Distress Mounting For New Jersey Investor Who Amassed Large Atlanta Apartment Portfolio

Yakov Stein has spent the past few years acquiring apartments across the Southeast, including more than 1,000 units in Metro Atlanta. 

But the Lakewood, New Jersey-based investor, who has been backed by his insurance mogul father, is facing a possible foreclosure at a 224-unit Atlanta apartment building near Northlake Mall and hasn't made a mortgage payment since April at a 508-unit apartment complex in Peachtree Corners.

An entity registered to Stein defaulted on the $46.5M mortgage tied to the Parkway Vista apartment complex in Atlanta, according to a public foreclosure notice published this month. An auction has been scheduled for Aug. 6 at the DeKalb County Courthouse.

Another Stein affiliate defaulted on a loan backed by the 508-unit 3500 The Vine apartment complex, according to servicer commentary in the Morningstar Credit database.

Stein acquired the property, built in 1981, for $62.6M in 2019, according to Gwinnett County property records. He took out a $53.2M mortgage to finance that purchase, then refinanced that loan in 2022 with a $75M debt package from FS Credit Real Estate Investment Trust.

Both loans were broken up into two pieces, the larger of which were sold into commercial real estate collateralized loan obligations. A $48.3M slice of 3500 The Vine was securitized into the $600M FS Rialto 2022-FL5 CLO, while $30M in debt tied to Parkway Vista was sold into the FS Rialto 2022-FL7 CLO. 

Both loans were originated by Philadelphia-based asset manager FS Investments in 2022 and are being serviced by Rialto Capital Partners. Rising interest rates have left Stein's properties unable to cover their debt service.

Stein is a guarantor on both loans alongside his father, Nachum Stein, who founded and runs American European Group, a regional insurance provider in the Northeast U.S.

According to a DBRS Morningstar report for FS Rialto 2022-FL5, Yakov Stein runs Silver Point Group, which invests AEG's assets into real estate and has built a portfolio of more than 3,000 apartment units across the Southeast. He reported his net worth as $13M, and Nachum Stein's was reported at $118.1M, according to DBRS Morningstar.

Yakov Stein didn't respond to multiple requests for comment. Spokespeople for Rialto and FS Investments also didn't respond to calls and emails seeking comment.

At 3500 The Vine, declining occupancy has contributed to Stein's inability to make payments. At the time of the 2022 mortgage, the property was 89% full and comfortably covering its debt service. Occupancy has since fallen to 77%, according to Morningstar Credit, and the property is only generating enough income to cover about half of its monthly mortgage payments.

The CLO piece of the debt was transferred to special servicing last month "for imminent monetary default," according to special servicer commentary via Morningstar Credit. 

Stein hasn't made a payment on the 40-building complex since April, according to Morningstar. On April 11, there was a shooting in a parking lot on that property after a 19-year-old man allegedly tried to rob a person parked in a truck and fired at the vehicle when it drove away, Fox 5 Atlanta reported.

A Stein company also owns the 285-unit Reserve at LaVista Walk apartment complex, where one of two buildings was destroyed by a three-alarm fire in October and 100 residents were displaced. That property is current on its mortgage, according to the Morningstar Credit database, although it is unclear how it is generating sufficient income.

Months of missed mortgage payments led to the 224-unit Parkway Vista complex going into foreclosure this month.

The $30M loan was originated in April 2022 and went into delinquency in the fall of 2023 as the property's income was only covering roughly 47% of its debt service, according to special servicer commentary.

Stein — who paid $55.3M to acquire the complex, according to the Reonomy database — missed payments from December to March, when the loan was marked as paid off, according to Morningstar Credit.

But according to the foreclosure notice, the loan was assigned in March from the CLO to FS CREIT Finance Holdings, then assigned again last month to an entity called FS CREIT Parkway Vista LLC. That's the entity that moved to foreclose on Stein and the full $46.5M owed. 

Issuers of CRE CLO debt have been increasingly buying out troubled loans from the debt instruments to prevent the number of delinquent loans in each package from rising too high, according to a JPMorgan Chase analysis.  

The CRE CLO market has been flagged as "the first shoe to drop" in times of real estate stress because it has been used to largely finance loans seen as too speculative for a traditional CMBS loan, Bloomberg reported. The share of troubled CRE CLO loans quadrupled this spring, according to CRED iQ.