Seven Brooklyn Buildings Tied To Zalmen Wagschal Go Into Special Servicing

"The servicer told Morningstar Credit that the borrower fell behind on payments on a $22.5 million loan, and the account was transferred to special servicing in January. The loan was listed as 90-120 days delinquent as of February, and the outlet reports that the servicer has been advancing property protections while investors evaluate the next move."

"Morningstar's underwriting summary, cited by The Real Deal, notes the portfolio was appraised at about $34.2 million when the loan was underwritten and that annual debt service is roughly $860,031. The servicer told Morningstar it has advanced more than $735,000 to cover unpaid taxes and insurance even as reported net operating income exceeded the annual debt service and occupancy was 100 percent at the time of reporting."

"Assignment to a special servicer shifts the loan into a different playbook, with a new set of powers and priorities over what happens next. Prospectus language and pooling-and-servicing agreements show special servicers can negotiate loan modifications, solicit offers for defaulted loans or pursue liquidation if that option is projected to deliver the"

A Brooklyn multifamily portfolio comprising seven buildings across Bed-Stuy, Crown Heights, and Borough Park, owned by Zalmen Wagschal, has entered special servicing after months of partial payments and missed obligations on a $22.5 million securitized mortgage originated in 2021 through Citi financing. The loan was 90-120 days delinquent as of February, with the servicer advancing over $735,000 to cover unpaid taxes and insurance. Despite 100 percent occupancy and net operating income exceeding annual debt service of approximately $860,031, the portfolio was appraised at $34.2 million. The shift to special servicing increases the likelihood of loan workouts, modifications, or property sales, drawing renewed attention to these buildings given their prior code-violation histories.

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