New York Foreclosures in Commercial Sector Soaring Upwards

by Simon Lindsay on cities

New York foreclosures in the commercial property sector continue to surge as more property owners and developers fail to pay their maturing acquisition and development loans.

These struggling properties span the breadth of commercial property types – multi-family, retail, industrial, mixed-use, office and lodging types – according to commercial lending analyst Trepp Group.

Trepp reported that more than 40 commercial buildings in New York City were in different stages of delinquencies and foreclosures as of the first week of March. They were either 60 days late, 90 days late, already foreclosed upon, or in non-performing status beyond maturity.

Investors and owner-occupant buyers spending time to find bank foreclosure homes in New York City can find a lot in these distressed properties as many of them are multi-family properties. Even the properties occupying the top of the Trepp distressed chart are multi-family complexes – the Riverton Apartments.

These apartment properties are a group of buildings mostly along Madison and Fifth Avenues that feature a total of 1,230 apartment units. Owners Stellar Management and Rockpoint Group have failed to work out favorable terms with their lenders, adding the apartments to listings of New York foreclosures.

The Riverton owes its lenders a loan of $225 million, but its most recent appraisal was only $196 million, far below its $340-million appraisal in December 2006. The original loan was part of a $6.6 billion mortgage debt that was sold to investors by Deutsche Bank and Citigroup in March 2007.

According to Trepp, the sale of Riverton is closely monitored by commercial property investors as its final selling price would influence the sales price of other commercial foreclosures in New York.

Just like other highly-leveraged multifamily properties in New York, the Riverton was acquired at a price using overly rosy income projections and at the assumption that rent-stabilized apartment units can be converted into market-rate units.

In the Trepp distressed commercial property list for New York as of the first week of March, 15 of the more than 40 properties are multifamily buildings, more than one-third of the assets in the list. This percentage indicates the high number of investors who projected inflated numbers of families and individuals willing and able to pay much higher rents.

According to Standard & Poor’s, New York foreclosures and delinquencies in the commercial sector may hit 3.5 percent in 2010 as more owners are unable to work out affordable refinancing or longer payment extensions.