The developers of a 143-unit apartment building in Long Island City have fallen behind on mortgage payments after the interest rate backing their property, which they delivered in 2021, more than doubled.

After local developers JMH Development and Mettle Property Group finished The Astor LIC at 36-20 Steinway St., they refinanced their construction loan with a $52.5M mortgage from Harbor Group International which was packaged into a collateralized loan obligation.

The three-year, floating-rate loan matures in September, but JMH and Mettle — run by Jason Halpern and Gerard Longo, respectively — didn't make the monthly interest payments in October, November and December on the loan, according to servicer commentary in the Morningstar Credit database.

The loan was placed on a watchlist in November when it was first delinquent. As of the latest commentary from master servicer KeyBank in December, nearly $1.3M is outstanding on the mortgage, which was declared in default in October.

The floating-rate loan was issued at roughly a 4% interest rate in September 2021 when the developers refinanced the six-story, mixed-income apartment building with ground-floor retail, Halpern said.

Since then, the interest on the loan has risen to an all-in rate of 9.2%, according to Morningstar Credit Head of CRE Analytics David Putro. Halpern said the developers didn't purchase an interest rate cap on the mortgage.

"The Astor is currently fully occupied and stabilized, unfortunately we have not been immune to the escalated interest rates which have taken its toll on many quality properties," Halpern told Bisnow in an email. "We are in the process to refinance with an agency loan at a significantly lower rate."

JMH and Mettle have a 99-year ground lease that expires in 2115 on the property, which is owned by the parent company of discount supermarket Western Beef. They secured a 421-a tax abatement for the building's development, keeping 43 of its units as restricted to those earning up to 130% or less of the area median income.

Lease-up of the 100 market-rate units in the building was handled in an unorthodox way. The marketing of the units was outsourced to a new proptech firm, Rezi, which paid the landlords $4M upfront for the vacant units at the building, according to a press release issued in July 2021.

The loan was underwritten with market-rate rents at a stabilized rate of $3,355 per unit. But as of March 2022, the property was 94% occupied with an effective rental rate of $2,760 per unit, according to servicer commentary. Units at the building last year leased for between $3,100 and $6,250 per month, according to StreetEasy.