Detroit's Riverfront Towers falls into delinquency

[Lowell]

From today's Free Press...

Riverfront Towers went delinquent last month on its $83.9 million commercial mortgage backed by the government- supported mortgage giant Freddie Mac, according to data firm Morningstar Credit Analytics.

The delinquency pertains to the two towers of rental apartments at the three-tower complex. The third tower has condos.

The Morningstar report said the apartment towers - more than 550 units between them - have faced a series of setbacks in recent years, including delays in evicting nonpaying tenants, an increase in insurance premiums and a period in 2020-21 when several apartments were vacated because of “water-related” incidents within the buildings.



The rental towers have been in a negative cash-flow situation since last year, the report says, with an occupancy rate of 89% as of March.

What effect - if any - the mortgage default could have on Riverfront Towers residents, as well as on the property's future, was not immediately clear Tuesday.

A management office staffer hung up on a reporter, and a message left for the management firm, Grand Rapids-based AMP Residential, wasn't returned.

https://freep-mi.newsmemory.com?selD...Detroit%20Free Press

[Jimaz]

"A management office staffer hung up on a reporter...." Now there's a line rarely heard.

[canuck]

"A management office staffer hung up on a reporter...." Now there's a line rarely heard.

Could be the Janitorial service doubles as PR department.

[K-slice]

This complex is in "Downtown" but totally isolated and not walkable at all. When the towers were built, its fortress-like environment was a benefit but now being an island unto itself is detriment.

This sounds so familiar...

[stasu1213]

They were great in their heyday but the mismanagement started in the late 90s early 2000s. There were a Farmer Jack in the complex during the 80s and early 90s

[mwilbert]

There is more detail here: https://yieldpro.com/2024/10/riverfront-towers/

If the numbers in there are correct, the buildings aren't worth the value of the mortgage, and probably the owner will
decide to go from delinquency to default. As they building is only 89% occupied, I assume they can't raise the rents enough to fill the gap.

I expect it will be fine in the end. If they do default, somebody else will buy the place at a better price and those owners should be able to make money running it with presumably lower debt payments.

Of course, what sometimes happens is that the owner cuts down on maintenance in the hope that they can raise the cash flow and save their ownership of the building, so there could be some unpleasantness for residents until that gets resolved one way or the other. In this case it looks unlikely the building can be profitable for the current owner, so that may not be a problem; they can just default and stop throwing good money after bad.

[Richard]

Going to see a lot of this next year when commercial mortgages reset,all across the country.

Which is going to be interesting with a domino effect because alot of pension funds are invested in stuff like this.

[CassTechGrad]

The subprime mortgage crisis of 2008, also known as the Great Recession, was the worst economic downturn since the Great Depression of the 1930s. If your portfolio is still loaded with them then it's your fault. You should have just taken your money to Vegas and rolled the dice....

[EASTSIDER BALDUCK]

Dump the pension funds, gambling on this risk.
cliff

[mwilbert]

Dump the pension funds, gambling on this risk.
cliff

The original developer sold the two rental towers to Image, and whatever bizarre financing structure they may have used to get the thing built would have terminated then. Image financed it with Freddie Mac. So presumably pension funds are not at risk here.

[Richard]

The original developer sold the two rental towers to Image, and whatever bizarre financing structure they may have used to get the thing built would have terminated then. Image financed it with Freddie Mac. So presumably pension funds are not at risk here.

The funds invest in Image Capital LLC - who then financed through Freddie Mac.

The actual buildings and who financed them is irrelevant,because they invested with Image - these buildings were just one in their portfolio,you are not investing in that building,you are investing with Image.

Buildings irrelevant.

Does not matter if any pension funds or 401Ks are invested with them because as a rule the majority do not even pay attention to them.

Lots of Detroit based pension funds are invested in Florida waterfront condos,the same ones that were hit multiple times by hurricanes in the past month,the same ones that are now required to double or triple their reserves,the same ones that are invested in condos that you cannot give away anymore just like office space.

[mikeg19]

Does anyone know what is going on with the plot of land directly to the west of the towers? I believe it was the site of a Freep Printing Plant at one time but I don't believe it belongs to the Riverfront Conservatory to incorporate into RW Park or the Riverwalk. That is a prime plot of land for a residential or hotel tower on the water.

[southen]

Does anyone know what is going on with the plot of land directly to the west of the towers? I believe it was the site of a Freep Printing Plant at one time but I don't believe it belongs to the Riverfront Conservatory to incorporate into RW Park or the Riverwalk. That is a prime plot of land for a residential or hotel tower on the water.

It is currently being used as a tree farm for Ralph C. Wilson Park. Once that park opens I wouldn't be surprised if you saw some proposals for that site. You will have the new hotel getting ready to open up with amenities within walking distance and an incredible park along the river at your doorstep. It would be nice to see them take out the completely unnecessary ramp there to further open the site.

[Gistok]

Those 3 towers [2 rental, 1 condo]) are not isolated from the rest of downtown. They have an elevated walkway to get to the [former] Joe Louis People Mover station from the towers. 2 of the walkways go thru the Riverfront Towers parking structure, where they meet up with the 3rd [condo]) walkway that connects with them, and heads for the PM station.

With the PM fare discontinued for now, those 3 buildings have easy access to downtown. It will get better when 2nd Ave. extends down to Atwater.

[401don]

Those 3 towers [2 rental, 1 condo]) are not isolated from the rest of downtown. They have an elevated walkway to get to the [former] Joe Louis People Mover station from the towers. 2 of the walkways go thru the Riverfront Towers parking structure, where they meet up with the 3rd [condo]) walkway that connects with them, and heads for the PM station.

With the PM fare discontinued for now, those 3 buildings have easy access to downtown. It will get better when 2nd Ave. extends down to Atwater.

I know what you're saying but it's like saying the Ren Cen isn't isolated. You certainly don't feel like you're downtown or in a neighborhood where you can walk out and down the street for a coffee.

[Gistok]

I know what you're saying but it's like saying the Ren Cen isn't isolated. You certainly don't feel like you're downtown or in a neighborhood where you can walk out and down the street for a coffee.

True, but that killer view of the waterfront would make the inconvenience of spending an extra 10 minutes to get to the coffee establishment worthwhile for some...

[Wintel]

Ugh, that's rough. 89% occupancy isn't terrible, but coupled with those other problems [[evictions, water damage, insurance hikes)... it sounds like they're really struggling. Hope the residents aren't going to get kicked out or anything.