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Blackstone has sold the majority stake in 11 of its Manhattan multifamily properties, dodging foreclosure efforts from its lenders.
Atlas Capital Group shelled out $142.5M to acquire a 51% interest in the properties, a price that would indicate a sizable discount to its previous sale, The Real Deal reported.
Atlas' purchase, which was first reported by PincusCo, included buying $90M in mezzanine debt from South Korean investment firm Mirae Asset Daewoo, which had placed the debt up for sale via Meridian Capital Group in April and triggered speculation that the loan was distressed.
The portfolio’s $271M senior CMBS debt was sent to special servicing in February after the portfolio’s cash flow stopped covering the monthly debt payments and Blackstone decided not to fund the shortfall, Bisnow reported at the time. Moody’s downgraded the portfolio’s debt service coverage ratio to sub-1.
A spokesperson for Blackstone told TRD the mezzanine debt had been paid off and that the senior loan is no longer in special servicing after it exercised a one-year extension option.
"We are pleased to have reached an agreement with our lenders that is in the best interests of all parties involved," a spokesperson for Blackstone told Bisnow in a statement.
The properties in question span 637 units dotted between the Upper East Side, Midtown and Chelsea. They include luxury building The Grove at 250 West 19th St. and a cluster of properties near Hudson Yards on West 30th St.
Atlas’ mezzanine debt purchase means that the default risk is no longer a concern for investors in the CMBS trust. But the prices paid by Atlas indicate that the equity may have disappeared from the portfolio.
A $142M price for a 51% stake would work out to a total portfolio value of $278M. Blackstone paid 43% more than that in 2015 when it bought the portfolio for $487M. The decline puts the property value $7M above the balance on the CMBS loan.
Blackstone denied there was no equity left in the portfolio, saying that the value of the transfer didn’t translate to the portfolio’s value. Instead, it said that its difficulties with the portfolio came from the renovations it performed on the decades-old properties.
"This legacy urban apartment investment faced challenges because significant capital was required to bring 60+ year-old product up to our standards and is not representative of the strength we’re seeing in our broader rental housing portfolio, which is nearly 40 years newer on average and highly concentrated in the Sun Belt," Blackstone said in a statement provided to Bisnow.
New York's multifamily market has outperformed the rest of the country this year with record-high rents and low vacancies, but there are still a large number of debt maturities on the horizon that could trigger further defaults, as interest rates are far higher today than when most loans were underwritten.
Buildings with rent-regulated apartments have seen their values drop by between 20% and 65% since 2019, according to a Maverick Real Estate Partners analysis earlier this year. Most, but not all, of the units in Blackstone's portfolio are market-rate.
UPDATE, AUG. 31, 3:30 P.M. ET: This story has been updated to include comment from Blackstone.
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