Fannie Mae Moves To Foreclose On 11 Rent-Stabilized NYC Buildings
A $72.3M loan on a group of rent-stabilized properties owned by multifamily landlord City Skyline Realty is the subject of pre-foreclosure action by government-sponsored lender Fannie Mae.
The agency filed pre-foreclosure actions against 11 City Skyline-owned buildings on Monday after the Douglas Peterson-owned firm defaulted on loans it received in 2019 and 2020, PincusCo first reported. Arbor Realty Trust originated the loans, which were later bought by Fannie Mae.
“Plaintiff has mortgages on each of the Properties, which secure loans that have been in default since the beginning of 2023,” the complaint, filed with courts in the Southern District of New York, reads. “Each mortgage loan is guaranteed by Douglas Peterson.”
City Skyline-affiliated LLCs failed to make monthly payments on the residential buildings in upper Manhattan and the Bronx starting in February, the complaint says. Peterson and other guarantors approached lenders to discuss difficulties with the loan in July, according to the complaint, and had signed a letter establishing the conditions for negotiating the loans by Aug. 1.
The pre-foreclosure proceedings themselves may be part of the negotiation process, PincusCo reported.
The 11 properties total 302 units, around half of which are rent-regulated, The Real Deal reported.
The largest loan in default is just shy of $12M and is secured by a 75-unit Fordham Heights rental at 2126 Tiebout Ave., according to PincusCo. The other properties serving as collateral for the loan are 2705 Morris Ave., 561 West 144th St., 622 East 169th St., 2707 Morris Ave., 452 West 164th St., 503 West 169th St., 505 West 135th St., 522 West 148th St., 554 West 148th St. and 712 West 180th St.
The Fannie Mae action comes two months after another City Skyline Realty default prompted CMBS trustees to file pre-foreclosure actions over a $26M loan. The CMBS loan is backed by four Harlem rental properties.
Combined, the defaulted buildings comprise approximately a third of City Skyline’s portfolio, which is valued at $316M, according to The Real Deal.
Landlords of rent-stabilized properties have raised alarms over their financial situation since 2019, when New York state passed new tenant protection laws that restricted their ability to raise rents. Those rules, high interest rates and increases to property taxes and maintenance costs have driven net operating incomes to fall 14% between 2016 and 2021, the Rent Guidelines Board said earlier this year.
Valuations have also fallen by as much as 45% for rent-stabilized properties, according to The Real Deal. In September, a 16-property portfolio in Manhattan's Inwood neighborhood sold at a 44% discount on what its seller paid for the building in 2015.
