The Real Deal New York

Belnord leads Fitch loan pool downgrade

December 29, 2011 06:41PM
By David Jones


The Belnord and Extell’s Gary Barnett

Fitch Ratings today said it downgraded a pool of $4.53 billion in commercial real estate loans from JPMorgan Chase, led by the Belnord, a landmark Upper West Side rental building owned by Extell Development President Gary Barnett.

The Belnord loan, the biggest contributor to losses in the pool, at 7.9 percent, was harmed by the recent decision that affirmed the controversial Stuyvesant Town and Peter Cooper Village ruling that New York City landlords would have to refund rent overcharges in buildings that received J-51 tax benefits.

The ruling effectively means that landlords cannot raise rents on rent-stabilized apartments to market rates, and if those units were illegally converted, the tenants can get reimbursed for past overcharges.

“The decision is basically whether Barnett wants to put up more money and retain the building or let it go,” said one analyst who asked not to be identified. “He just may wipe his hands of the property.”

The Belnord, a 215-unit building at 225 West 86th Street with more than 60,000 square feet of retail space, was acquired by Barnett in 1994 for $15 million, one of his first major acquisitions after becoming a New York real estate developer. He has since grown Extell into one of the most powerful firms in the city, with existing luxury towers including the Rushmore and Aldyn and the massive One57 luxury tower in the works.

Fitch reports that the $375 million Belnord loan was transferred into special servicing with LNR in June 2011, for imminent default.

The loan was originally structured with a $50 million reserve fund for debt service, but only $12.2 million remains. Fitch estimates at current operating levels, the fund will last one more year.

According to Streeteasy.com, a number of 2,500-square-foot, four-bedroom units were renting for $17,500 a month in November.

Barnett declined to comment through a spokesperson.

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