Distressed Multifamily Debt Finds Buyers as Banks Exit New York Portfolios
Cerberus Capital Management acquired a $1.3 billion loan portfolio from OceanFirst Financial Corp., with roughly $736 million tied to New York rent-regulated apartments. OceanFirst priced the 1,400-loan book at approximately 92 cents on the dollar, consistent with its internal valuation. The bank purchased the portfolio through its acquisition of Flushing Financial Corp. in June and moved quickly to offload the exposure.
New York’s rent-regulated market has deteriorated for lenders since 2019, when state legislation capped landlords’ ability to raise rents. Mayor Zohran Mamdani’s administration intensified the pressure last month when the city’s Rent Guidelines Board froze increases on roughly 1 million rent-stabilized units. Regional banks fear rising landlord costs and tighter regulations will erode borrowers’ ability to service debt, prompting investor concern and portfolio sales.
ConnectOne Bancorp Inc. announced Thursday it is exploring a bulk sale of its own rent-stabilized loan book, after reducing that exposure by 10% over the past year. OceanFirst CEO Christopher Maher said the sale made strategic sense given current market dynamics. Cerberus, which manages approximately $70 billion in assets, acquired the portfolio through its Residential Opportunities platform and continues to invest directly in properties, provide financing, and buy distressed loan portfolios.
The transaction represents one of the largest loan sales in New York’s rent-stabilized sector since the 2019 legislative shift. Cerberus’s willingness to acquire the book at near-par pricing indicates that certain institutional buyers still see value in multifamily debt despite regulatory headwinds. Regional banks continue to shrink their exposure to reassure equity investors, creating opportunities for alternative asset managers with longer hold periods and higher risk tolerance.
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