A Brooklyn multifamily portfolio appears to be in trouble.
The seven-building portfolio operated by B&H Management and sponsored by one-time “worst landlord” Zalmen Wagschal has been delinquent on payments and transferred to special servicing, according to information the servicer provided to Morningstar Credit.
The portfolio is tied to a $22.5 million loan that has been securitized and sold to investors.
The buildings are clustered around the Brooklyn neighborhoods of Bedford-Stuyvesant and Crown Heights, between Eastern Parkway and Brooklyn’s Broadway. One of the buildings is in Borough Park. The addresses are 30 Claver Place, 269 Kosciuszko Street, 1100 DeKalb Avenue, 119 Albany Avenue, 4219 15th Avenue, 662 Park Place and 132 New York Avenue.
But it’s not clear why the buildings might be falling behind on payments. The refinancing loan was underwritten fairly recently, in 2021.
Expenses equal about one-fifth of revenue, the same as when the loan was underwritten, according to Morningstar Credit. Debt service, at $860,031 per year, hasn’t changed as revenue has increased. Net operating income, which is a measure of profit, is more than double the annual debt service. The portfolio is 100 percent occupied.
Over the summer, the borrower failed to pay insurance and taxes, according to information from the servicer provided to Morningstar. The servicer has paid more than $735,000 in taxes and insurance on behalf of the tenant.
B&H Management did not respond to a request to comment for this story. But Crain’s reported that Wagschal’s attorney, Avinoam Rosenfeld, said the landlord says he purchased insurance and disputed the cost of the new policy forced on his buildings.
In October, the portfolio fell delinquent on its debt. The borrower sent payments for October and subsequent months, but they were insufficient, the servicer said. The loan is listed as 90-120 days delinquent as of February. The loan was transferred to special servicing in January.
The seven properties were appraised at $34,200,000 when the loan was underwritten in 2021. That valuation has not been refreshed.
It’s not Wagschal’s first time dealing with loan trouble. In 2023, he filed for bankruptcy protection on six walk-up buildings in Central and Northern Brooklyn. An analysis by The Real Deal at that time found that Wagschal had borrowed aggressively against the buildings
Between 2019 and summer 2023, Wagschal defaulted on loans backing at least 14 properties tied to $30 million in debt, resulting in 11 foreclosure actions.
In 2016, Wagschal made the public advocate’s worst landlords list for his properties’ total of 385 housing code violations.
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