While an expected wave of distressed property sales hasn't yet hit, ripples are starting to emerge.

New York landlord Chetrit Group is looking to sell more than 8,000 residential units it acquired across 10 states in 2019 as it faces default on a $481M loan it used to finance the acquisition, The Real Deal reports, citing a report by Trepp.

The CMBS loan, originated by JPMorgan Chase, was used to acquire 8,671 units New York, Illinois, Indiana, Ohio and several Sun Belt states, but despite strong nationwide demand for apartments in nearly four years since the acquisition, the portfolio had an occupancy of just 76% in the year leading up to March 2022, per Trepp.

The occupancy rate hasn't been high enough to pay the debt service on the floating-rate loan, which was pegged to Libor. The loan was originated at an 84% loan-to-value ratio, The Real Deal reported in 2019, and rising interest rates last year could have caused debt service payments to double.

It's not the first CMBS loan from 2019 Chetrit has struggled to stay current on. Jacob Chetrit and his sons, Michael and Simon, acquired 850 Third Ave. from Chinese conglomerate HNA Group in 2019 for $422M, and two years later, the $177M CMBS loan on the 617K SF building was sent to special servicing.

Harbor Group International, which owned the $25M junior mezzanine loan on Chetrit’s 850 Third Ave., initiated a UCC foreclosure auction, but Chetrit was able to pay off its debt when it refinanced the property with $320M investment firm HPS Investment Partners.

Multifamily properties bought in the low-interest rate environment before last summer are seen as some of the most prime buying opportunities for distress investors.