Atlanta Multifamily Building Owner Faces Foreclosures

Yakov Stein, a Lakewood, New Jersey-based investor, is the latest to join the growing club of distressed multifamily owners.

Two of his Atlanta properties are facing foreclosure, BisNow reported.

One involves a $46.5 million mortgage on a 224-unit apartment complex in Parkway Vista, near Northlake Mall, where a foreclosure notice was issued this month. An auction is scheduled for early August.

The other is a 508-unit, 40-building apartment complex at 3500 The Vine in Peachtree Corners that hasn’t made a mortgage payment since April, according to BisNow.

While the investor has spent the past few years acquiring apartments in the Southeast, rising interest rates and falling occupancy have left Stein’s properties unable to cover their liabilities.

Stein’s entities acquired the Parkway Vista property for $62.6 million in 2019 with a $53.2 million mortgage, according to land records.

Stein then refinanced that loan in 2022 with a $75 million loan from FS Credit Real Estate Investment Trust, according to BisNow. The loans were split into two parts, with the larger part sold as loan obligations secured by commercial real estate.

One of the loans went into default in the fall of 2023 because the property’s income covered just under half of its debt service, BisNow reported.

Stein guaranteed both loans with his father, Nachum Stein, who founded and runs the American European Group.

The Peachtree complex’s declining occupancy rate, which fell from 89% in 2022 to 77%, contributed to Stein’s inability to make mortgage payments, according to Morningstar. The property only generates enough income to cover about half of its monthly mortgage payments.

Multi-unit distress has nearly tripled in six months. Delinquent or pending real estate transactions financed by commercial mortgages jumped 185% between late June and January, according to a report by CRED iQ.

Short-term, floating-rate CRE CLO bonds were a go-to option for investors looking for quick exits at the start of the pandemic when interest rates were low. However, since rates have spiked, many of these borrowers have struggled to make their repayments.

CRE CLO debt issuances have increasingly involved buying up distressed loans from debt instruments to prevent the number of delinquent loans in each package from growing too large, according to an analysis by JPMorgan Chase.

According to a Bloomberg report, the CRE CLO market has been flagged as “the first to fall” during times of real estate stress because it has been widely used to fund loans considered too speculative for a traditional CMBS loan.

— Christina Previte