One of New York City’s largest multifamily owners, months after defaulting on a CMBS loan backed by dozens of apartment buildings, is now in jeopardy of losing the properties.
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A&E Real Estate Holdings was hit with a preforeclosure lawsuit over a $506.3M loan backed by a 31-property portfolio that includes the massive Harlem housing complex Riverton Square. PincusCo first reported the filing.
The portfolio covers 53 buildings throughout Manhattan, Brooklyn, Queens and the Bronx and totals more than 3,500 housing units, according to a 2021 analysis of the loan by ratings agency Morningstar.
The loan, originally provided in 2021 by JPMorgan Chase, was securitized into a CMBS trust. A&E has been in default on the loan since it matured on June 9, special servicer KeyBank claims in the filing.
The portfolio also is tied to a $93.7M securitized mezzanine loan.
An A&E Real Estate spokesperson told Bisnow by email that the litigation is part of an ongoing negotiation with senior and mezzanine debtholders that will be resolved within the next 45 days.
“A&E has always made and continues to make interest payments and will continue to maintain the highest standards at these properties for our residents,” the A&E spokesperson said.
A KeyBank spokesperson declined to comment.
Riverton Square, a 1,200-unit housing complex in Harlem that is roughly 80% rent-regulated, is one of the buildings used to secure the loan.
A&E acquired the complex in 2015 after previous owner Stellar Management lost it in a foreclosure sale in 2010. But the property’s value had fallen so much that its loan-to-value ratio had grown 200% by the time its loan maturity date rolled around, The Real Deal previously reported.
Other properties subject to the filing include a 200-unit Rego Park property at 98-51 Queens Blvd., a 41-unit building at 65 Ocean Ave. in Prospect Lefferts Gardens, and a 62-unit building at 909 Sheridan Ave. in the Bronx’s Concourse Village neighborhood.
Morningstar flagged the age of the properties, all initially constructed between 1915 and 1964, as potentially problematic in its 2021 analysis of the loan.
“The high leverage point, combined with a lack of scheduled amortization, pose potentially elevated refinance risk at loan maturity,” the ratings agency’s analysis says.
Owners of rent-stabilized units have struggled to refinance in NYC in recent years.
Owners have faced a one-two punch in the form of New York state’s 2019 tenant protection laws, which made the asset class unappealing to investors because of strict limitations of rental increases, and 2023’s regional bank failures that resulted in the primary lenders on the asset class pulling back from the market.
In the meantime, rent-stabilized owners have also dealt with rising costs for maintenance, insurance and mortgages.
“The rent-regulated space is in a doom loop,” Marcus & Millichap broker Shaun Riney told Bisnow last month. “It takes a long time to sink the Titanic, but the Titanic is sinking.”
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