Multi-family Distress rate climbs significantly nationally.

 

See below excerpts from Bisnow.com article found here.

The worst isn't over for the distressed 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. The multifamily distress rate increased from 3.7% in March to 7.2% in April.

The jump was led by a loan backed by the 3222-unit Parkmerced, one of the largest multifamily complexes in San Francisco being transferred to a special servicing.

About $1.2B worth of multifamily CMBS loans were transferred to special servicing in April boosting the multi-family commercial mortgage backed loan ‘special servicing to 5.1% according to Trepp.

Loans on more than 58,000 multifamily properties totaling $525B will mature over the next five years according to Yardi. That accounts for almost half of the 1.1 trillion of current apartment loans. About 150 billion 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.

As refinancing long-term loans for newly built properties has become more and more difficult for owners and developers, distress numbers could rise further in coming months the outlet reports.

Ben Kreigsman, Dallas based Lion Real Estate Group’s director of acquisitions told Multi-family Dive that refi out of construction financing is “getting exceeding difficult”.

Weitz – if you read this blog, none of this should be a surprise. What I do find moderately surprising is the multi-family component of all this. They have been one of the ‘belles of the ball’ and presumably more of a safe haven than their office, and retail counterparts. A distress rate increase from 3.2% to 7.2% in a single month is nothing less than staggering – that may be a short term anomaly, but I expect the overall rate will likely increase from current levels regardless.

Sadly, I think the “party” is just getting started and we can expect more of the same in the coming months/ years…. especially if rates stay at the levels they are at. The banks have to be feeling the pinch at least modestly making re-fi’s harder in general and especially challenging in the current interest rate environment.

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