Occupancy Plunges to 70% at San Francisco Luxury Apartment Towers across from Twitter Headquarters: a Broad Phenomenon

While landlords are muttering, “And this too shall pass.”

By Wolf Richter for WOLF STREET.

The award-winning luxury-apartment property NEMA San Francisco, with 754 units in four linked towers completed in 2013, on the corner of 10th Street and Market Street (NEw MArket, get it?), has become part of the story of suddenly and deeply plunging occupancy rates as a large number of tenants have packed up and left during the Pandemic.

For the three largest towers, the occupancy rate has plunged to 70% as of September, according to data by Trepp, which tracks commercial mortgage backed securities (CMBS). The occupancy rate of the smallest building as of September is not available. But as of June, it dropped to 80% and may have deteriorated further since then. The four towers are across the street from Twitter’s headquarters, part of which Twitter is now trying to sublease because it won’t need that much space, after its switch to work from home (image via NEMA):

Each of the four towers, ranging from 10 stories to 35 stories, is collateral of a mortgage that total $274 million. The 10-year interest-only mortgages, a fairly typical arrangement, have been securitized into a “private-label” CMBS.

The other day, I noted that the occupancy rate of the iconic wrinkled-appearing “New York by Gehry” tower with 899 apartments in Manhattan had plunged from 98% in 2019 to 74% by September. This plunge in occupancy rate was the reason the $550 million loan, the only asset backing a “private-label” CMBS, had been put on the “servicers watchlist.”

“Private label” means the CMBS are not guaranteed by taxpayers via Ginnie Mae, Fannie Mae, or Freddie Mac that after the Financial Crisis have waltzed energetically into issuing multifamily CMBS and have taken on an ever-larger market share, with the market share of private label CMBS shrinking. And to halt and reverse the meltdown of the CMBS market in March and April, the Fed has bought $9.3 billion of those taxpayer-guaranteed multifamily CMBS within a few weeks, which did the trick.

The taxpayer-guaranteed CMBS that are backed by high-rise apartment properties have the same problems as private label CMBS: plunging occupancy rates in certain markets.

But the taxpayer is for once not on the hook for the NEMA and New York by Gehry loans, and the Fed has not bought them. Investors have to deal with them.

The NEMA property, owned by real estate development company Crescent Heights, includes over 11,000 square feet of rentable retail space, when retail has essentially shut down.

Of the 754 apartments, 664 are market-rent units without restrictions, and 90 are “affordable-rent” units under San Francisco’s Inclusionary Housing Program.

The numerous units advertised as available for rent on NEMA’s website start with tiny studios of 476 square feet and go to a 2-bedroom, 2-bath unit with 1,442 square feet. But it’s going to be tough to fill them. There are estimates that 89,000 people have left San Francisco from March through November 1, according to USPS data. The median asking rent of one-bedroom apartments has plunged by 27% since June 2019. And you guessed it…

“Three months free” translates into an effective rent over 15 months that’s 20% lower than nominal rent. Landlords could cut the asking rent by 20% and forget the “three months free,” but their lenders, seeing documented on paper what this would do to cash flow, would have a cow. Plus there’s the hope that tenants would stick around for longer than 15 months.

The two largest NEMA loans form the only assets in the CMBS issued by Natixis, “NCMS 2019-NEMA” – a single-asset CMBS like the CMBS backed by the New York by Gehry property. And the occupancy rate of the towers that form the collateral for the CMBS was 70% at the end of September.

When Moody’s last rated five tranches of this NEMA CMBS in April 2019, it said that the occupancy rate was 94%. It assigned its highest rating for CMBS, “Aaa (sf),” to the top tranche and gushed:

“The property is a Class A newly constructed multifamily, with premium amenities expected in a high end luxury development, including an on-site subterranean parking garage, large modern fitness facility, door to door package delivery service, and approximately 30,000 SF of outdoor space designed to reflect Northern California’s diverse landscapes.”

Despite the plunge in occupancy rates, and despite the reduced cash flows due to the plunging occupancy rates, all four NEMA loans are marked as “current,” according to Trepp’s data. And they have not been moved to a special servicer, which would be an early warning of a potential delinquency.

And this has been the case more broadly. The delinquency rate for private-label multifamily CMBS was 3.1% at the end of November, according to Trepp’s update a week ago, in the same range where it had been before the Pandemic. By contrast, hotel and mall CMBS delinquency rates, despite widespread forbearance agreements, have shot up to 19.7% and 14.2% respectively.

For now, landlords with apartment towers whose occupancy rates have plunged are mostly dipping into reserve funds and are making payments on their mortgages, thinking, “This too shall pass” – “this” being the sudden phenomenon of tenants moving out and leaving apartment towers behind and relocating to the suburbs or further afield, to cheaper pastures and to places without elevators.

Many multifamily mortgages have not been securitized. They’re held by banks, particularly regional banks, by insurance companies, and others. According to the Mortgage Bankers Association, lending on multi-family properties has plunged 31% in the third quarter compared to a year ago: with occupancy rates this low and potentially still falling, landlords who want to sell and potential buyers appear to be too far apart, and lenders won’t lend.

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  122 comments for “Occupancy Plunges to 70% at San Francisco Luxury Apartment Towers across from Twitter Headquarters: a Broad Phenomenon

  1. Cas127 says:

    “lending on multi-family properties has plunged 31% in the third quarter”

    It would be nice to think that apt lenders could take a look at the monthly Zumper apt rpt and simply redirect lending into those lower tier mkts where rents are *rising* due to the NYC/SF/LA exodus.

    • Ethan in NoVA says:

      They would only build overpriced lipstick-luxury properties in the rising markets. Those markets probably have overpriced units still sitting empty.

      • Cas127 says:


        Yes, but supply is supply and adding supply (even at top prices) forces all other suppliers to lower prices to meet the newer competition.

