The worst isn’t over for the distress-riddled multifamily industry, according to new monthly financial indicators.
The overall distress rate set a new record of 8.35% in April, according to real estate data firm CRED iQ, with multifamily leading the increase. Multifamily’s distress rate increased from 3.7% in March to 7.2% in April, CRED iQ reported.
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The jump was led by a loan backed by the 3,221-unit Parkmerced, one of the largest multifamily complexes in San Francisco, being transferred to special servicing. Parkmerced, a student-focused housing complex near San Francisco State University, has a mixture of townhouses and tower apartment units on a 152-acre property.
The complex has 83.5% occupancy and is performing below a break-even debt service coverage ratio, CRED iQ reports. The asset’s senior loan debt stack totals $1.5B and the mezzanine loan dent stack totals $275M, according to data firm Trepp.
A $1.2B loan backed by the property transferred to special servicing in April, helping boost the multifamily commercial mortgage-backed security loan special servicing rate to 5.1%, according to Trepp. This is the first time it has passed the 5% mark since June 2017, Trepp reported.
The overall CMBS special servicing rate rose to 8.11% in April, marking the largest monthly uptick since the early months of the pandemic, the Trepp report states.
About $1.62B worth of multifamily CMBS loans were transferred to special servicing in April, accounting for 30% of the month’s new transfers, according to the report.
Loans on more than 58,000 multifamily properties totaling $525B will mature over the next five years, Multifamily Dive reported, citing Yardi. That accounts for almost half of the $1.1T of current apartment loans. About $150B of that is set to mature by the end of next year, Multifamily Dive reports.
Interest rates rose as multifamily property values fell 20% to 30% from peaks in 2022, the article states.
As refinancing long-term loans for newly built properties has become more difficult for owners and developers, distress numbers could rise further in coming months, the outlet reports.
Ben Kriegsman, Dallas-based Lion Real Estate Group's director of acquisitions, told Bisnow that it is evaluating acquisitions where sponsors are finding it “exceedingly difficult” to refinance out of their existing debt. Though the group primarily focuses on acquisitions of value-add apartments, newer construction opportunities have become available where sponsors cannot refinance out of existing construction financing, the statement said.
UPDATE, MAY 21, 5:21 P.M. CT: This article has been updated to include a statement from Ben Kriegsman.
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