Multifamily Faces $4B of Maturities in October

The intimidating “wall of maturities” is only a few months from closing in on the multifamily sector.

More than $4 billion in commercial mortgage-backed securities loans tied to multifamily properties will mature in October, according to a report from Gray Capital reported by Bisnow.

November isn’t expected to be much better, as slightly less than $4 billion in CMBS loans will mature, according to CoStar data cited by the firm. The totals will be even higher than the projected totals, as those figures don’t include non-CMBS loans.

The impending maturities come two years after a peak of investment activity in the sector. Concern around the loans attached to commercial properties has been growing in tandem with the Federal Reserve’s interest rate hikes of the past 15 months.

While demand for rentals remains high, many owners borrowed on their properties at a time when interest rates were very low. Since they’ve shot up, the appetite of banks and lenders to refinance has waned.

Some owners will work things out with their lenders, but others will be faced with difficult choices, especially as interest rates don’t look poised to come down.

Owners can try to extend-and-pretend, although their chances to pay off loans will grow less favorable. They can also sell their properties, although the sagging commercial market means selling at a discount, in all likelihood. Otherwise, they can allow things to take their course and potentially lose their properties to foreclosure.

Much of the onus will be on lenders, according to Gray Capital CEO Spencer Gray.

“Are their balance sheets going to be so upside down that they’re going to be forced to make some decisions and start foreclosing?” Gray asked Bisnow.

In the coming years, commercial real estate faces a wall of maturities adding up to $1.5 trillion across sectors. While the multifamily sector may be in for better months after October and November, it’s not yet clear what loans coming due will mean for the sector.

— Holden Walter-Warner