        And…sooner or later even those empty, glistening monuments to over aggressive lending have to capitulate and drop their prices to increase occupancy.

        Overall, there is an astronomical amount of slack lending capacity in QE stuffed banks (particularly the TBTF big four) but median rents for many metros have rapidly inflated since 2011.

        Check out RentJungle’s metro history reports.

  2. Tony22 says:

    Schaden Freudecisco!

    I saved this from 2013:
    NEMA, “an array of lifestyle enhancing packages that fit the new normal.” Residents can choose between the “remote worker,” which includes 12 months of a cable/internet credit up to $200 per month, an Amazon Echo Dot, and Tile™ Mate Tracker, the “mind-body mover,” which includes 12 personal training session, six 60-minute massage sessions, a fitness cooling towel, fit tracker, and NEMA-branded yoga mat and glass water bottle; the “do-gooder,” which includes a $2,000 donation to the local charity of your choice; or the “move maker,” which includes a credit toward movers or a relocation expert up to $1,000, bedroom blackout shades, a Dyson air purifying fan and a bottle of wine and NEMA-branded wine glasses to celebrate.”
    Surely those glasses will make a huge impact when you donate them to the Haitian orphanage!

    • GotCollateral says:

      Is picking up assets for pennies on the dollar an option they’re offering too after they file chapter 7/11?

  3. Zantetsu says:

    CNBC just posted a story about “Returns return to Manhattan, driving 30% gain in new leases in November”.

    What I feel like they didn’t address at all, is are these 30% “new” leases just churn or do they actually represent people returning to the city? Some of both I am sure but how much of both?

    I feel like the reporters for rags like CNBC are lazy. They always seem to draw the most shallow conclusions in their reporting, never digging deeper than is needed to produce a catchy byline.

    This is why I read Wolfstreet.com. I have come to expect far better.

    • Lou Mannheim says:

      “ I feel like the reporters for rags like CNBC are lazy.”

      I used to think that about all media as well, but it turns out it’s just willful ignorance. You’ll never get msm to ask the hard, obvious questions because they’re just making a living and can’t rock the boat. Unless you’re a Shkreli, and even then they’ll just bitch about a Wu-Tang Clan record until real charges are about to be filed.

    • Heinz says:

      Why bother with lame mainstream business news when you can get insightful information from cream of the crop sites like Wolfstreet, indeed.

      Media content these days is a shadow of what they once were– i.e. investigative and hard-hitting, and not afraid to ask tough questions.

      Today’s media puppets are much more about bias by selective coverage of news and lying by omission to support a narrative they are told to keep polishing.

      Every time I see network news talking heads I imagine a light post in the background– they are gas lighting average IQ clueless commoners. It seems to work well since big news corps are still in business.

      • Sir Eduard R. Dingleberry III says:

        I don’t think the mainstream news even needs to write the article. They are only writing headlines to influence people and have no interest in actual investigative reporting. I don’t think they even know what it is to be honest. Plus investigative reporting might uncover something against “the narrative,” so they think there’s no reason to do it. Thanks to Wolf for being the last known journalist.

        • Ed says:

          Historically, you get the best insight from the serious magazines and major newspaper investigative reporting, but those are getting their lunch eaten by aggregators and outfits with no original content.

          (CNBC has almost no original content, unless you count allowing CEO’s to recite the company press release.)

        • number1gi says:

          Ditto Sir Dingleberry III, keep up the good work!

    • Wolf Richter says:


      In San Francisco, there is a huge amount of churn. We saw that in the USPS change-of-address data. Everyone is trying to get that “free upgrade” — that nicer place for the same rent. I would think it’s the same in NY City. It’s just a logical reaction of regular people trying to improve their lot.

    • Petunia says:

      If you read the NYC papers the answer is there, NYers are moving within the city to cheaper larger newer-ish apts. There’s your increase in new leases. NYers that want/have to stay are taking advantage of the rare opportunity to trade up.

    • muneshwar budhu says:

      Yes, people who are near lease expiration, signed new leases with the concession. People are moving across the block, that is why total inventory is the same.

  4. RollingStone says:

    Multi family and Ultra-luxury just doesn’t seem to go together so well – at least in the times we are entering.

    • Heinz says:

      My local city gov is still handing out subsidies to developers of multi-family housing developments.

      But only luxury apts seem to be financially viable to these profit-driven business entrepreneurs, much as large expensive houses are the only cash-cow choice for home builders, from a profit perspective.

      They have started using ‘first class’ term to describe their apts– ‘luxury’ must now have a negative connotation when you are going hat in hand to city officials for a handout.

    • Petunia says:

      Mixed income housing doesn’t work and I have seen it fail in NYC countless times. The projects were built as workforce housing and were nice until they began putting in welfare families. The working people left as soon as they could. Now middle income families avoid these buildings even if the apts themselves are nicer.

      • AlamedaRenter says:

        I’ve always wondered about that and how it plays out. Especially in some of the smaller buildings in SF were 2 or 3 units out of a dozen are below market rate.

        Like does everyone living there know the 3 families that didn’t have to pay full price? Is there animosity? Do they get full HOA rights and can serve on the board?

        • Petunia says:

          In NYC mixed income projects are usually huge with hundreds of renters. You can tell who’s who because it becomes obvious, who dresses better, who goes to work, who drives the better car, etc.

          Plus like it or not there are cultural/behavioral differences. Who hangs out in the common areas all night keeping people up. Who’s friends are scary, etc.

          All of the mixed income projects I have seen are all renter occupied, not owned. They were managed by some bureaucrats who can barely collect the rent. They are never actively managed properties, which is why the tenant quality degrades fast.

  5. Old School says:

    I own one REIT with strong balance sheet. Permanent revenue loss to 60% of peak revenue is where it would all fall apart. Got to think these guys have a smaller cushion than that. Guess it comes down to is this a short term event or permanent revenue loss.

