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.
1) 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.
2) 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.
3) 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.