NYC Luxury Apartment Tower Loan Goes to Special Servicing

A $196M CMBS loan packaged backed by The Aire, a 310-unit luxury apartment tower on the Upper West Side of Manhattan, has gone to special servicing.

The loans on the 43-story tower at 200 West 67^th Street, which is owned by A&R Kalimian Realty, the developer who built the apartment building in 2010, is facing “imminent” default ahead of its November 2023 maturity date, according to special servicer commentary from CRED iQ.

The debt includes a $118M loan and a $78M loan that are both part of the CMBX 7 index, which includes a mix of loans in several CRE sectors. The property was valued at $365M in 2013.

According to a report from Trepp, occupancy levels at The Aire plunged to 70% in 2020 before rebounding this year to the pre-pandemic level of 97%.

While multifamily market fundamentals—unlike the office sector—appear to be stabilizing, some multifamily owner are finding themselves backed into a corner by loans coming due, plunging valuations, the rising cost of debt and a lending window for refinancing that’s been slammed shut.

As a pending wave of $1.5T in CRE loan maturities crests in the next three years—Trepp says a record $152B in CMBS backed by rental apartment buildings will expire in 2023, $940B over the next five years—many may have no option but to hand over the keys to the property.

In April, Green Street is estimating that apartment building values are down more than 20% from their peak. At the same time, rent growth is slowing, which means some properties with large, floating-rate mortgages no longer generate enough profits to make debt payments.

In April, Houston-based Applesway Investment Group defaulted on $230M in CMBS loans it used to acquire a portfolio of four Houston multifamily campuses in Houston during the pandemic, before interest rates started to go up.

Arbor Realty Trust, a publicly traded mortgage company, foreclosed on the properties and sold them to NYC-based investment firm Fundamental Partners for an undisclosed price.

In November, a $481M loan backed by The Chetrit Group’s 8,671-unit portfolio comprising 43 properties in 10 states went into special servicing.

A month later, San Francisco’s largest apartment landlord—San Francisco-based Veritas Investments—and its partner Boston-based Baupost Group defaulted on a $448M loan backed by 1,734 apartments in 62 multifamily properties across the city.