Recapitalization Paves Way for Parkmerced’s First Phase
The fully developed Parkmerced will include nearly 10,000 homes, 80,000 square feet of office space, 230,000 square feet of retail, a new elementary school and 64,000 square feet of amenities.
SAN FRANCISCO—Maximus Real Estate Partners was founded in 2012 by Rob Rosania and Seth Mallen. Rosania acquired his interest in the 152-acre Parkmerced in 2005.
Thereafter, he and his local team negotiated a development agreement with the city and began repositioning the property to become a model of sustainable urban living. Rosania and his team secured new entitlements in 2011.
Maximus has now recapitalized and cleared the way for financing Phase 1 of its long-term revitalization project. With a loan package of $1.775 billion from Barclays, Citi and Apartment Investment and Management Company/Aimco, Maximus has successfully refinanced Parkmerced. Maximus previously bought out Fortress Investment Group and refinanced Parkmerced in 2014.
Aimco’s portion was $275 million. It also acquired a 10-year option to acquire a 30% interest in the partnership and in so doing, participate in its substantial development pipeline. The option to acquire a 30% interest in the partnership is for 10 years at an exercise price of $1 million, increased by 30% of future capital spending for development/redevelopment of the property.
This is the first phase of a long-term master plan. The recapitalization enables Maximus to initiate Phase 1of its planned revitalization of Parkmerced (approximately 2,000 new apartments), with the intention of securing construction financing in early 2020 and breaking ground later next year.
With San Francisco’s booming employment market including the nation’s highest year-over-year job growth along with a deepening housing shortage, the new development comes at a critical time.
“We will now be able to build nearly 2,000 new homes in the next few years–a huge delivery of new housing at a time when San Francisco desperately needs it,” Rosania said.
The fully developed property will include nearly 10,000 homes, 80,000 square feet of office space, 230,000 square feet of retail space, a new elementary school and 64,000 square feet of amenities.
Maximus was advised by Pat Hanlon at Ackman Ziff, and Adam Spies and Douglas Harmon of Cushman & Wakefield.
“Of our recent major large-scale residential sales and recapitalizations around the country, Parkmerced is special,” Harmon tells GlobeSt.com. “We have been fortunate to be the advisor on five different sales or recaps of this property over the last 20 years beginning with Leona Helmsley’s sale for $326 million in 1999. Over the years, the valuation of this premier asset has steadily increased and this latest transaction now values the property at $2.1 billion. Our 2015 record sale of Peter Cooper Stuy Town for $5.44 billion and last year’s $905 million sale of Spring Creek Towers/Starrett City were monumental large-scale multifamily transactions, but Parkmerced is the deal that we have transacted multiple times and it will continue to benefit from its location in one of the most sought-after residential markets in the country–the Bay Area in Northern California.”
Parkmerced has a scenic westside location with 152 acres, 3,221 existing apartment homes and the vested right to develop 5,679 market-rate apartment homes. The re-envisioned Parkmerced will feature an updated design, vastly improved mass transportation and an emphasis on sustainability, likely making it the only carbon-neutral neighborhood in the world.
“The recapitalization of San Francisco’s Parkmerced, the largest private residential property in Northern California, will help build 2,000 new homes with the ability to add an additional 4,000 units over time,” Spies tells GlobeSt.com. “This will also allow for ample room to grow the retail offerings, build a school and offer modern amenities at a very important time for the San Francisco housing market.”
San Francisco’s highly educated tech and finance-heavy workforce earns a median income of $130,000 per year, ranking number out of the top 50 US markets. Its multifamily rents have increased at a 4.12% compound annual growth rate during the last 20 years, fifth in the nation. Its median home price is $1.1 million, first in the nation with a home price-to-income ratio of 8.5 to 1.