Dive Brief:
- Despite commercial mortgage-backed securities student housing delinquency rates hitting almost 15-year lows, real estate data firm Trepp says there are still pockets of distress in some states.
- Illinois, where the rate of student housing loans that are 30-plus days delinquent is twice the national average, had the most student housing distress among all states, according to Trepp’s weighted rankings that take several distress metrics into account. Tennessee, which has a delinquency rate more than five times the national average, was second on the list. Louisiana, Missouri and Ohio filled out the top five.
- Trepp didn’t just look at delinquency rates to determine the states with the most distress. The firm weighed the percent of loans more than 30 days delinquent, the percent of loans with a debt-service coverage ratio less than 1.0, the weighted average trailing 12-month occupancy rate and the percent of loans on the servicer’s watchlist.
Dive Insight:
In 2019, the 30-plus-days delinquency rate for this loan type sat at 7.36% before jumping to 13.66% in July 2020 at the height of the pandemic. Since then, however, the number of distressed CMBS student housing loans has declined.
The impact of COVID-19 on student housing occupancy was smaller than many operators feared, Manus Clancy, senior managing director of applied data, research and pricing for Trepp, told Multifamily Dive in September.
“We thought 10% of kids wouldn’t go back and would wait for COVID to be over,” Clancy said. “Instead, they went back and just sat in their rooms for 18 months and occupancy never really sank at all.”
In October 2022, delinquencies dropped below 2% — the sector’s lowest figure since 2008. “Distress is really not impacting that market,” Clancy said. “Every now and then, you'll see something in student housing that goes delinquent.”
Furthermore, Trepp points to Blackstone’s $12.8 billion acquisition of Austin, Texas–based student housing REIT American Campus Communities as a signal of health in the student housing sector.
“Student housing is a compelling sector due to growing enrollment at the top universities in the U.S. as well as a shortage of quality housing supply,” said a spokesperson from Blackstone in a statement supplied to Multifamily Dive. “This has led to strong and resilient performance throughout cycles.”
Still, student housing can be a volatile sector, especially with college enrollments potentially falling.
“Only time will tell if some of the recurring stress themes that plagued student housing loans in recent years resurface given that this sub-sector is fiercely competitive and requires highly diligent property management as the seasonal leasing and capital-intense nature of this beast (high turnover costs) can get out of hand quickly, especially when inflationary pressure lingers in the background,” wrote Trepp’s Stephen Buschbom in the delinquency report.
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