When Community Preservation Corporation took over some of the worst rent-stabilized property loans in the city, officials there knew foreclosures would be on the table.
Now that reality is coming to pass. The nonprofit loan servicer has filed for foreclosure at two Washington Heights buildings owned by Olshan Properties, located at 385 and 395 Fort Washington Avenue.
Olshan purchased the buildings with Mill House Properties for $40.1 million in 2017, mortgaging them with Signature Bank. In February 2023, the borrower modified those loans, creating a prime mortgage of $16.1 million and a subordinate loan of $7.4 million.
But then Signature Bank collapsed. Just weeks after that agreement, Signature was closed by regulators and its loans transferred to the FDIC.
In the subsequent auction, Community Preservation Corp and partners won a joint stake to take over $5.8 billion of the bank’s portfolio. Signature had been a big lender to rent-stabilized building owners, but that market was seeing increasing distress. As of June, about one-quarter of the portfolio was in payment default and close to 70 percent of loans had other red flags for financial distress.
In this case, the nonprofit alleges that the borrower hasn’t made any payments on the prime loan since the month that Signature collapsed. No payments have been made on the subordinate loan since December 2023, it claims. The owner hasn’t fully paid real estate taxes or supplied a rent roll.
In total, Community Preservation Corp says the borrower now owes $11.7 million on the subordinate loan and $28.9 million on the prime loan.
In a June interview with The Real Deal, officials at the nonprofit said foreclosure is a last resort. The first strategy is to modify the loans to restore cash flow. That means maturity extensions, rate relief and, if necessary, principal forgiveness. But not every owner communicates or works with the organization. And by mid-June, CPC had filed 41 foreclosures affecting 2,200 units.
The properties are both 6-story, 56,900-square foot elevator buildings. 385 Fort Washington Avenue contains 61 residential units, 50 of which are rent-stabilized, according to property tax records, while 395 Fort Washington Avenue contains 55 residential units, 54 of which are rent-stabilized.
Neither Olshan nor Community Preservation Corp immediately responded to a request for comment.
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