Harlem Complex May Be Put Up For Auction

Source : The Business Times, February 19, 2009

(NEW YORK) Riverton Apartments, a high-rise complex in Manhattan's Harlem neighbourhood, may be auctioned off this Friday because owners Rockpoint Group LLC and Stellar Management have been unable to modify loan terms, according to Trepp LLC, a commercial real estate data company.

In trouble: A recent appraisal valued the property at US$196million, down from US$340 million in a December 2006 valuation. If the property were to sell for US$196 million, the commercial mortgage bond trust would take a loss of US$29million plus expenses

The mezzanine lender is holding a public sale to foreclose on all of its pledged collateral, Trepp said, citing documents from the servicer of the loan. The lender is not identified. A recent appraisal valued the property at US$196 million, down from as much as US$340 million when the complex was last appraised in December 2006, Trepp said.

The Riverton loan was packaged into bonds as part of a US$6.6 billion commercial mortgage debt offering sold in March 2007 by Citigroup Inc and Deutsche Bank AG, according to Bloomberg data. If the property were to sell for US$196 million, the commercial mortgage bond trust would take a loss of US$29 million plus expenses, according to Trepp estimates.

'The sale of the property, should it take place, will be closely watched by the CMBS market as investors try to get a sense of what properties like the Riverton are worth,' Trepp said. 'The value of the Riverton in foreclosure would give the market a new benchmark.'

Foreclosure proceedings were filed in court this month, according to the loan documents. The documents do not disclose the location of the court or the exact date of the filing. 'We continue to work with the mortgagee in a cooperative manner and are hopeful for a good result,' Larry Gluck, a principal of Stellar Management, said.

Riverton has 1,230 apartments, according to Trepp. Its addresses are 2171-2200 Madison Ave, 2225-2265 Fifth Ave, 10 East 138th St, 45 East 135th St.

Delinquencies on commercial mortgages bundled and sold as bonds may triple by late this year as large real estate loans default, Standard & Poor's said on Tuesday.

Late payments on commercial mortgages reached 1.10 per cent during the fourth quarter of last year, and have been climbing since the low of 0.27 per cent in March 2007, S&P said. The commercial real estate market is in the early stages of a correction, and delinquencies may reach 3.5 per cent this year, the New York-based ratings company said. Yields on commercial real estate securities rose to near-record highs relative to benchmarks last August when a trustee report showed Rockpoint and Stellar would likely miss their September payment.

Loans against the Riverton were financed using income projections that assumed rent-stabilised apartments in the complex would be converted to market rate faster than they have been. Tishman Speyer Properties LP and BlackRock Realty relied on similar projections when they purchased Stuyvesant Town and Peter Cooper Village, Manhattan's largest apartment complex, for US$5.4 billion in 2006.

A reserve fund for Stuyvesant Town and Peter Cooper may run dry in six months unless it is replenished, New York-based Fitch Ratings said in a Jan 23 report. -- Bloomberg