    • Dave says:

      Like most things I think the truth is in the middle.
      Apartment and condo prices in high end urban will remain hurt for years. But 6 months from now people will begin returning to their offices and apartments.

      I only wish there were more opportunities to get things at “value” pricing. I still don’t see it where I have looked. I believe this is mostly due to the liquidity being engineered. It saves the economy in the short term, but long term means there will be a big price. In the mean time savers like me are punished.

      • RightNYer says:

        Yes, people will begin returning, but not everyone. Remember, many people living in cities were doing so to avoid a commute, and if they don’t have to go to an office, they’d rather live elsewhere.

        Urban living is very polarizing. Some people love it and think the suburbs are “stuffy and boring,” while others hate it and think cities are “dirty and crowded.”

        • Lisa_Hooker says:

          I have always felt that big cities were absolutely marvelous things. That’s why I live in a forest preserve and visit the city when needed.

        • Dan says:

          What I find interesting is whether people will try to continue working remotely and pressure employers to do so in order to retain them. There still possible be some significant churn even if things go back to “normal”. It will likely be a strategic advantage for employers offering remote working,

          I suspect that the recent Senate betrayal of Americans and the middle class by throwing open the gates to H1B visas is a component of that tension between commercial real estate and this whole fiasco caused by the planned economy types in the first place.

          But there is commercial real estate to fill so they will be filled by importing replacements if the indigenous population will not coöperate or has worn out it’s purpose. If that commercial real estate equation comes undone, so will a lot of other things.

          No one is an expert or we would never have any busts, but so much of what is going on these days feels like the lead-ups to all the other busts, where a certain “do something … anything” mentality underpinned a detached ruling and beneficiary class too busy enjoying the partying to realize that the boiler is under immense pressure with very little time left to intervene, possibly even less time than the shutdown sequence takes.

  6. tom15 says:

    Out here in flyover, the escapees continue to arrive.

    • Arizona Slim says:

      Here in Tucson, I’m seeing SFR real estate listings that note the work-from-home amenities of the residence.

      • aqius says:

        Hey AZ Slim

        Long time no see! Still ridin’ the bike?


        • Arizona Slim says:

          Well, hello there, aqius!

          I still am riding the bike, but not today. Reason: It is raining in Tucson! Woo-hoo! We need it!

      • Cas127 says:


        Ah, Tucson, my despoiled sweetheart!

        With your fine weather and entrancing prices.

        For years and years, lingering alluringly there at the bottom of the Zumper cost survey.

        Now increasingly pawed over by the late panicked hordes of SoCal.

        Now I must turn my weeping eyes to your frigid sister…Wichita.

        • Pavel says:

          Hmm… are you sure about the fine weather? A college friend of mine just bought a place in San Diego as a second home [one of the very few buying *into* California!] because the summers are swelteringly hot in Tucson now — or rather becoming even more so due to climate change.

          Mind you, I speak as someone who lived quite a few years in Montreal and loved the climate there. :)

      • tom15 says:

        Over here its wedn. darts, thurs. pool league, friday fish fry, and saturday prime rib.

      • Sir Eduard R. Dingleberry III says:

        How is Tucson nowadays? I went to college there is the 80s but don’t remember much coz I drank too much.

  7. Paulo says:

    If you can’t make it on ‘interest only’ 10 year notes at today’s rates, your business plan was used as rolling papers somewhere along the way.

    And a good time was had by……a few.

  8. 2banana says:

    A little back of the envelope math.

    $274M over 30 years (assuming the 10 year would be rolled over) with a 3% interest rate = $1,160,000 per month in P/I.

    That is $1538 per apartment (754 apartments). However, 90 “affordable rent” apartments will be subsidized by the others so figure $1700 per month for a base cost to cover P/I. Now add in property taxes, insurance, utilities, maintenance, etc.

    Just to keep the lights on – estimate at $2400 per apartment in “alligator” costs.

    Apartment rent at NEMA (used to) start at $2700 per month and probably (used to) averaged $3400 per month (for the 664 “free market” rentals).

    So – no problem at 100% occupancy.

    At 70% – that is a loss of $230,000 per month or $2.7M a year for the reserve fund.

    Add in “3 month free” and other incentives (anything to not lower the rent) and that balloons to $3M loss/year just to be in survival mode.

    Your assumptions may vary.

    • Petunia says:

      You also need to assume the apts with higher rents will be the first to empty out and/or remain empty. The apts with the higher profit potential will be the least desirable to market renters. This is the real economics of poverty politics.

      • Dan says:

        Poverty politics, buying power through votes and keeping the help close by with “affordable housing”. “By all means necessary” just to not have to pay market wages … and doing it all on the tax slaves’ dime too, financing the enslavement of the middle class with the proceeds from their own enslavement, it’s rather genius actually. It’s like a leveraged buyout scheme for humanity.

    • Harrold says:

      If the price comes down to $1,200/month, I am moving in.

      • 2banana says:

        In a few years given projected spending increases and deficits – that wouldn’t even cover the property taxes.

        • Dan says:

          Joke’s on you, buddy. We’ll soon be making $1 billion/yr and our $1000 UBI will not at all increase inflation because it’s magic and magic just works.

    • Tony22 says:

      You forget maintenance costs; “affordable rent” multi-family occupants in a luxury S.F. building had kids who rode BMX bikes down the stairways and hallways because the “streets were too dangerous”. French fry cooking oil clogged pipes etc.

      Per federal, state and local non-discrimination laws, a family can have an infinite number of new children, like nephews, nieces, grandchildren, adoptees, move into a two bedroom and there’s nothing that can be done to evict.

      Also, those “natural areas”, terraces and other amenities are good places for hanging out all day, getting high and commenting on ladies’ bodies and trying to make dates for those so inclined. No need to drop down to the street to buy illicits either. It’s amazing how fast and how few it takes to make a semi-public place deteriorate. One more reason to move to the suburbs.

