City Skyline Faces Pre-Foreclosure in 11 NYC Properties Over $72.3M Loan Default

In a significant development in the multifamily real estate sector, government-sponsored lender Fannie Mae has taken pre-foreclosure action against a group of rent-stabilized properties owned by City Skyline Realty, a prominent multifamily landlord.

What properties are affected: The pre-foreclosure actions involve 11 buildings owned by City Skyline Realty, following their default on loans obtained in 2019 and 2020. These loans, originally originated by Arbor Realty Trust, were later acquired by Fannie Mae.

The complaint, filed with courts in the Southern District of New York, highlights that "Plaintiff has mortgages on each of the Properties, which secure loans that have been in default since the beginning of 2023." Furthermore, each mortgage loan is personally guaranteed by Douglas Peterson, the owner of City Skyline Realty.

How they got here: The trouble for City Skyline Realty began earlier this year when their affiliated LLCs failed to make monthly payments on a collection of residential buildings located in Upper Manhattan and the Bronx, with payment issues dating back to February. Recognizing their financial challenges, Peterson and other guarantors engaged with lenders to discuss the loan situation in July. By August 1st, they had signed a letter outlining the conditions for negotiating the loans.

The 11 properties involved in this pre-foreclosure action collectively contain 302 units. The largest loan in default amounts to nearly $12 million and is secured by a 75-unit Fordham Heights rental located at 2126 Tiebout Ave. Other properties serving as collateral for the loan include 2705 Morris Ave., 561 West 144th St., 622 East 169th St., 2707 Morris Ave., 452 West 164th St., 503 West 169th St., 505 West 135th St., 522 West 148th St., 554 West 148th St., and 712 West 180th St.

Combined, these defaulted properties represent approximately one-third of City Skyline's portfolio, which is valued at $316 million, according to The Real Deal.

City Skyline Realty's current financial predicament underscores the challenges that landlords of rent-stabilized properties face in a changing regulatory landscape, and how these changes have far-reaching consequences for the real estate industry in New York. As these pre-foreclosure actions unfold, the fate of these 11 properties and the larger implications for City Skyline Realty will continue to be closely monitored by industry experts and stakeholders.