Lender Files $500M Foreclosure On NYC Apartment Portfolio

A&E Real Estate Holdings, one of New York City’s largest multifamily property owners, is facing a significant legal challenge, as reported by Bisnow.

Namely, a $506.3M foreclosure lawsuit has been filed against a portfolio of 31 properties across the city, including the sprawling Riverton Square housing complex in Harlem. The filing, reported by PincusCo, stems from A&E’s default on a loan secured by more than 3.5K housing units.

Follow The Lawyers

The preforeclosure lawsuit pertains to a CMBS loan issued by JPMorgan Chase in 2021. The loan was securitized into a trust and has been in default since June 9, 2024, when it matured.

In addition to the senior loan, A&E’s portfolio is tied to a $93.7M mezzanine loan. The properties under scrutiny include several large multifamily complexes across Manhattan, Brooklyn, Queens, and the Bronx, including the iconic Riverton Square in Harlem, which is 80% rent-regulated.

Taking The Tour

Riverton Square, a 1.2K-unit complex, has been a key asset in the portfolio since A&E acquired it in 2015. The property had previously been foreclosed upon in 2010 when former owner Stellar Management lost it in a sale, and since then, A&E has struggled with the property’s declining value.

By the time the loan reached maturity, Riverton Square’s loan-to-value ratio had ballooned to 200%, highlighting the portfolio’s financial strain.

Rent-Regulated Challenges

The default reflects broader issues in NYC’s multifamily market, particularly within the rent-regulated segment. The state’s 2019 tenant protection laws, which significantly limit rent hikes for rent-stabilized units, have made such properties less appealing to investors.

At the same time, the regional banking crisis in 2023 led to a pullback by primary lenders, further complicating the ability to refinance. Rent-regulated property owners have faced rising operational costs—including for maintenance, insurance, and mortgages—when their ability to raise rents has been severely restricted.

As Marcus & Millichap broker Shaun Riney noted, the rent-regulated space is caught in a “doom loop.” Despite the long-term challenges, the industry has yet to find a viable solution, leaving owners like A&E in a precarious financial situation.

Risk Factors

Morningstar, a ratings agency that analyzed A&E’s loan in 2021, flagged the age of the portfolio’s properties as a potential risk. Most of the buildings were constructed between 1915 and 1964, which can present challenges in terms of maintenance and modernization.

Morningstar’s analysis pointed to the high leverage on the properties—combined with a lack of scheduled amortization—as key factors contributing to elevated refinance risks when the loan matured.

The combination of these aging assets, high leverage, and a restrictive regulatory environment has created an increasingly difficult environment for rent-stabilized property owners. A&E’s situation reveals a broader trend in the NYC multifamily market, where owners of older, rent-regulated buildings struggle to meet their financial obligations.

What’s Next

Despite the preforeclosure filing, A&E Real Estate Holdings remains optimistic about resolving the matter. A spokesperson for the company indicated the litigation is part of an ongoing negotiation with both senior and mezzanine debt holders, which they hope to resolve in the next 45 days.

A&E maintains that it has continued to make interest payments and assures that it will uphold high standards for the properties it manages.

The outcome of this foreclosure battle will have serious implications for the Big Apple’s multifamily market, particularly as more properties tied to rent regulation face the music.