Dive Overview:
According to a new report from Yardi Matrix, with a few exceptions, the Sunbelt has the most multifamily loans coming due in the next few years. Atlanta, Dallas, Denver, Houston, New York City and Chicago have the most multifamily loans coming due between now and 2029, according to the report. At least $5 billion in loans will come due in 27 major metros in that time frame. According to the Yardi report, $61.8 billion in apartment loans will come due in 2024, with another $84.3 billion coming due in 2025. Over the next five years, 58,533 properties, representing $525 billion of the $1.1 trillion in total loans currently secured by apartments, will come due, according to Yardi.
Dive Insights:
Multifamily lending peaked earlier this decade when transactions hit record levels. Yardi projects $194.7 billion in loans will be originated in 2021, followed by $209.8 billion in 2022. In 2023, sluggish interest rates and rent growth will take hold, leading to a 45% decline in loan volume to $115.3 billion.
Scheduled government bond redemptions by year Year Total 2024 $61.8 billion 2025 $84.3 billion 2026 $89.3 billion 2027 $77.9 billion 2028 $107.3 billion
Source: Yardi Matrix
Fannie Mae and Freddie Mac originated $641.8 billion, or 56.3%, of the multifamily loans in the Yardi Matrix database. Commercial banks originated 16.4%, or $187.3 billion, followed by the federal government, including HUD, at 10.1%, or $115.7 billion. Debt funds (6.2%, or $69.9 billion), life insurance companies (5.9%, or $67.6 billion), and commercial mortgage-backed securities (2.2%, or $25.2 billion) rounded out the list.
So far, apartment delinquency rates have been relatively low compared to other sectors like office, hovering below 1% for many lenders. “Delinquency rates will rise, but not to the point where they become a systemic crisis,” Paul Fiorilla, director of U.S. research at Yardi Matrix, told Multifamily Dive.
Cities maturing through 2029 City Total Atlanta $34.9 billion Dallas $26.6 billion Denver $22.9 billion Houston $20.8 billion New York City $19.9 billion Chicago $18.8 billion
Source: Yardi Matrix
Will the hardships continue?
As loan maturities loom, negative rent growth in Atlanta, Houston, Raleigh/Durham, N.C., Orlando, Fla., and Austin, Texas, could exacerbate the problem. Interest rates, loan extension strategies, property fundamentals, regulatory issues and the timing of loans will help determine the extent of the distress, Yardi said in the report.
But Fiorilla doesn't see widespread problems. “There will still be some issues,” he said. “But if you look at the national numbers, the fundamentals for multifamily housing are doing well in almost every market.”
Apartment owners whose mortgages are coming due face rising interest rates and falling property values, but Vincent DiSalvo, chief investment officer at Boston-based apartment owner Kingbird Investment Management, believes those concerns are “overblown.” He cited rent increases still outpacing historical trends in many cities as a reason to be optimistic that rising incomes can help owners offset some of the rising debt payments they owe.
“Even with the supply that has come online over the last six months to a year, we've still seen a significant recovery in many markets,” DiSalvo said.
But DiSalvo acknowledged that owners who bought within the last few years could face problems. “I think the distress we’re starting to see is coming from people who got financing in the last 24 months, bought at super low cap rates, borrowed at floating rates and are paying debt service 50% to 75% higher than they expected,” he said.
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