Delinquent Debt, Deteriorating Conditions Fuel Property Acquisition Strategy For Some Real Estate Operators Targeting Bronx Buildings

In The Bronx, New York, Crain's New York Business reports:

• The senior debt collaterized by two overleveraged buildings in the Morrisania section of the Bronx has been sold for $31 million. Brokerage Massey Knakal Realty Services represented LNR, the special servicer which took over the debt about two years ago, in the deal.
  
  The two rent-regulated towers—Fordham Towers and Robert Fulton Terrace—are at 530 and 540 E. 169th Street and 490 E. 188th St., respectively. The two total 434,000 square feet and together boast 490 apartments. The pair were just two of many properties across the city, where owners overpaid for rental buildings during the height of the real estate market and pinned their hopes on their ability to hike rents.
  
  When the market crashed, Fordham Towers and Robert Fulton Terrace fell into foreclosure. According to sources, the buyer of the note was real estate investment firm United Realty Trust.
  
  "This was a complicated transaction given the dynamics of the assets and how long the note was in default," Massey Knakal Chairman Robert Knakal said, declining to identify the buyers. United Realty Trust executives Jacob Frydman and Eli Verschleiser did not return calls for comment.
  
  All but 39 apartments at Fordham Towers and Robert Fulton Terrace are rent-stabilized. Almost all of the apartments that are no longer rent stabilized are vacant, according to Massey Knakal Realty's marketing material for the note. It's unclear if United Realty Trust has moved to acquire the deed of the properties.
  
  In 2007, real estate investor Mark Karasick bought Fordham Towers and Robert Fulton Terrace for $44 million. At the time tenants at the complexes were concerned about the deal and the inflated price. CIBC lent Mr. Karasick $36.5 million for the transaction and later sold the loan to J.P. Morgan Chase. Two years after buying the properties Mr. Karasick defaulted on his mortgage, according to public records, and the properties were foreclosed on. That is when LNR stepped in to take over the properties.
  
  Meanwhile, tenants have reportedly complained of the deteriorating conditions of the buildings. According to city records, as of mid-September there were 389 housing violations at Fordham Towers and Robert Fulton Terrace.

Source: Debt on two Bronx apt. buildings sells for $31M (The price is nearly 20% less than the amount a buyer paid five years ago for the pair, which boast 490 apartments. The loans had been in foreclosure for three years).

In a related story, see Bronx is burning over failed deals (Overleveraged buyers of rent-regulated apartments create one big mess across city).