Multifamily property owners fared better in the past year than those in other real estate sectors, but as the pandemic drags on, they’re increasingly facing issues with their loan payments.
The share of the riskiest apartment debt held by banks rose to 17 percent from 5 percent during the pandemic, the Wall Street Journal reported, citing data from Trepp that looked at the risk ratings from more than a dozen banks.
Nearly a year after the pandemic began, landlords are feeling the pain from eviction moratoriums — including a proposed extension of the federal ban from the Biden administration — as well as a decline in rent collections. That’s leading some lenders and rating agencies re-evaluate things.
New York’s Chetrit family saw a $481 million securitized loan that backed 43 of its rental properties throughout the Midwest and the Sunbelt region marked as “at-risk” by KeyBank, the publication reported. The bank said that the property’s income wasn’t enough to cover its loan payments.
Rating agencies have also downgraded bonds attached other types of rental housing that were popular prior to the crisis, including senior housing, dorms and co-living companies.
Though some banks have backed away from lending to multifamily, some investors are finding a niche by giving struggling apartment owners high-interest financing.
Norfolk, Virginia-based Harbor Group International has raised about $245 million for a fund that can make a total of $900 million to $1 billion in loans, according to the Journal. The investment firm, with about $13 billion in assets under management, is providing financing for developers that stopped signing leases right as the pandemic started.
[WSJ] — Keith Larsen