Trepp: Multifamily CMBS delinquencies rise, but properties in servicing decline

Dive Brief:

Multifamily commercial mortgage-backed loans going into servicing in July fell slightly, dropping two basis points to 3.26%. They jumped 39 basis points to 3.28% in June, according to New York City-based Trepp. One year ago, the rate sat at 1.23%.
Multifamily CMBS delinquencies rose 24 basis points to 1.83%. In June, that rate increased 13 basis points to 1.59%. One year ago, delinquencies were at 0.94%.
For commercial real estate, the overall delinquency rate rose 51 basis points to 4.41% — the highest level since December 2021. The CRE servicing rate jumped 20 basis points in July to 6.62%, its sixth increase in a row.

Dive Insight:

Despite multifamily delinquencies and servicing rates jumping over the past year, investors aren’t seeing a lot of properties sell at distressed pricing. If owners can, they’re holding onto their apartment communities.

“I think most people, if they didn't have to trade, just wouldn't be willing to accept the number,” said Chicago-based Equity Residential’s Chief Investment Officer Alexander Brackenridge on the REIT’s second-quarter earnings call in late July. Brackenridge expects that to change as more capital enters the market.

On his company’s Q2 earnings call in late July, UDR President and Chief Financial Officer Joe Fisher said distressed land and apartment sales were limited.

“I think there are sectors that have become much more capital starved and/or have different fundamental profiles, but in multifamily with the [government-sponsored enterprise] backstop, there's always liquidity available and it is a preferred asset class as we've seen good performance going through COVID and coming back out the other side,” Fisher said.

Memphis-based MAA’s Chief Investment Officer Brad Hill said cap rates have ticked up, but investors are bidding on the properties that do come to market.

“The fundamentals generally are holding up pretty well within our region of the country, and we're not seeing distress certainly in our region and especially in these lease-up properties,” Hill said on the REIT’s recent earnings call. “We've seen cap rates tick up over the last year or year and a half.”

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