A massive multifamily portfolio held by global investment giant Blackstone is being liquidated to pay back its matured loan as the asset class continues to face headwinds in the Sun Belt.

The $1.3B CMBS loan tied to Blackstone’s Blackjack Portfolio entered special servicing after the borrower missed its Oct. 9 maturity payment, Morningstar Credit reported this week.

The loan, which now has a $517.7M remaining balance, was originally backed by 21 multifamily properties spanning 6,671 units. The pool has dropped to six properties totaling 1,842 units after Blackstone sold many of the properties to pay down the loan by 60%.

The remaining portfolio includes the Hue Watercolor Place outside Tampa in Bradenton, Florida; Aslan on the River south of Atlanta in Jonesboro, Georgia; West Oaks in the northern outskirts of San Antonio; and Alexan 20th St. Station in Denver, according to Morningstar Associate Managing Director David Putro.

It also has two remaining properties in Seattle: Ascent and Marlowe, which are down the street from each other in the South Lake Union neighborhood.

“These remaining properties have generated a bit more cash flow than was underwritten, so I don’t think there’s much to take from this loan and extrapolating to the wider market,” Putro said in an email.

Barclays and Morgan Stanley originated the $1.3B floating-rate loan in 2021, which is when Blackstone acquired the portfolio in a series of all-cash transactions, according to Fitch Ratings commentary at the time.

Since then, the outlook for many Sun Belt multifamily investments has deteriorated dramatically.

The large rent increases those markets experienced in the years immediately after the pandemic didn't continue as they dealt with a wave of oversupply.

Investors also have to contend with rising operating costs, which grew nearly 37% between 2019 and 2026, according to Harvard University's Joint Center for Housing Studies.

The challenging climate comes as $1.8T worth of multifamily debt is supposed to come due over the next decade, including up to $757B by 2028, according to The Wall Street Journal.

“I'm not saying it's going to get as bad as office,” Rialto Capital Head of Special Situations Investments Joe Bachkosky said during Bisnow’s National Commercial Real Estate Finance event last month. 

“But it's creating a challenge for an asset class that has been probably one of the stronger-performing asset classes over the last 25, 30 years.”