Luxury Upper West Side Apartments Head To Special Servicing
A loan on a luxury apartment tower with views of Central Park has been transferred to special servicing ahead of a potential default despite record multifamily rents in Manhattan.
A&R Kalimian Realty’s 43-story glassy residential tower The Aire, which sits close to Lincoln Center on Manhattan’s Upper West Side and features amenities like a private party deck and courtyard, has struggled to make its debt payments ahead of its CMBS loan's maturity later this year.
The $250M loan — split into a $225M senior loan and a $25M subordinate loan — was moved to special servicing on June 1 "due to imminent maturity default," according to special servicer commentary in the Morningstar Credit database. Approximately $195.8M is still due on the loan, which was originally provided by JPMorgan Chase. Commercial Observer first reported the loan's transfer.
The loan had a trigger clause if the debt service coverage ratio at the property dropped below 1.05x. The loan matures in November and is secured against the 310-unit luxury towers at 200 West 67th St.
The loan was added to the lender's watchlist in 2017 due to its low debt service coverage ratio after its 10-year tax abatement ran out, according to loan rating agency Morningstar. The end of the abatement led to tax increases of 20% every two years since 2014.
The Aire’s loan worries were then exacerbated by the pandemic, when its occupancy dropped to 70%, according to Trepp data reported by Commercial Observer. Occupancy rose to 93% by the end of 2022 and to 97% by March, according to Morningstar Credit's database. The loan is now in cash management following the trigger event.
“Borrower indicated the residential rental market in New York has been decimated in relation to COVID-19, thus, they are offering rent reductions and free rent to retain tenants and rent vacancies,” loan servicer commentary from April reads.
“The property was certainly impacted by the pandemic, but cash flow issues were evident pre-pandemic,” CRED iQ Senior Managing Director Marc McDevitt told CO. “The borrower is likely anticipating refinance issues and getting an early jump on negotiations for relief, extension, or some other modification of debt.”
