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Rent freeze threatens losses on $506M CMBS loan tied to NYC apartments
Bondholders face projected losses of more than $80M as a mostly rent-stabilized portfolio valued at about $717M in 2021 has fallen to about $460M, KBRA Credit Profile analysts said.
Bondholders in a $506 million CMBS loan secured by a 53-building apartment portfolio in New York City are facing rising losses as a rent freeze is set to take effect, according to Bisnow. The collateral spans more than 3,500 units across Queens, Brooklyn, Manhattan, and the Bronx, with 86% classified as rent-stabilized.
The owner, A&E Real Estate, defaulted on the mortgage when it matured in June 2024, and the portfolio has accumulated more than $5.5 million in unpaid interest, Bloomberg reported. After lenders began foreclosure proceedings in February 2025, the investment has been generating just 58 cents for every dollar of debt payments, the outlet added.
KBRA Credit Profile analysts said the portfolio valuation has dropped to about $460 million from roughly $717 million when A&E secured the loan in 2021, and bondholders are projected to lose more than $80 million. The CMBS structure also includes $93.7 million of mezzanine debt, according to a presale report cited by Bisnow.
Bisnow reported that while the rent freeze has not yet started, A&E has seen operating expenses run 13% above expectations, with annualized expenses roughly 22% above initial levels and revenue up just 6%. The city’s Rent Guidelines Board approved a rent freeze in June that is scheduled to begin in October for one- and two-year leases, compounding pressure from earlier tenant protection rules, the report said.