Sterling Commons: 46-unit multifamily sample, San Francisco

## Revenue & Loss-to-Lease In-place collections total $794,964 annually ($66,247/mo) across 46 units, with a mean monthly rent of $1,440 and a median of $1,443 — figures that are tightly clustered at the center but mask a wide $676–$5,777 range. The $245,364 annual loss-to-lease (23.6% of market) is the dominant underwriting risk. In a San Francisco rent-controlled environment, this gap is largely structural: absent tenant turnover, the city's allowable annual increase schedule (typically CPI-linked, historically 1–3%) will not close a 23.6% discount in any near-term hold period. Buyers pricing to current NOI should not underwrite meaningful organic rent growth. ## Occupancy & Rollover The rent roll shows 100% occupancy (all 46 units marked occupied), which supports current NOI but simultaneously confirms there is no vacancy-driven mark-to-market opportunity in the near term. The rollover profile is notably sparse: zero leases expire within the next 12 months, and only one lease is identified as extending 13+ months. The near-absence of formal lease expirations is consistent with a heavily month-to-month or long-term statutory tenancy base — common in 1926-vintage SF assets — rather than a portfolio of term leases. This limits the buyer's ability to re-lease at market rents without triggering just-cause eviction scrutiny. ## Rent Distribution & Tenancy Risk The $676 minimum monthly rent against a $5,777 maximum suggests at least one deeply discounted legacy tenancy and one potential market-rate or commercial unit. The $1,440 mean being close to the $1,443 median indicates the distribution is not heavily skewed by outliers at the portfolio level, but individual unit economics vary materially. Any unit at or near $676/mo represents a significant drag; at that rent level, the implied loss-to-lease on that single unit could exceed $1,000–$2,000/mo depending on the applicable market rent, consistent with the $20,447 aggregate monthly shortfall spread across 46 units. ## Physical & Capital Risk At 99 years old (built 1926), Sterling Commons is pre-war construction. This vintage is consistent with elevated capital expenditure exposure across seismic retrofitting (SF's mandatory soft-story program), original plumbing and electrical systems, and envelope/facade maintenance. The IC should require a full PCA/PCR with a 10-year capital reserve schedule before finalizing underwriting. Reserves should not be modeled at standard multifamily assumptions given the building's age and San Francisco's regulatory environment around habitability and tenant protections. ## Underwriting Posture The asset's 100% occupancy and stable in-place cash flow of $794,964/yr provide a visible income floor, but the 23.6% loss-to-lease is effectively permanent under current tenancy unless the hold strategy explicitly underwrites turnover-driven mark-to-market over a long horizon. Buyers should stress-test NOI against capex draws on a 1926 structure and should not assign value to loss-to-lease recovery without a credible, unit-level turnover assumption grounded in historical vacancy rates for this asset specifically.