Blackstone’s $271M Loan on Manhattan Multifamily Portfolio Hits Special Servicing
By Cathy Cunningham February 16, 2023 6:00 pmreprints
The $270.3 million commercial mortgage-backed securities (CMBS) loan on Blackstone’s Manhattan multifamily portfolio has been sent to special servicing, according to a Trepp alert, CRED iQ data and sources familiar with the transfer.
The loan backs the BX 2019-MMP CMBS deal and is collateralized by 11 multifamily properties totaling 637 units in Chelsea, the Upper East Side and Midtown South.
“We continue to focus on delivering a best-in-class experience for our residents while we work with our lenders on the capital structure,” a Blackstone spokesperson told Commercial Observer Thursday, declining to comment further.
The loan was still marked as current as of this month, and — according to CRED IQ data— a specific transfer for the special servicing transfer wasn’t given in commentary. The loan was, however, put on the servicing watch list in November for tripping its floating-rate debt service coverage ratio (DSCR) trigger.
As the real estate industry continues to grapple with a series of interest rate spikes, plus a scarcity of debt capital, Blackstone is currently facing a couple of struggles specific to the deal itself and the broader market environment. Specifically, sources said the portfolio currently requires higher capital expenditure than expected while the firm simultaneously faces higher borrowing costs associated with floating-rate debt.
One source said that while Blackstone continues to lean into multifamily overall as a high conviction theme, it doesn’t believe the best use of its capital is to continue to fund cash-flow shortfalls within this specific multifamily portfolio.
As such, Blackstone transferred the loan to special servicer Mount Street to allow the firm time to work with its lenders and decide how best to move forward in today’s bumpy market environment, sources said.
The 11 property addresses in the portfolio are: The Grove at 250 West 19th Street, 31 East 31st Street, 344 East 63rd Street, 451 East 83rd Street, 309 West 30th Street, 434 West 19th Street, 337 West 30th Street, 345 West 30th Street, 425 East 84th Street, 445 East 83rd Street and 162 East 61st Street. Of the 637 units, 612 are market rate.
Morgan Stanley originated the CMBS loan in 2019, with South Korean investment firm Mirae Asset Daewoo and PropCap originating a further $93 million of junior and senior mezzanine debt at the time, per data from CRED iQ. The two-year loan came with three one-year extension options, giving a final maturity date of August 2024. The portfolio was 95.8 percent leased at the time of the loan’s origination.
Blackstone, together with Fairstead Capital, acquired the portfolio in 2015 from the Caiola family. At the time, the partnership paid $690 million for 24 properties totaling 979 assets, but has since sold 13 of them, totaling 342 units.
Until a loan resolution is reached, sources said Blackstone is continuing to operate the properties as normal, and the transfer has “zero impact” on the buildings’ management.
Multifamily is one of Blackstone’s core investment themes. In October, Kathleen McCarthy, the global co-head of Blackstone Real Estate, said that the asset class, along with warehouses, data centers, lab office spaces and hotels, make up roughly 80 percent of the company’s real estate portfolio, Yahoo Finance reported. Further, a national housing shortage and inflationary environment have only strengthened the multifamily sector’s tailwinds and led to strong rent growth.
Cathy Cunningham can be reached at email@example.com