Dive Brief:
- An entity of Los Angeles-based FMB Development, led by CEO Ilan Kenig, has filed for bankruptcy on a project that it planned to build but never started at 7111 North Sepulveda Blvd. in Van Nuys, California, according to court documents.
- Court documents listed four groups of creditors with claims secured by the property, including Lone Oak Fund ($8 million claim); Marom Kislev Three ($2.6 million); Qualfax ($2.5 million); and Heng Li, Jie Li and Ning Jiang ($2 million).
- FMB defaulted on the project’s loan to build the six-story, 180-unit complex in October, according to The Real Deal. It paid $9.5 million for the site in 2018. In court documents, the property was listed as a $7 million asset.
Dive Insight:
The Van Nuys project isn’t the only FMB deal facing issues. In October, the developer’s deal at 1317 South Hope St. in downtown Los Angeles had a notice of default placed on it. The company did not respond to Multifamily Dive’s request for comment.
FMB’s issues come at a time when the number of distressed loans are increasing in the multifamily sector. However, most issues revolve around existing properties in areas like Houston, New York City and San Francisco, as rent growth has declined and interest rates and expenses have risen. Recently, Trepp reported that $351.8 billion in multifamily bank loans will mature between 2023 and 2027.
New developments haven’t been under as much stress, though apartment executives expect to see more new properties hit the market as developers face difficulties. In the third quarter, concessions increased at many of these apartment communities as developers looked to get their properties stabilized as fast as possible.
Spencer Gray, CEO of Indianapolis-based apartment owner and operator Gray Capital, knows of several projects offering heavy concessions in an effort to get stabilized as soon as possible.
“There are costs to carry, just from the interest payment alone, not to mention the building materials and labor,” Gray said. “They're missing their pro forma and they need to get stabilized and be taken out to permanent financing or to sell because the longer time goes on those returns go down and the costs go up.”
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