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June 08, 2018  

Ivanhoe Seeking Big Loan on SF Apartments

A partnership between Ivanhoe Cambridge and Veritas Investments wants to line up a $600 million mortgage on a San Francisco multi-family portfolio.

The loan would be backed by 66 properties with a combined 1,512 units scattered across the city. The preference is for floating-rate debt with a term of 5-7 years. Eastdil Secured is showing the assignment to a variety of lenders.

Some $450 million of the loan would be funded initially. The remaining $150 million would be provided as the partnership achieves certain benchmarks in its strategy for improving the performance of the properties.

The properties are mostly smaller buildings, with an average of 23 units. In-place rents average roughly 50% below market rates, so the Ivanhoe team will look to boost revenue by raising rents as leases roll over. The properties include 54,000 square feet of mostly street-level retail space, with similarly below-market rents. The ownership also can add as many as 77 units to the properties, which would further increase cashflows in the second year of the loan term.

The pitch to lenders is that the portfolio’s potential for generating higher income offers insulation against any slowdown in the market that could drive down commercial-property values.

San Francisco-based Veritas is one of the largest owners of apartment properties in the city. Ivanhoe, a real estate investment unit of Canadian pension Caisse de Depot et Placement du Quebec, began investing alongside Veritas several years ago. The collateral for the proposed mortgage represents a sizable portion, if not all, of the multi-family buildings the two jointly own in San Francisco.