem is that there are large numbers of dwellings that are empty, but the property owners don't want to rent them out in the vague hope that in the future they'll be able to charge much more. So you get high rents and homelessness (that's your fentanylpocalypse that you've decided is the city's fault and not the predictable consequence of cost driven homelessness) while also having large numbers of unoccupied apartments. All because a bunch of investors are hoping that by restricting the supply they can push rent prices up.

by lacker 3y ago

potatopatch 3y ago

Interest rates have doubled in the last 2 years, so rents being flat roughly corresponds to asking price of about half..

bequanna 3y ago
I don’t follow. There isn’t a perfect relationship between cap rates and interest rates, especially during this cycle cap rates haven’t fallen as quickly as expected.
- potatopatch 3y ago
  > NEMA’s debt-service coverage ratio, which measures the ability of a property’s cash flow to pay its debt, has been below 1 since 2020, a troubling sign for the ability of the developer to control the building. The cap calculation on the property has also been fixed by cutting the price in half, but more importantly a new commercial owner would at least be able to service a loan based on the new value.. While the cap rate could be such that expectations are insufficient for debt service, I think that means there are no realistic buyers.

tempsy 3y ago

It's not that rents are declining, it's that interest rates keep going up.

olliej 3y ago

Why do you need new buildings? This article is literally about the value of a building declining. The problem is that there are large numbers of dwellings that are empty, but the property owners don't want to rent them out in the vague hope that in the future they'll be able to charge much more. So you get high rents and homelessness (that's your fentanylpocalypse that you've decided is the city's fault and not the predictable consequence of cost driven homelessness) while also having large numbers of unoccupied apartments. All because a bunch of investors are hoping that by restricting the supply they can push rent prices up.