A group of seven apartment properties owned by Neenah, Wisconsin-based investor Trinity Flood — known as the Trinity Multifamily Portfolio — were transferred to special servicing in September due to payment default after Dallas-based servicer K-Star had to force place insurance, according to a report Morningstar Credit shared with Multifamily Dive.
The $24.2 million loan is backed by seven properties in three states — Illinois, Georgia and Arizona. Multifamily Dive was unable to locate contact information for Trinity Flood.
The loan’s performance had been declining, with its net cash flow of $1.9 million falling below the underwritten net cash flow of $2.4 million in 2023. However, the debt service coverage ratio remains above breakeven.
Unlike many troubled assets, loan performance wasn’t the reason that K-Star stepped in, according to David Putro, head of commercial real estate analytics at Morningstar Credit.
“The loan servicer is required to force place coverage if the borrower fails to maintain adequate insurance,” Putro said.
While Putro occasionally sees servicers take over properties when they force place insurance, he says it’s not a trend. “In this case, the servicer commentary notes that the borrower reported that the ‘insurance coverage is not available,’ so I think this is more of a property-specific issue,” Putro said.
The seven properties include:
- The 130-unit property on 7500 South Shore in Chicago
- The 295-unit Heather Glenn in Valdosta, Georgia
- The 60-unit Sierra Antigua Apartments in Sierra Vista, Arizona
- The 25-unit South Chappel in Chicago
- The 53-unit South Clyde in Chicago
- The 18-unit Timbers in Valdosta, Georgia
- The 38-unit Woodlands in Valdosta, Georgia
In January 2020, Trinity Flood acquired the three buildings on Chicago’s South Shore — 7500 S. South Shore, South Clyde and South Chappel — from New York City-based DAX Real Estate for $18.4 million, according to Crain’s Chicago Business. Nearly two years earlier, DAX paid $11.5 million for the properties.
K-Star took over the Trinity Flood portfolio just as the servicing rate for multifamily commercial mortgage-backed loans hit thresholds not seen in years this August, according to a pair of reports from data firm Trepp.
The Trepp CMBS multifamily special servicing rate rose 60 basis points to 5.71%, reaching its highest point since December 2015.
CMBS delinquencies also increased for apartments, rising 67 bps to 3.30%. Multifamily also contributed the largest net change in delinquent dollars of any sector, with a total of $407.8 million.
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