Multifamily lender saw delinquent loans double in Q1

M&T Bank, a Buffalo-based lender with a $36 billion commercial real estate portfolio and $4.2 billion in multifamily loans, said April’s rent collections exceeded its borrowers expectations.

In its first quarter earnings call Monday, the bank reported $530 million in loans that are 90 days or more past due for the quarter ending March 31, an increase of 117 percent from the end of 2019 — primarily in residential real estate. The bank’s net income also took a pummeling, down to $268 million from $493 million at the end of 2019.

Despite the jump in past-due loans, the bank’s multifamily customers were “pleasantly surprised” by healthy rent collections in April, said M&T’s executive vice president, Darren King. In average rental buildings, rent collections were about 75 percent of their normal levels, while buildings with higher-end tenants collected 90 percent of their normal rent roll.

Overall, the multifamily market has not been hit as hard by the pandemic as other sectors, like hospitality, retail and shopping malls, which have taken bigger hits to income.

Apartment owners can also take advantage of the forbearance program for loans backed by government-sponsored enterprises Fannie Mae and Freddie Mac.

Servicers for such loans responded to 540 requests for relief in the two weeks ending April 12, representing $4 billion in outstanding multifamily loans — a 500 percent increase from the 105 multifamily borrowers with $810.2 million in mortgage loans who applied for relief in the first week of the forbearance program.

Multifamily property owners in New York City who have retail on the first floor are seeing the most severe immediate impact, according to King.

“For mixed-properties, cash flow from upper floors is enough to sustain the property if retail is vacant or challenged,” said King.

Lenders are hoping that cash flow holds steady for May, as those commercial tenants start to receive financial assistance available through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Tenant groups across the country, however, could dampen the bank’s optimistic outlook for multifamily with plans to withhold May rents.

While the potential impact of such a tactic on cash flow in multifamily assets is difficult to assess, a coalition of 70 tenant groups in New York is aiming to convince 1 million renters to go on rent strike.