Dive Brief:
- The multifamily commercial mortgage-backed security servicing rate rose 43 basis points to 2.7% in February, driven by the transfer of a $270.35 million loan backing 11 New York City properties owned by Blackstone, according to Trepp. Nineteen percent of new commercial real estate servicing transfers involved multifamily properties.
- The multifamily delinquency rate for CMBS rose 27 basis points in February to 1.83%, according to Trepp. Six months ago, the multifamily delinquency rate sat at less than 1%.
- Problem loans continue to pile up. After Veritas Investments, The Chetrit Group and Blackstone saw properties face issues, Laguna Point Properties fell behind on a $329 million loan backing a portfolio of more than 1,000 apartments in Los Angeles, according to The Real Deal. MF1 Capital provided the loan, which helped Laguna Point purchase the assets from DTLA Management.
Dive Insight:
The overall CMBS delinquency rate across commercial real estate increased 18 basis points in February to 3.12%. This jump was the second highest since June 2020, when COVID-19 sent rates soaring. Only December 2021’s 19-point jump was higher.
The all-time high delinquency rate was 10.34% in July 2012. The highest since COVID was 10.32% in June 2020. In January, the rate was the second lowest since the beginning of the pandemic.
The overall servicing rate for commercial real estate rose seven basis points in February to 5.18% – moving beyond what was recorded at the close of 2022. February marked the fifth time in the last seven months that rates increased. The office sector led the way for all new special servicing transfers, though industrial and multifamily also saw increases.
Some investors are already preparing for these delinquent and distressed properties to start hitting the market. For example, Houston-based Three Pillars is under contract to buy a property at distressed pricing, according to CEO Gautam Goyal.
“As time goes on, we’re going to see more of those become available,” Goyal said.
But many observers still think distress will be limited in the apartment sector.
“I don't think as an asset class multifamily will see a lot of distress,” said Yonah Sturmwind, manager of specialty originations at Chicago-based Alliant Credit Union. “There might be more maturity issues, but we don't expect to see widespread distress out in the market this year or next year.”
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