Harlem default.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aM3zwmra0p5Q&refer=home Commercial-Mortgage Bond Spreads Soar on Harlem Loan (Update2) By Sarah Mulholland Aug. 21 (Bloomberg) -- Yields on commercial real estate securities relative to benchmarks rose to near record highs amid concern that Riverton Apartments, a high-rise complex in Manhattan's Harlem neighborhood, will default on a... [more]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aM3zwmra0p5Q&refer=home Commercial-Mortgage Bond Spreads Soar on Harlem Loan (Update2) By Sarah Mulholland Aug. 21 (Bloomberg) -- Yields on commercial real estate securities relative to benchmarks rose to near record highs amid concern that Riverton Apartments, a high-rise complex in Manhattan's Harlem neighborhood, will default on a loan. AAA rated commercial mortgage-backed bonds widened about 37 basis points to 305.57 basis points more than 10-year swap rates during the week ended yesterday according to data from Bank of America Corp. A basis point is 0.01 percentage point. The gap, or spread, jumped after a trustee report showed payments wouldn't be made by Rockpoint Group LLC and Stellar Management in September on a $225 million loan on the 1,230-unit Riverton. The property was refinanced in December 2006 using optimistic assumptions for anticipated income, a practice that became common as prices reached their peak, said Alan Todd, head of commercial-mortgage backed securities research at JPMorgan Chase & Co. ``It is indicative of the type of loans that were allowed to get securitized during this time,'' Todd, who is based in New York, said yesterday in a telephone interview. The $776 billion commercial-mortgage bond market hasn't faced the same rate of late payments as debt tied to subprime home loans. Delinquencies on commercial mortgage bonds increased 2 basis points to 0.43 percent in July, according to Fitch Ratings. Total delinquencies for subprime loans in 2006 bonds climbed to 41.7 percent, based on July reports from trustees, from 34.2 percent in February, Standard & Poor's said today. Rent-Stabilized Apartments At Riverton, income projections factored in converting rent- stabilized apartments to market rates. Almost 93 percent of the New York property's units were rent stabilized when the loan was originated, according to a JPMorgan report on Aug. 15 from analysts led by Todd. The owners intended to deregulate 53 percent of all the apartments by 2011, more than doubling the average monthly rent on those units from $894 to $2,261. Only 10 percent of the units in the 12 buildings were converted to fair-market rents as of July, according to the Aug. 13 report from trustee LaSalle Global Trust Services Ltd. in Chicago. The borrower burned through a $19 million reserve to cover the shortfall in cash flow that was expected from initially lower rent payments, according to an Aug. 15 report from Lehman Brothers Holdings Inc. analysts Aaron Bryson and Tee Yong Chew in New York. A telephone call to Rockpoint wasn't immediately returned. The Riverton loan was packaged into bonds as part of a $6.6 billion commercial mortgage debt offering sold in March 2007 by Citigroup Inc. and Deutsche Bank AG, according to Bloomberg data. The losses on the loan could ``wipe out'' investors who bought the lower-rated pieces of the securitized debt, according to the Lehman report. ``We expect that additional pro forma loans will likely suffer a fate similar to Riverton Apartments,'' the Lehman analysts wrote. To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net Last Updated: August 21, 2008 16:16 EDT The funny thing is, I posted this the other day and was told that it has nothing to do with NYC RE. I guess it matters a little, it grabbed a headline on Bloomberg. All signs point to major NYC RE drop. [less]