    • Old School says:

      Probably different on this than on the outlet REIT I own. But the REIT is triple net where tenant is responsible for maintenance charge, taxes and utilities. Depreciation allowance more than covers interest charges so it’s very easy for property to be cash flow positive, although the depreciation must be reconciled when the property is sold. For the REIT current interest only rate is 3.1%, but I would think it might be higher on rate on this property.

      • Petunia says:

        We stopped at an outlet mall about three weeks ago, on a Saturday. Had a hard time finding parking, it was really busy, which surprised me considering the economy.

        • Old School says:

          That’s what I hear on the stock message board as well. I think I lucked out that destination outlets with outdoor formats are going to hold up pretty well. Stock price was $14 precovid to $4 in March, back to $11. Short interest still 45% so no everyone is a believer.

    • Cas127 says:


      Thanks for stepping us through it.

      It ain’t rocket science, but it takes some work and everybody benefits by seeing the details of how the sausage gets made.

      • 2banana says:


        Now extrapolate to the entire city. How many of these developments are out there?

        A thousand?

        Assume NEMA is at the higher end.

        That is still at least $2 billion in losses for SF alone.

        Multiple by all the other cities in similar circumstances. $100 billion in losses per year? Most in private and non tax payer guarantees funds?

        When do certain banks or hedge funds collapse?

  9. OutWest says:

    Considering that well over 90% of US GDP comes from large cities, vacancy rates tell an interesting story.

    Regarding economic output, SF is the 4th ranked US city behind NY, LA, and Chicago.

    Large cities subsidize more rural parts of the country. If people are moving out of larger cities permanently that dynamic will certainly change.

    • Old School says:

      GDP is an imperfect measure. I pay $450 rent and my landlord still makes a profit because it’s an old house on a farm. My son pays $2200 for a Manhattan apartment shared with two others ($6600 total). Five times more GDP doesn’t mean five times the value.

    • Lisa_Hooker says:

      Then again, large cities suck taxes out of rural areas through the federal government and disburse them back to big cities which don’t provide services to rural areas.

      • Harrold says:

        I don’t think that’s anywhere close to being accurate.

        Rural areas are net beneficiaries of Federal money.

        • Lisa_Hooker says:

          Harrold, there are some ancient projects such as the TVA. However, everyone is income-taxed the same, and the proceeds are disbursed predominantly to the big cities to “aid the poor and needy”, while the rural poor and needy seem mostly overlooked. Professional social workers congregate in the big cities where there’s room for advancement and bigger budgets. Ponder where the most votes reside.

        • DanR says:

          With what little I know on the topic, social services agencies, social workers, etc. appear more accessible in the big cities.

          Plus I think people in cities have more knowledge on how to get the government services.

        • Rumpled Bemused says:

          $40 billion in farm subsidies this year accounting for approximately 40% of farm income.

        • Lisa_Hooker says:

          Rumpled, you got me. The amount of money propping up agriculture is mind boggling. It’s not just farms. Think sugar tariffs and hops for beer, peanut permits, etc.

        • Dan says:

          I used to believe that trope when I was still brainwashed by the “liberal” cult, but then I started thinking about things myself and started realizing what a con job and abusive lie it is, to prevent the realization of the reality that cities are like decadent predatory parasites on society.

          Here’s just one example of what I realized; in those equations about being net beneficiaries, not only are things like agriculture subsidies considered rural benefits, they also artificially suppress the market rate for agricultural products that mostly benefits cities. So the actual benefit is realized by cities, while being held over the heads of the rural communities that are not getting the benefits from higher prices.

          Similarly rural immigration wildly benefits cities and agricultural prices, while the “federal benefits” tabulated as rural are largely spent on immigrants on people whose wages are suppressed to a massive degree in order to benefit cities. Again, cities realize the benefits, rural areas get the raw deal and are blamed and denigrated for it. Is utterly abusiveness and psychopathic even, especially in the gross self-righteous and supremacist belief city people usually have as they clearly see themselves as superior. That whole “net recipients” trope is just a part of that supremacist mentality.

        • Lisa_Hooker says:

          Thanks Ross, I didn’t realize how much more Federal employees are paid compared to private sector. Apparently every single state pays federal employees a minimum of 25% to over 100%+ more than private sector. And why does Arkansas receive 2.7 times as much as they are taxed? Very much appreciate the link. Bookmarked; further research called for.

        • Lisa_Hooker says:

          An additional thought. Should we consider Federal salaries as Federal “services?”

        • Think Critically says:

          Ross, the article you cite is vague and may be political misinformation. Here’s a different conclusion from the article’s statements: The comparison of taxes to federal funding shows the states that the federal government depends on the most. An internet search of the term “federal funding” shows multiple definitions of that term. Even various federal government departments define that term differently. Federal funding includes the purchase of goods and services used by the federal government. For example the government purchases billions of dollars of petroleum products. The state of Louisiana has a large petroleum industry. So it gets federal funds for those purchases. This means the Federal Government is dependent upon the businesses and people of Louisiana to provide goods to them. Thus states that produce real goods and services will likely get more federal funding. While states like NY or CT that produce relatively few tangible products receive less federal funding. In other words the states that are the most productive are the states that the federal government buys from the most.

        • CG3 says:

          W/r/t median federal earnings v median private sector earnings, the comparison is apples to oranges. The fed gov’t outsources a substantial portion of lower-paid workers such as admin assistants, clerks, entry-level employees. This is a net savings to the taxpayer, but skews the stats for federal earnings upwards.

  10. MiTurn says:

    “While landlords are muttering, “And this too shall pass.”

    They’re probably right. Things will most likely go back to status quo ante pandemic.

    But what if they don’t? That’ll be interesting! Thank goodness Wolf is there to keep us abreast with the play by play.

    History gonna be made?

