$598M wall of debt coming due in San Antonio

Multifamily owners may have trouble refinancing with low income to debt ratios

A photo illustration of the San Antonio skyline (Getty)

A photo illustration of the San Antonio skyline (Getty)

It isn’t always sunny in San Antonio, at least for multifamily owners. 

The Alamo City ranked sixth on a list of cities with high percentages of “at-risk” multifamily loans compiled by real estate data service Trepp. Of the city’s $1.7 billion in outstanding multifamily loan balances set to mature in the next five years, some 35 percent are at risk of refinancing troubles, according to Trepp’s analysis. That means landlords and their lenders face a wall of roughly $598 million in debt that is coming due with limited refinancing options. 

In order to determine a loan’s risk factor, the analysis focused on two measures: a property’s debt service coverage ratio and its debt yield. 

Debt service coverage ratio, a function of a property’s net operating income over its debt service amounts, assesses how easily a building owner can meet monthly payments. Anything less than a 1.25 ratio was considered a risk factor, suggesting significant refinancing risk, as it means incomes are just narrowly enough to keep up. About two thirds of maturing multifamily loans nationwide were in the clear.

Debt yield compares a building’s net operating income to its total loan amount — anything lower than 6 percent was considered a negative indicator of future refinancing ability. Nearly 29 percent of multifamily loans maturing across the country in the next two years fell below that threshold. 

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“The multifamily market, which not too long ago had a resilient outlook due to struggling single family homes resulting in upward growth in rents, is now facing tighter credit conditions, higher spreads, and, at least in some areas, rent growth rates that are underperforming market expectations,” the report’s authors wrote. 

The San Francisco-Oakland metro area topped the list, with 53 percent of maturing multifamily loans at risk of refinancing troubles. New York, which had by far the largest volume of maturing multifamily loans on the list, faces $2.8 billion in at-risk maturing debt, or 30 percent of the total amount coming due. 

Multifamily loans account for the largest volume of maturing, securitized debt in the next two and five years. All told, some $176 billion in multifamily debt is coming due in the next five years, with nearly half set to mature in 2023 and 2024 alone. 

The report is a troubling sign for San Antonio, where investment activity has increased, particularly in hospitality and multifamily. Local developer Weston Urban plans to break ground this summer on a $150 million apartment project at 110 South Laredo Street. 

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