Famed Wall Street short seller Carson Block sees trouble brewing for owners of apartments owners during the pandemic years, especially in Sun Belt markets.

Block, who runs Muddy Waters Research, said investors that purchased apartments at negative capitalization rates — meaning the property’s operating expenses exceeded its income — on bets that fundamentals would improve are now likely facing huge losses, Bloomberg reported Thursday.

“A lot of multi-unit residential in the US — particularly in the Sun Belt — is in trouble.  That’s the shoe that hasn’t really dropped yet, but that we think will,” Block said in an interview in London, according to Bloomberg.

Block is among those ringing the alarm about the U.S. apartment market, especially as $5.5B in maturing loans tied to CMBS is coming due by October 2025, many of which were made when interest rates were at historic lows.

The Wall Street Journal reported that Block was in London this week, attending the Sohn Conference Foundation’s investor conference, where he also questioned the sales and profits reported by cosmetic giant e.l.f. Beauty.

Bloomberg did not disclose if Block named any specific REITs that his firm was targeting, or if his commentary was more global in nature. Short sellers borrow stocks with the aim of selling them back at lower prices, keeping the difference as profit.

Block rose to fame on Wall Street in 2011 when his firm issued a report warning investors about Sino-Forest, calling it a “multi-billion dollar Ponzi scheme.” A year later, the Chinese-owned Canadian forestry company filed for bankruptcy.

The Sun Belt was a popular target for CRE investors, especially in multifamily, after the pandemic-related remote work brought waves of new residents to the area.

But many of the loans used to finance the purchases used floating rate debt, which has since ballooned under the Federal Reserve’s record rate hikes, leaving $80B in apartment loans vulnerable to distress, Marketplace reported, citing MSCI data.

“A lot more of these things were purchased with ultra-cheap money,” Block told Bloomberg.