    • nick kelly says:

      ‘Work from home’ is partly permanent. Big question for employers of clerical workers is ‘why didn’t we think of this before?’ They are working on- line and can be monitored. In fact, you can probably monitor them more closely, using excuse that you have to.
      Then after saving money on office space, employer can ponder how much can be saved by not giving raises or travel allowances because employee is also saving money.

      This piece is about res RE but commercial is looking at an even more drastic change: the whole concept of retail may be getting obsolete. ‘Retail’ being defined as a wholesaler buying a durable from manufacturer, who resells to consumer. Part of the space taken by retailers now, may be replaced by manufacturers’ show rooms, but there will only be one of each item. Yours will be delivered.

      • Tony22 says:

        From a hundred years ago:
        “the whole concept of stables may be getting obsolete….”

        Stables became buildings or car parking. Thus real estate was saved. Farms where horsefeed was grown did became depressed.
        However, the whole concept of workers in the United States may too become obsolete since if an employee can work remotely from their home in Bremerton, the job can just as easily be done from Bangalore at 1/10th the cost.

        There are billions of people overseas who are hungry, clever, educated and desperate for work. If Americans don’t get damned militant about fighting this, soon we will become India.

        • JBird4049 says:

          I am more worried about how we will be fighting and what the government responses will be; this Summer was not just about George Floyd’s murder and the police in many cities were beating up innocent bystanders, reporters, and peaceful protesters more often than actual rioters. What will happen when 60s style riots happen? Machine guns?

          Next Summer is going to be interesting.

        • Reg A says:

          “We will soon become India” you say as we import Indians by the hundreds of thousands, creating whole colonies of Indians that taller over whole districts of cities, of multiple cities. Some will say that it was the same in the past with Italians and Irish or even the germans that essentially built the USA, but the difference is that the numbers are massively different. To put it into perspective, all of texas had the same amount of people in it in 1850 as we are “legally” importing into the USA every 3 months, or every 7 months in the case of NYC. These are massively different scales. We aren’t just getting a couple blocks of people from the same country or that together go in on some land and start towns together; we’re talking about wholesale transplantation of whole foreign societies that are not in any way even remotely similar or share similar characteristics or cultures or values and priorities. What people don’t get is that “immigration” before 1960 was small scale and of pepper who were self-reliant, after 1960, its importation of replacements that are given the wealth and possession and control over government that belonged to native Americans and it is given against the will of those it is taken from.

  11. Heinz says:

    “And to halt and reverse the meltdown of the CMBS market in March and April, the Fed has bought $9.3 billion of those taxpayer-guaranteed multifamily CMBS within a few weeks, which did the trick.”

    If I am correct the Fed now owns 30% of single-family MBS (and growing).

    What’s to prevent them from playing role of ‘cavalry to the rescue’ in CMBS market to an ever greater extent.

    After all, aren’t bankers doing God’s Work?

  12. MF says:

    A colleague from grad school is a small landlord in Seattle, where a similar vacancy situation is playing out.

    She regarded me with barely disguised contempt as I doubled down on the affordable sector as the housing crisis flayed everyday working families, forcing some of them into tents along I-5. I suspect her contempt was based on my insistence on keeping my personal income modest, since there is no way a truly sustainable affordable housing solution can be made to pencil out if it makes me and my staff rich (unless, of course, you can figure out how to hitch it to a tax donkey somewhere; i.e.: via the GSEs). Based on the occasional conversations at alumni events, I found out she regarded me as hopelessly inept, stupid, naive, etc.

    Meanwhile she leveraged to the hilt to cash in on the rentier bonanza so she could “do well by doing good” (her words). People in the tents needed to leave the city; go where they were “wanted”. Yanno. Just move further out and drive into town whenever she needed some drywall fixed on the cheap. It was SO HARD to find good help these days!

    So. If she loses her shirt now, I’m supposed to wring my hands over her losses? I’m supposed to fist bump in the air chanting “think of the landlords!”?


    • 2banana says:

      All depends on your definition of “affordable housing.”

      Some think it means just taking private property from those deemed “undesirables” or allowing government to change private and legal contracts to buy votes.

      • MF says:

        @2banana: Focusing on the definition of affordable is a tedious red herring. It’s simple division. Affordable housing consumes less than one third of the income of the people living there. That’s it.

        You occupy a $1mm house but it consumes less than one third of your monthly cash flow? Congratulations, you live in affordable housing.

        You live in a $50k trailer but it takes half your income to stay there? My condolences.

        • 91B20 1stCav (AUS) says:

          MF-thank you.

          may we all find a better day.

        • cb says:

          Yes, Thank you MF. You sound like a decent guy. As does 91 B20 1stCav (AUS); and as he says, may we all have better days.

        • Old School says:

          Met a retired couple who lived in a 50K trailer half mile from lovely beach. She was recovering from cancer. She was so happy just to be able to plant flowers in the yard. They were running a small business of refurbishing golf carts mechanically and redoing the upholstery. They obviously loved each other (and their retirement business). Golf carts are the second car at the beach. Anyway, never equate being poor with lack of happiness. They are not related. Nearly everyone in a developed country has enough to be happy if they are wired that way.

  13. polecat says:

    First Joe, now Elon …

    Is that the rumble of Cali willed-a-bests heading off the peninsula to greater veldts (here’s lookin at you Texas ..)

    Who’s gonna be left to run the $$$juice Machine, that keeps Cold ’empty bowl’ Nancy in ice cream?

    • 2banana says:

      Masive federal bailouts.

      Because waitresses working in Kansas should be bailing out and subsidizing the most wealthiest zip codes and public union pensions now common at close to $100,000 per year.

      Is just fairness….

      • Harrold says:

        Waitresses in Kansas making $2.13/hr dream of making enough money to pay federal taxes.

        • 2banana says:

          With tips. A good waitresses can easily pull in $20/hour…tax free.

          But you miss the point.

          Why are the wealthiest city zip codes in the most financial trouble with nearly all of them near bankruptcy?

