Thursday, February 9, 2012

Improvements in Multifamily sector driven by NYC MSA

Herschmeyer at Co-Star notes:

Removing these loans [see list below] reduces the multifamily Fitch Loan Delinquency Index from 14.4% to 9.3% at the end of 2011. This moves multifamily from the worst performing of the five asset classes to the middle of the range with office (6.8%) and retail (6.9%) being the best performers and hotel (12.0%) and industrial (10.25%) being the worst.

In 2006 and 2007, issuers underwrote fixed-rate multifamily loans with stabilization plans, whereby rent stabilized units were converted to market. These loans, Stuyvesant Town/Peter Cooper Village ($2.8 billion), The Belnord ($375 million), Riverton ($225 million), and Savoy Park ($210 million) for a total of $3.6 billion did not see their stabilization plans pan out.

I might add to that last paragraph, "because each of the aforementioned projects were blatantly attempting to evade taxes, break NY state law, and all had ludicrous plans based on the expectation that they could simply kick out the rent control tenants and replace them with market rents - a strategy that has parted fools with their money for nearly a century". But I wasn't consulted, so I'll keep my thoughts to myself.

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