Bloomberg News

NYC’s Savoy Park Apartments $210 Million Loan Modified

July 06, 2012

A real estate fund created by Citigroup Inc. (C:US) and L&M Development Partners modified the $210 million loan on New York’s Savoy Park apartments after they took over the property.

The senior mortgage on the rent-stabilized Harlem complex was split into two, including a $50 million portion on which payments may be deferred until the property is sold, according to a note by LNR Partners LLC, the loan’s servicer.

Citigroup and L&M announced last month that they agreed to buy the seven-building complex, which was valued at $153.3 million in 2011, according to data compiled by Bloomberg. They took ownership after junior lenders they were affiliated with gained control when the original borrowers, AREA Property Partners LP and Vantage Properties LLC, failed to make payments.

“Lenders maybe are less patient than they used to be, and if they conclude that the borrower is not necessary for the project to work, maybe they’re going to get aggressive in getting rid of the borrower,” said Joshua Stein, principal of New York-based commercial real estate firm Joshua Stein PLLC, who was not involved in the deal.

“The trend has been amend, extend, pretend, wait,” he said in a telephone interview. “And with values recovering, that has worked pretty well. But rent-stabilized properties in New York City have a pretty steady income stream, and if it couldn’t service the old debt, that probably isn’t going to change.”

Mounting Debt

Vantage and AREA bought Savoy Park for $175 million in 2006, near the peak of the commercial real estate market. In 2007, the complex was valued at $420 million on the expectation of higher rents, according to data compiled by Bloomberg. That same year, the owners borrowed against the property, adding $367.5 million of debt, including the $210 million senior mortgage that was packaged into bonds and sold to investors.

The partners were unable to raise apartment rents high enough to cover the debt service, prompting a transfer in 2010 of the senior loan to a so-called special servicer, Bloomberg data show. Special servicers negotiate with property owners on behalf of commercial-mortgage bondholders.

With 97 percent of Savoy Park’s units occupied, Vantage and AREA generated enough income to cover only half of the about $1.1 million in monthly interest payments on the mortgage, according to Bloomberg data from 2009.

Jonathan Gasthalter, a spokesman for Vantage, and Eric Waters, an AREA spokesman, declined to comment on the loan transfer. Maya Kriet, a spokeswoman for L&M, didn’t respond to an e-mail.

Loan Terms

Citigroup and L&M negotiated new terms for the senior mortgage, splitting it into two, including a $160 million portion on which the partners will make monthly interest payments at a reduced rate, LNR said in the note. The owners won’t be required to pay off the $50 million second loan until the property is sold or refinanced.

The servicer extended the loan maturity by almost four years, to December 2017, with the option of another extension to April 2018, according to the note.

As part of the deal, Citigroup and L&M paid $3.15 million in fees, LNR said. They also invested $17 million in new equity in the property, which will accrue interest at 13 percent annually.

To contact the reporter on this story: Oshrat Carmiel in New York at

To contact the editor responsible for this story: Kara Wetzel at

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    (Citigroup Inc)
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