Rent-stabilized heavyweight City Skyline just took another punch.
After defaulting on loans tied to five rent-regulated buildings this summer, the firm, headed by Douglas Peterson, was hit by pre-foreclosure filings from Fannie Mae on 11 buildings in Upper Manhattan and the Bronx, court records show.
Peterson’s latest defaults total $72 million, bringing the firm’s distressed debt to $108 million. That’s about one-third of City Skyline’s $316 million portfolio, according to landlord tracker Who Owns What.
The buildings listed in the pre-foreclosure complaint are also rent-stabilized. About half of the portfolio’s 302 units are rent-regulated, tax records show.
The City Skyline buildings named in the pre-foreclosure filings are 2705 and 2707 Morris Avenue, 2120-2126 Tiebout Avenue, 505 West 135th Street, 561 West 144th Street, 522 West 148th Street, 554 West 148th Street, 452 West 164th Street, 503 West 169th Street, 622 East 169th Street and 712 West 180th Street.
City Skyline could not be reached for comment.
Brokers reported signs of rent-stabilized distress early this year as owners exposed to the decaying assets began to buckle under the one-two punch of the 2019 rent law and rising expenses, especially interest rates.
The legislation effectively capped rents on stabilized apartments. Inflation, along with the pandemic’s hit to rent rolls, a bungled rent relief program, an eviction moratorium, a “cancel rent” campaign and rising interest rates, have made it impossible for some landlords to make their mortgage payments.
It’s possible Peterson will secure a workout with Fannie Mae. PincusCo noted that lenders, in some instances, must file pre-foreclosure actions to renegotiate loan terms.
But as more foreclosure filings have hit public records, brokers say agency lenders have been quick to foreclose.
“They don’t seem to be willing to work with their borrowers,” Alpha Realty’s Lev Mavashev told The Real Deal in September.
Mavashev said rent-stabilized owners don’t have the same relationships with Fannie Mae and Freddie Mac that they may have built with regional banks that specialize in such properties.
After Signature Bank’s collapse, New York Community Bank stands as the top lender to rent-stabilized multifamily. The bank last week reported $2 million in multifamily loans marked non-recoverable, twice what it had reported last year, but just 7 percent of its total apartment loan book.
The industry expects rent-stabilized distress to spread. Valuations have fallen between 20 and 45 percent and brokers say even buildings priced to sell have not moved.
A few months back, Mavashev said he was working to sell 735 East 182nd Street, a fully stabilized building in the Bronx that backs an agency loan.
“I’m trying to talk to [loan] servicers, I’m trying to let them know, ‘Hey, we’re marketing this; here’s the bids we’re getting.’ But they don’t seem to be cooperative.”
The lender filed to foreclose on the building in June. The case is pending.
Read more
Commercial
New York
Another rent-stabilized landlord faces foreclosure
New York
Distress in rent-stabilized buildings rises to surface
Commercial
New York
Cut and run: Rent-stabilized landlord sells at 44% haircut