Friday, March 2, 2012

Fitch explores the 'contradictions' of U.S. multifamily CMBS

I haven't read the Fitch report, Reuters reported that there is one out there asking the tough questions about why multifamily has the biggest loan performance problems despite improved property performance and gives NY as an example:

A notable example is New York City. Despite being the second-best performing city in the Case-Shiller index, the city has four big problems in multifamily CMBS; Stuyvesant Town/Peter Cooper, The Belnord, The Savoy and Riverton, the underperforming loans of which total $3.6 billion.

I'm going to take a stab at the answer for at least these four. The business plans were almost comical in their overconfidence in their ability to kick out rent control tenants and replace them with market tenants, they were highly overleveraged and underwritten to future revenues that never materialized, and they were breaking the law and evading taxes.

1 comment:

crabsofsteel said...

why would anyone care what Fitch thinks about anything? They are the only agency who hasn't downgraded supposedly super-senior bonds. AAA all the way, unless you are in AMs or AJs! Meanwhile, anyone who put in for a mod is getting it, from 10 to 30%.