According to JK Dinnen, at least thirty (30) of the seventy-five (75) or so ex-Lembi owned San Francisco apartment buildings that had been taken back by the banks have been resold at discounts of 25 to 40 percent under what “the Lembis were paying for the buildings at the height of the market.”
Building buyers swoop on Lembi apartments [Business Times]
The Chronicle Reports “Dozens,” A Plugged-In Source Says Over 100 [SocketSite]

19 thoughts on “Lemons To Lemons For Thirty Ex-Lembi Apartment Buildings”
  1. Heeeeey
    Hopefully we will see a few evictions with the resulting TIC conversions.
    Remember, everytime a rent controlled tenant gets evicted….An Angel gets its wings 🙂

  2. I’ve been fairly surprised to see some new TIC buildings come on the market recently. Some may have been planned before the slump, but I can think of at least one moderate sized building where the renovations are just getting underway. Have TIC sales held up any better – or worse – than the rest of the market?

  3. Glenn – be nice. As much as the monied class would like to not have to associate with those who rent, there are some of us making positive contributions to San Francisco who would not be here without rent control.

  4. unless your project was approved by the lender some time ago, there is really no fractional financing for buildings over 8 units. there will be some exceptions made and the fractional financing for projects larger than 8 units most likely will return, but thats where it stands now.
    that being said, there are plenty of tic developers still in the game and still looking for projects. they’re much more selective than they used to be, but don’t worry…some rent-controlled tenants will be helping those angels get some wings 🙂

  5. Can someone with full access to the biz times article quoted above c&p it here as a comment? Thx.
    And as I suspected, there would be plenty of action on the lembis bldgs from other SF owners. It shows there are many out there who believe in SF RE as investments, and our residential commercial market did not fall off a cliff. I read the brisk sales of ex-lembi bldgs as overall good news. Glad I don’t invest in Phoenix/Vegas/miami!

  6. I know that many buildings (Lembis and others, as documented on the previous Lembi thread) have gone into judicial foreclosure with a court appointed receiver. My gut tells me that these receivers (many times, commercial prop. management firms) will systematically fill vacancies at market rate. For example, they are more likely to lower rents to find a tenant than the previous owners. This should put further deflationary pressure on rents. Does anyone have some inside knowledge on how receivers operate? Are my assumptions correct, or do the receivers operate with a different set of directives?

  7. “plenty of action on the lembis bldgs from other SF owners”
    Well, 40% of them have sold, at 25-40% discounts. Read from that what you will.

  8. rent control laws exist precisely because of the entitled, rapacious, society-destroying Land Pirate mentality glenn so well exemplifies.

  9. Here’s a link from Google News to the complete story. I’d like to add some color commentary, but all that comes to mind as this point is: wow, man…
    UBS, which took 51 buildings back from the Lembis in lieu of foreclosure, has now sold — or is in the process of selling — about 20 buildings. The financial firm has suggested that it plans to hold onto the remainder of the portfolio until prices and rents start to improve. Another investor, Los Angeles-based CIM Group, was deeded 24 Lembi buildings in lieu of foreclosure. CIM has also told investors it plans to hold onto the properties for now.

  10. EBGuy,
    Thanks for the scoop. I may be off base, but my take on this is that perhaps the banks don’t have to write off the loss until they sell the asset. So if they hold on to them they remain a performing asset at full book value?
    That same old saying again:
    A rolling loan gathers no loss..

  11. I understand from one of my sources that some of these buildings will be sold in groupings, of course for significantly less than their original purchase price.
    My building is one of the ones that is currently bank owned and I understand it is in one of those lots. There have been many unfamiliar faces in and out of the building, conducting meetings with the building manager, etc. No smiles on anyone’s faces here.

  12. CIM didn’t get a good deal – they jumped in too early. Want to buy an apartment building? Wait at least 6-9 months. The only reason they are selling is because you can get a loan on apartment buildings.
    Those programs will be scaled back after March next year.

  13. CIM didn’t get a good deal – they jumped in too early. Want to buy an apartment building? Wait at least 6-9 months. The only reason they are selling is because you can get a loan on apartment buildings.
    Those programs will be scaled back after March next year.

  14. I live in a 33 unit former Citi/Trophy property that is in receivership and is managed by a non-Citi(now dba First) management company. In the months before receivership started in 9/09, any tenant who asked was given a significant rent reduction from Citi if they signed a year lease and paid an additional month’s rent in advance. There were only a couple tenants who didn’t ask and receive. An example: a lovely $1,500/month studio rent was reduced to $1,150. New pre-foreclosure tenants were getting the same lower monthly rent rates if they paid an additional month’s rent at the time of lease commencement. Citi was obviously plundering future cash flow knowing that they were going down. Is this sinking in? Those pre-receivership reduced rents are now the rent controlled rents. The receivership prop. management company is currently renting the apartments at the lower rate too. Rather than holding out for higher rents, the receivership prop. management company is renting turnover apartments at rates that would make any new purchaser/investor cringe just to keep the building fully rented. These are the now rent controlled rents and unless those tenants vacate, any new owner, no matter how cheaply they sweep up the smoldering ashes of the Lembi debacle, will have a building full of rent controlled tenants paying the renter’s equivalent of the bargain prices a foreclosed building might be purchased for. Not to mention the fact that the DBI is forcing the new property management company to rectify the non-permitted and not to code ‘renovations’ that Citi performed in this building over the years which will total hundreds of thousands of dollars. Plus a decade of dealing with Citi Apartments has filled the building with experienced, knowledgeable, empowered, and angry tenants who won’t take crap from a landlord and know how to protect themselves. This is the real Lembi legacy. Any investor considering buying a fire-sale post Lembi building would be advised to buy very, very carefully.

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