    • DeerInHeadlights says:

      J. Gundlach also weighing his options…

    • Anthony A. says:

      Damn, we are getting popular this great state of Texas! (we really don’t need these recycled people)

  14. Martha Careful says:


    SF supervisors slam ‘Twitter tax break’: ‘This was a terrible piece of public policy’
    Trisha Thadani June 7, 2019

    City officials cooked up the tax break, officially called the Central Market Street and Tenderloin Area Payroll Expense Tax Exclusion, in 2011 when San Francisco-based Twitter threatened to move to Brisbane. At the time, San Francisco was crawling out of the Great Recession and suffering from dramatic budget cuts. The city’s unemployment rate was at 9% and Market Street was rife with vacancies, homeless people and crime.
    The Board of Supervisors at the time hoped the tax break would not only keep Twitter in the city, but also bring more jobs, retail and prosperity to the struggling Mid-Market district. Those benefits, they said, would then trickle out to the rest of the city.
    The result was a mixed bag.

    Duh …

    • Arlen says:

      “city’s unemployment rate was at 9% and Market Street was rife with vacancies, homeless people and crime.” which meant the Merchandise Mart building was worth less than market value were it not for the crime and homeless.

      See how selective police non-enforcement, under the guise of human rights can make money for those buying distressed properties, like Walter Shorenstein Jr?

      Jobs and prosperity? Like the Walgreen’s shuttered because of massive shoplifting by the slightly relocated homeless?
      What it was about was that the Twitter stock options later worth billions were spared city taxes. Oh, gee, maybe that was just a ‘coincidence?’

  15. dr spock says:

    As I said previously, I think the federal reserve will be secretly buying massive amounts of commercial and apartment mortgages at retail prices from the banks in San Francisco and and across the nation very soon, just like they did with houses in 2009, then secretly selling them wholesale to hedge funds. I also think in the last year, the fed already has secretly spent incredible amounts of digitalized money than they have revealed on the bailouts. We are going to see more renters in commercial and residential units in the future and more homeless. Folks, this is not capitalism.

    • cb says:

      dr spock said: “Folks, this is not capitalism.”

      Why not? It’s those with capital making the rules. same as it ever was …..

      • Wolf Richter says:

        ? and so true!

      • Dan says:

        Fair enough, so I guess the plan is to triple down and just give the ruling class all control over all aspects of our lives through planned economy and planned society. Literally sounds like a slave plantation or a serf fief scaled up; free housing, free food, free healthcare, free education … all you have to do is serve, obey, respect your masters and not have unapproved thoughts or you get ruined with the whip of social and economic ruin.

      • Robert says:

        Not true. Capitalism was never about running your own private money-printing press. What Spock said was true, but he left out the fact that the banks that own the Fed are having trillions made available to them virtually interest free TO THE EXTENT THAT THE NATIONAL DEBT CAN BE EXPANDED. That has nothing to do with capitalism.

  16. dr spock says:

    On Tuesday, Elon Musk compared himself to a war general when he announced that he was moving to south Texas to build his Space X and electric automotive plants. Musk asked if you want your war general on the front lines or in an ivory tower, stating that the troops will fight a lot harder if your general is on the front lines. But who is he fighting? Space aliens? In January, he presided over the opening ceremonies at his electric auto plant that was built in a record time of less than a year just outside Shanghai, China. Then he talked about the quality of his cars compared to his competitors. Oh, ha, ha, ha, Oh,…

    • Petunia says:

      Looks to me like he finally realized the CA govt is just nuts and he can’t fix that.

      • Harrold says:

        Wait until Elon finds out getting caught with one joint can get him life in prison.

        • Cas127 says:


          As somebody who lived in TX for 20 yrs…provide a cite please.

          Are Texans harder on criminals than Californians?


          But nobody is remotely in jail for life because of a single joint.

        • Anthony A. says:

          Maybe not life, but a few nights until he posts bail. This is not the west coast.

        • Cas127 says:


          Life vs. A few nights (or one).

          Good thing the coasts are known for their lack of prejudice.

        • Bet says:

          When I lived in Texas for twenty years. A man who stole a can of beans got ten years in prison
          But a mj joint. ? Didn’t see that

        • Robert says:

          FYI, no one goes to jail in Texas when a chemical plant catches fire and spews carcinogens all over Houston (which happens pretty much annually), or a mini-Beirut-style ammonium nitrate storage facility blows up leveling a small town(nothing having been learned from the ’47 Texas City disaster), or a foreign-owned refinery is allowed to dump heavy metals into the Gulf of Mexico. Elon Musk has nothing to fear.

  17. Island Teal says:

    There is a RedHouse on Mississippi St. in Portlandia that seems to be a fine investment for some developer right now. Getting lots of free advertising. Just needs a little demo, cleanup and some paint. ???

  18. Bobber says:

    I think it’s obvious the Fed is going to start buying up CMBS that won’t survive on their own.

    This is very similar to centrally planned China, where they don’t allow 99.9% of companies to go bankrupt. Every now and then they’ll pick one to let fail, to maintain the facade of a market.

    Any company that receives funding assistance from the government is state-sponsored. The US has many such state-sponsored companies.

    • Petunia says:

      Will this turn into the backdoor bailout of the big liberal cities when the fed has to pay the real estate taxes on these properties?

      • Old School says:

        We used to believe that price discovery was the answer to most problems, but the Fed thought it would be better to take away price discovery for a year, then a decade and now two. Going to just make for more and more trouble. Can’t have a 1% hurdle rate for approving projects or you get too many boondoggles.

      • Greg Hamilton says:

        The Fed has already ‘lent’ Illinois $2 billion. I wonder who is next?

        • Greg Hamilton says:

          *$1.2 Billion

        • Absur Ditty says:

          Well, Greg, I just don’t think it’s right for you to criticize the Fed. How much money have you lent to Illinois? If you aren’t willing to then the Fed has to. It’s that simple.

