Brooklyn multifamily portfolio transferred to special servicing

"The portfolio is tied to a $22.5 million loan that has been securitized and sold to investors. The buildings are clustered around the Brooklyn neighborhoods of Bedford-Stuyvesant and Crown Heights, between Eastern Parkway and Brooklyn's Broadway. One of the buildings is in Borough Park."

"Expenses equal about one-fifth of revenue, the same as when the loan was underwritten, according to Morningstar Credit. Debt service, at $860,031 per year, hasn't changed as revenue has increased. Net operating income, which is a measure of profit, is more than double the annual debt service. The building is 100 percent occupied."

"Over the summer, the borrower failed to pay insurance and taxes, according to information from the servicer provided to Morningstar. The servicer has paid more than $735,000 in taxes and insurance on behalf of the tenant. In October, the portfolio fell delinquent on its debt."

A seven-building multifamily portfolio in Brooklyn neighborhoods including Bed-Stuy, Crown Heights, and Borough Park is experiencing financial distress. The $22.5 million securitized loan, underwritten in 2021, has fallen 90-120 days delinquent as of February. Despite strong fundamentals—100 percent occupancy, expenses at one-fifth of revenue, and net operating income more than double annual debt service of $860,031—the borrower failed to pay insurance and taxes over the summer. The servicer has covered over $735,000 in these obligations. The portfolio was transferred to special servicing in January. The operator, B&H Management, sponsored by controversial landlord Zalmen Wagschal, disputes insurance costs imposed on the buildings.

Read at therealdeal.com