Lakewood, New Jersey-based investor Yakov Stein is the latest to join the growing club of distressed multifamily owners.
Two of his Atlanta properties are looking at possible foreclosures, BisNow reported.
One is for a $46.5 million mortgage on a 224-unit Parkway Vista apartment complex near Northlake Mall, where a public foreclosure notice was published this month. An auction is scheduled for early August.
The other is a 508-unit, 40-building apartment complex at 3500 The Vine in Peachtree Corners that hasn’t made a mortgage payment since April, according to BisNow.
While the investor has spent the past few years acquiring apartments across the Southeast, rising interest rates and decreased occupancy have left Stein’s properties unable to cover their liabilities.
Stein’s entities acquired the Parkway Vista property for $62.6 million in 2019 with a $53.2 million mortgage, according to property records.
Stein later refinanced that loan in 2022 with a $75 million debt package from FS Credit Real Estate Investment Trust, according to BisNow. The loans were broken up into two pieces, with the larger being sold into commercial real estate collateralized loan obligations.
One of the loans went into delinquency in the fall of 2023 as the property’s income was only covering slightly less than half of its debt service, BisNow reported.
Stein guaranteed both loans with his father, Nachum Stein, who founded and runs American European Group.
Declining occupancy at the Peachtree complex, which fell from 89 percent in 2022 to 77 percent, has contributed to Stein’s inability to make the mortgage payments, according to Morningstar. The property is only generating enough income to cover about half of its monthly mortgage payments.
Multifamily distress has nearly tripled in six months. Apartment deals marked delinquent or in special servicing and financed with commercial mortgage backed securities loans jumped 185 percent in late June from January, according to a report by CRED iQ.
The debt on CRE CLO’s, which are floating-rate and short-term, were a go-to option for investors eyeing quick exits early in the pandemic when interest rates were low. However, since rates have skyrocketed, many of those borrowers are struggling to make loan payments.
Issues of CRE CLO debt have been increasingly buying out troubled loans from the debt instruments to prevent the number of delinquent loans in each package from rising too high, according to a JPMorgan Chase analysis.
According to a Bloomberg report, the CRE CLO market has been flagged as “the first shoe to drop” in times of real estate stress because it has been used to largely finance loans seen as too speculative for a traditional CMBS loan.
— Christina Previte
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