        • Old School says:

          Nirp or Zirp is the new bailout. If someone let’s you hold a billion dollars for a hundred years at real interest rate of zero it’s within a frog’s hair of them giving you a billion dollars.

          Same with Fed government borrowing perpetually at zero real interest rate is like not owing the money at all except that government is going to break the system by transitioning from merit based system to political based system.

  19. Sam says:

    Obscurement maximus.

    SEC report released in October titled “U.S. Credit Markets Interconnectedness and the Effects of the COVID-19 Economic Shock.”
    The report makes no mention of the fact that the repo market blew up on September 17, 2019 – months before there was a COVID-19 case reported anywhere in the world.

    • Cas127 says:


      It is interesting that the big boys were exiting the credit mkts en masse six months before Covid March.

      Sadly, it isn’t proof.

      And, in all honesty, the financial system already had far, far more than enough accumulated cancer in it by fall 2019 to spook any institutional investor with half a brain or an ounce of historical knowledge.

  20. Crush the Peasants! says:

    About 2 years ago I stayed at the Hampton Inn on Mission and Mint street in SF. Over $300/night. It was a real eye opener when the Uber car rounded the block through an alley way/minor side street for my late evening check-in. Night of the Living Dead! Sketchy looking homeless people, folks shooting up, shopping carts with belongings, people laying about in various states of decay, heroin nod-offs, etc. I was there for a conference at UCSF Mission Bay, and chose the hotel because it was within walking distance. What an eye opener! I could only imagine the horror of a family with young children checking in and seeing this.

    Yes, I had to keep eyes down to avoid human waste, and I did bleach my shoes upn returing home, but familiarity bias of desensitized residents aside, THIS IS NOT NORMAL! I was further shocked to see the crap hole location for LinkedIn’s headquarters.

    What had happened to San Francisco? I recall homeless encampments during Art Agnos’ reign, in fact, directly adjacent to the beautiful city hall building. The merchants complained about the fall off in tourism and of business in general, a former COP Frank Jordan was elected, and the homeless seemed to have disappeared during his reign. Still wondering what he did. Did he fly all of them to Hawaii?

    • Wolf Richter says:

      “What had happened to San Francisco?”

      One thing that happened is that the homeless used to congregate in and around the old bus depot, and around the old decrepit unused industrial buildings South of Market, where hardly anyone went. Then developers built all these new high rises on these locations, and the old bus depot was torn down, and the new Transbay terminal sprang up amid swank towers, including the leaning Millennium Tower, and all the homeless were driven out, and they scattered all over the place where now everyone can see them. It used to be “out of sight, out of mind.” But that no longer works.

      • Cas127 says:

        To my limited perspective, I think SF may have always sorta been “NYC with better PR”.

        I’ll never forget my 1980 visit there.

        1) Within an hour of arriving at hotel, crazed knife wielding madman ran screaming through busy street in front of hotel. Police had to shoot him (this was 1980). Changed hotels (at double initial rate) to get safer neighborhood.

        2) First attempted BART trip aborted because of attempted pickpocketing…and the *pickpocket* went ape shit when caught with hand in mother’s purse…by time disinterested BART employee/cops could be persuaded to get involved, pickpocket vanished in confusion.

        3) Trip to Oakland (SF’ers can see it coming…) to see A’s game was like trip to Oz (the prison TV series, *not* the Emerald city).

        Walkways from BART station/parking lots to stadium *completely* enclosed by chain link fencing and concertina wire (making a tunnel of metal)…at no pt was there *any* access to those very long walkways from the Oakland streets. Definite “Escape from New York” vibe, considering city felt necessary to *completely enclose* those tourist walkways…would/had Oakland residents scaled mere 25 ft vertical fencing to get at tourists previously?

        4) Ironically, felt safest during entire trip while on Alcatraz tour…

        5) There was a reason why early 70’s “Dirty Harry” was set in SF.

    • Happy1 says:

      Regarding what happened to the homeless during Frank Jordan’s time as mayor, I lived there then, the homeless moved from downtown to the rest of the city and especially into Golden Gate Park.

    • SpencerG says:

      I have never been to San Francisco (yet) but my sister and her husband are doctors who just moved there in the last couple of years. He made the point to me that a lot of the homeless “problem” is the result of rules written for a different… SMALLER… homeless population. That while San Francisco’s homeless population was small there wasn’t much issue with liberalizing rules on how the authorities deal with them. But that “liberalization” made San Francisco more attractive than other locations and more of the homeless drifted into town. Now the homeless population is FAR larger and what used to be minor irritations for citizens are now major problems for the city as a whole.

      As I said, I don’t live there and his point of view may be that of a newcomer. but the stats that I have seen show the SF “unsheltered” homeless population has almost doubled just since 2005. So there is that.

      • Bob says:

        And 2005 was double 2000, which was double 1990. It started when “you got spare change man” became acceptable behavior in the 1960s and was no longer enforced as vagrancy nor begging. It’s been half a century that San Francisco has been attracting people from all over through its tolerance. The pot gets sweetened every time they try to “solve” the “problem” with more and more services. Now, some lucky ‘unhoused’ from wherever, get to stay at the Mark Hopkins with a stunning view, maid service, alcohol and drug deliveries, etc. And they wonder why they keep coming?

        The way to end homelessness in San Francisco is to cut off all tax dollars for services and allow individuals with a conscience to open up their wallets. ~95% would leave within a year.

        The data from the Homeward Bound program that buys free bus tickets to return “homeless people” where they came from, includes travel destinations for the program from 2004 through 2018. It shows approximately 20 percent of Homeward Bound’s trips, or about 2,400, took place inside California during that period. About 80 percent took place out of state.

        Texas was the most popular destination outside of California, with 827 trips or 6.7 percent of the program’s 12,268 trips since it started. The next most popular were Washington state, at 5.8 percent, and Florida, at 5.4 percent.

