UPDATED, 5:49 p.m., October 1: Savvy real estate investors made a killing on distressed properties in the wake of the financial crisis. But as the market continues to get stronger — and as distressed assets continue to be worked out — the well has dried up.
“Last August, we had $4 billion in loans delinquent for more than 60 days in New York City, now we’re down to $3.5 billion,” said Joseph McBride, a research analyst at commercial mortgage analytics website Trepp. “There were 35 loans on the list last year, now there are 25.” The overall delinquency rate for properties in the city also fell, to 5.43 percent from 6.5 percent.
“It’s a good sign for the city, obviously,” added McBride, noting that he expected the overall amount of delinquent loans to drop even further next year. Despite an outlier like the $3 billion outstanding loan on Stuyvesant Town – Peter Cooper Village, McBride said lower-balance loans are getting resolved in a far timelier manner.
“Once that thing [Stuy Town] gets resolved,” he said, “it’s a huge rock in the pipe that’s cleared out.”
The majority of delinquent loans are for multifamily properties with pro-forma underwriting, Trepp analysts said, meaning that the borrower was betting on rents to appreciate.
Here are the 10 largest delinquent loans on New York City real estate assets, according to Trepp data from August.
Stuyvesant Town-Peter Cooper Village (Manhattan)
Outstanding balance: $3 billion
Stuy Town’s financial troubles started after a disastrous $5.4 billion takeover led by Tishman Speyer and BlackRock at the very height of the property boom in 2006. The buyers turned over the keys to the complex in 2010, making it one of the largest casualties of the real estate downturn.
Senior bond holders represented by CWCapital Asset Management now control the sprawling, 11,000-apartment, 110-building complex, which a recent deed transfer valued at just over $4.4 billion. Last month, CWCapital, which is angling to sell the complex, agreed to extend a deadline on talks to keep it affordable. Private equity giant Fortress Investment Group, which owns CW Capital, is said to be readying a $4.7 billion bid for the complex.
An estimated 5,000 apartments in the complex are now market-rate.
Riverton Apartments at 2156 Madison Avenue (Manhattan)
Outstanding balance: $225 million
Stellar Management’s Larry Gluck and private equity giant the Rockpoint Group paid a hefty $135 million for this Harlem rent-stabilized complex in 2005, which has 1,228 apartments in seven buildings, and counts Mayor David Dinkins and the jazz pianist Billy Taylor among its former residents.
A year later, Gluck refinanced Riverton for $250 million, a move that allowed him to recoup his $44 million initial investment and make a hefty profit on the deal, according to the New York Times.
In 2009, Gluck defaulted on the debt and offered to turn over the deed in lieu of foreclosure. The delinquent loan currently stands at $225 million, Trepp’s data show.
The Shoreham Hotel at 33 West 55th Street (Manhattan)
Outstanding balance: $33.8 million
The 50,000-square-foot, 11-story hotel was owned by ARK Partners, whose principals are Brad Reiss and John Yoon. The loan, which was originated by Column Financial in 2006, was recently moved to special servicer C-III Asset Management, which is pursuing a deed in lieu of foreclosure, according to Trepp.
1865 Burnett Street (Brooklyn)
Outstanding balance: $31 million
This 144-unit apartment complex in Marine Park lost half its tenants during a four-year foreclosure suit, and served as a refuge for Hurricane Sandy victims in 2012.
The complex’s owner, Victor Dedvukaj, took out a $31 million loan on the property in 2007. In 2009, lender Torchlight Loan Services sued, claiming Dedvukaj had missed four monthly payments, and later took control of the property, according to Trepp.
1604 Broadway (Manhattan)
Outstanding balance: $25.7 million
SL Green Realty and Onyx Equities, the former ground lease holders on this large Times Square retail building, formerly home to the Spotlight Live Club, fell behind on the $27 million dollar loan attached to the property.
The loan, which was provided to the operators by Deutsche Bank in 2007, was transferred to special servicer LNR in 2009, according to Trepp’s data, and is secured by the partnership’s leasehold interest in the 29,875-square-foot property.
The land beneath is owned by Farmore Realty. Torchlight took over as the special loan servicer from LNR in 2012, according to Trepp.
In June, a RKF team led by Robert Futterman was hired to market the property, which is adjacent to a Sbarro restaurant and beauty product purveyor L’Occitane en Provence.
Cross Island Plaza at 133-33 Brookville Boulevard (Queens)
Outstanding balance: $24.2 million
Montvale, N.J.-based Ivy Equities paid $24.3 million last year to acquire this 230,000-square-foot office building from the seller, Block 12892 Realty Corp., as part of a court-approved bankruptcy plan. But according to commentary from special servicer CWCapital cited by Trepp, the “allocation of sale proceeds still remain subject of extensive ongoing litigation.”
Clarion LaGuardia Airport Hotel at 9400 Ditmars Boulevard (Queens)
Outstanding balance: $16.6 million
This 78,246-square-foot, 172-room hotel is located in East Elmhurst, Queens. The loan’s special servicer, Torchlight, took control of the property in 2009.
Food Emporium at 2409-2415 Broadway (Manhattan)
Outstanding balance: $15.3 million
Benjamin Ringel, the president of Armstrong Capital and a developer of shopping centers, lost a foreclosure case involving a defaulted loan backed by the 20,800-square-foot retail condo at the property, which is net leased to Food Emporium through 2025.
Special servicer LNR originally filed suit against Ringel in 2012, alleging default on a $16.3 million loan balance at the Food Emporium site. Ringel is now locked in a court battle with lender Acadia Realty Trust.
326 Warren Street (Brooklyn)
Outstanding balance: $11.1 million
This 48-unit, 63,207-square-feet multifamily property in Cobble Hill took out a $12.9 million loan in 2004 from CIBC, and still owes $11.1 million, Trepp data show. The property, listed in property records as belonging to Smith Street Realty, was built in 1904 and renovated in 2002.
Correction: A property that was previously on this list has been removed, after representatives for the owner produced evidence that the owner is not required to make debt service payments and that the property is not in default, as a temporary restraining order is in place.