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New York Landlord's Portfolio Goes Into Special Servicing

Pinnacle Group Not Meeting Financial Expectations on Upper West Side Portfolio
April 1, 2009
Standard & Poor's Ratings Services placed its ratings on commercial mortgage-backed securities (CMBS) GE Commercial Mortgage Corp. Series 2007-C1 Trust on CreditWatch with negative implications. The action comes primarily from problems with loans tied to New York landlord Pinnacle Group and its owner Joel Weiner.

The loan, called the Manhattan Apartment Portfolio loan ($192.1 million), is secured by 1,083-unit apartment units in 36 apartment buildings on the Upper West Side of Manhattan. Most of the units in the portfolio are subject to rent-stabilization laws and the borrowers had intended to convert rent-stabilized units into market-rent units.

The loan was transferred to special servicer LNR Partners Inc. on Feb. 26. Standard & Poor's preliminary analysis of the MAP loan indicates a 48% valuation decline since issuance in 2007.

At issuance, Standard & Poor's estimated the borrower would be able to convert 88 units per year to market rents; however, only 14 units have been converted since issuance.

Since its October 2008 review the interest reserve has declined 34% to $11.8 million.

The master servicer, KeyBank Real Estate Capital, reported debt service coverage of 0.36x for the year-ended ended Dec. 31, 2008, compared with 0.40x for the year ended Dec. 31, 2007.

Wiener has ownership and management interests in an estimated 100 buildings totaling approximately 20,000 rental apartment units in the New York City metropolitan area.

Currently, New York City landlords cannot increase rental rates on rent stabilized units more than approximately 4% annually until they reach $2,000 per month and the tenant income exceeds $175,000 for two consecutive years.

New York state is proposing tenant-friendly changes that could increase the rent trigger to $2,700 and the income trigger to $250,000. This can extend a unit's participation in the rent regulation program up to eight additional years, according to recent analysis by Fitch Ratings.

The Manhattan Apartment Portfolio properties in GE 2007-C1 consist of 36 multifamily buildings (1,083 apartment units and two office suites) situated between West 100th and West 161st streets.

Download this story and all of the stories in the Watch List Newsletter here. The Adobe pdf version also includes all of this week’s leads of distressed properties and loans of concern, lease cancellations applied for in bankruptcy proceedings, all of the local and national facility closures & layoffs, banks with distressed real estate portfolios and lists of loans approaching their maturity date. Plus the pdf version contains bonus news items not found in these columns or the CoStar Group web news pages.

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