        • Dam says:

          I’m all for a CA bound program to send all homeless to CA. Just send all homeless and addicts to the liberal west coast or NE. We could start a little PR campaign telling them of all the benefits of going and of course paying their way.

  21. MonkeyBusiness says:

    I wouldn’t live in that area even during good times. Even before Covid, the area was already filthy and it’s too close to a couple of dodgy areas. The Tenderloin is just a couple of short blocks away, and there’s the area bordered by 6th, 7th and Market Street. P*** can be seen everywhere, and I always fear for my safety whenever I am in the area.

  22. gorbachev says:

    During times like this the largest and the smallest apts.
    are the first to get squeezed. Those in the middle seem to find a way.
    There is hope coming soon and the lower numbers should provide
    some relief. If a credit crisis follows this all bets are off. Now would
    be a good time to have a healthy pile of cash handy. Maybe a years worth

  23. Martha Careful says:

    As an example

    Sublease Income is down this year and will drop like a rock in 2021 and beyond. It’s obvious, this type of arrangement will not be a cash cow for any business caught with excess sq/ft (or people) capacity. Therefore, this type of pandemic/social change will hit operating income for craploads of overvalued corporations ….

    Twitter, Inc FORM 10-Q | Quarterly Report
    Oct. 30, 2020

    Note 6. Operating and Finance Leases
    The Company has operating leases primarily for office space and data center facilities. The Company subleases certain leased office space to third parties when it determines there is excess leased capacity. The Company’s server and networking equipment leases typically are accounted for as finance leases. Operating lease right-of-use assets obtained in exchange for operating lease obligations were $253.9 million and $34.0 million in the nine months ended September 30, 2020 and 2019, respectively.

  24. Rickv says:

    I have a persistent worry I can’t shake that I hope is wrong. It is a possibility that no one has mentioned to my knowledge. And yes I’m a pessimist at heart. My worry is that the vaccines don’t work as advertised to stop the virus. Maybe the virus mutates to reemerge as a same level or worse pandemic. Or maybe there is an unanticipated long term reaction to the vaccines that wasn’t identified. This would cause a market crash of epic proportions. I hope it doesn’t happen, but I’m hedging the possibility.

    • Memento mori says:

      Your vaccine concerns are valid but the conclusion you draw about the market are wrong.
      If the virus mutates or vaccine doesn’t work, the markets will shoot higher in expectations of MOAR stimulus

      • JBird4049 says:

        What about all the growing homeless encampments? If our Lords and Ladies can’t be bothered to give stimulus checks and pass legislation on housing, next May will be worse than last. I don’t think open rioting and burning cities will be good for Mr. Market.

        Most stimulus to the just already wealthy is just corn candy for the system. Eventually, a body will just fail.

        • Old School says:

          Mr. Market has to do what he has to do in dictatorships and that figure out what the government is going to do first. I think someone did the empirical work and figured a out somewhere around half the stock markets value is due to Fed programs. Doesn’t sound like a good thing to me.

  25. c1ue says:

    Depends on what you mean by “this”.
    SF rent is clearly out of line historically: the notion that SF rent should exceed New York by a significant margin, is ridiculous.
    The recent jumps are unquestionably a function of the VC flood going into money losing companies like Uber and Twitter, as well as outposts of profitable companies like Microsoft and Google.
    However, these tech companies are still a small fraction of the jobs in SF.
    Now that the tech companies are all WFH – and will be for at least another 6 months, plus the lack of entertainment/restaurant/convention/bar business – it is not clear that “this” will return in the sense of tech bubble rents.
    Sure, New York rents are falling too as WFH equally affects the financial industries there. But NY has 8 million people and an actual economy; SF is all tourists and rentals.

  26. Anthony A. says:

    I just read a news flash that Oracle is moving from Silicon Valley to Austin, Texas. Who’s next?

  27. The tech exodus from SF and Bay Area is a great opportunity. I hope that process accelerates and property values and rents plummet all through California. It would be great to see Texas become the new Silicon Valley and for all the douchey tech-bro founders to move there. And maybe the South will secede again and all the Trump supporters in California can move to Utah, Montana, and Idaho to support their leader. In the event all of that happens, I’ll certainly return to my home state of California. It’s still hands down, one of the greatest places to live on Earth if all those folks were to leave – it would climb the ranks even more with amazing climate saving focus, an end to poverty, and an enlightened population.

    • Pedro says:

      Amen, california is the nicest place to live in the US outside the politics…. hands down.

      My gut says that the downturn will just attract another wave of hopefuls looking to stake their claim in California. Been a hole into now for 200years in 10-20years cycles.

      This time it will be a mix of GenZ and foreigners that want to settle in this state. Foreigners want out of their home countries because they’re 10x worse than the US or GENZ wants out of boring suburbs where they can’t find enough young people to socialize and have sex with. The big cities will roar back to life once the vaccines are prevalent.

  28. Walter Ego says:

    There are estimates that 89,000 people have left San Francisco from March through November 1, according to USPS data.

    Says it all right there. Basically there was a bomb dropped in every major city in America. Anyone who could get out did but they’re cleaning up the mess now. It’s called a vaccine.

    I own apartments. In a big city. We are re leasing like crazy but at lower rents. Higher than 2017-2018 though. And the flipside is the cost of money is significantly cheaper today and lenders are throwing money at good landlords.

    My prediction is within 18 months of herd immunity every unit will be least up again and SF will be 80-90% recovered. A lot of tech workers will return and work from home in their luxury apartments but go to the head office 2-3x a week. Younger workers particularly don’t want to be isolated and alone in a suburban subdivision. Some will move to Texas I’m sure but California has a very broad appeal over Texas.

    The suburbs are great don’t get me wrong but the city has an appeal that can’t be manufactured in the suburbs or online.

    Stay safe everybody.

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