NEW YORK, NY - Standard & Poor's Ratings Services said today that it's monitoring proposed legislation that could result in broad-based changes to New York state's rent control laws, whose sphere of influence currently includes New York City. The proposed changes were recently passed in the New York State Assembly. The next step for these bills is the State Senate.
"If passed, many of these proposed changes, which heavily favor tenants rather than landlords, could have a significant impact on outstanding commercial mortgage-backed securities transactions with New York City multifamily exposure," said Standard & Poor's credit analyst Harris Trifon. "Specifically, the changes could impact those transactions containing loans where cash flow projections were based on the developers' ability to convert rent-stabilized units to market rents over a certain period of time."
In a review of its internal database, Standard & Poor's analysts identified 12 large loans with a balance of greater than $50 million that could potentially be impacted by the legislation. These loans are secured by multifamily properties in the New York City area that have a large number of units that are subject to current rent-stabilization laws. The results of this review appear in the article published today titled, "Newly Proposed New York State Rent Control Legislation Could Affect CMBS With Multifamily Loan Exposure"
"If the proposed legislation is signed into law, it will likely lead to a reduction in the number of units that are converted to market rents, and could further pressure cash flows and reserve balances," said Standard & Poor's credit analyst James Manzi, CFA. "In addition, the lower future cash flows could have a negative impact on our valuation of the properties and could also increase the refinance risk of the loans."
Source: AnotherFP.com