Dive Brief:

• Gotham Organization and Carlyle Group recently bought the Aire, a 43-story, 310-unit luxury property on the Upper West Side of Manhattan in New York City, from A&R Kalimian Realty, according to the New York Post.
• A&R Kalimian Realty, which developed the building in 2013, was staring down the expiration of roughly $200 million in mortgage loans. The firm decided not to seek new financing and sold the property to Gotham and Carlyle for $265 million, according to the Post.
• In 2013, A&R Kalimian took out a $225 million senior loan on the property with JPMorgan Chase, which packaged it into a commercial mortgage-backed security, according to Bisnow. Last June, the property went into special servicing. When the loan matured in November 2023, it was marked as delinquent, according to Trepp. However, the property did not go into default, according to the New York Post.

Dive Insight:

The sale of the Aire comes at a time when apartment sales are sluggish in New York City. In 2023, $7.4 billion changed hands across 1,036 multifamily transactions for a year-over-year drop of 35% and 52%, respectively, according to New York City-based brokerage firm Ariel Property Advisors’ Multifamily Year in Review.

In New York City, which has many rent-controlled properties, 35% of last year’s transactions were affordable. However, Chicago-based Nuveen's purchase of a portfolio of more than 12,000 units concentrated in New York City from New York-based Omni Holding Co. boosted that total. 

Market-rate assets, which Ariel Property Advisors calls free-market properties, constituted 48% of the dollar volume. In 2023, only nine deals exceeded $100 million, the lowest number in the past decade, excluding 2020. Of those trades, six were for affordable housing, and three were for free market buildings.

“Several factors contributed to the year-over-year decline, including the impact of interest rates staying higher for longer, the ongoing effects of the 2019 HSTPA [Housing Stability and Tenant Protection Act] regulations, and [the] closure of Signature Bank, which was a major multifamily lender,” Shimon Shkury, president and founder of Ariel Property Advisors said in a news release accompanying the report. 

Forced sales

When sales do occur, owners facing financial stress are contributing to more of the volume, according to Erik Yankelovich, principal and founding partner at Atlas Realty Group Partners, a Manhattan-based investment brokerage and advisory firm.

“Loan maturities are driving a lot of sales now,” Yankelovich said. “Investors are making calls, in many cases, where they're saying, ‘Look, we have no opportunity to raise more equity. We're going to take a loss and just be lucky to pay off the debt on it instead of having to potentially have more money at risk.’ Unfortunately, that's happening a lot across the board.”

As more property owners face loan maturities or the expiration of interest rate caps in 2024, Yankelovich expects transactions to increase in New York City. “I see it picking up only because people are going to make these tough calls to say, ‘I'm just going to take my losses because I'm afraid of more losses down the road,” he said. 

However, positive economic news could also drive more sales. “We’re optimistic because we believe that job gains, interest rate cuts and an abundance of capital will lead to growth in multifamily investment during 2024, most likely in the second half of the year,” Shkury said in the release.

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