Loan maturities driving scant multifamily sales in San Antonio

Multifamily sales fell 92 percent year-over-year in the fourth quarter

Loan Maturities Driving San Antonio Apartment Sales

(Photo Illustration by Steven Dilakian for The Real Deal with Getty)

Multifamily sales have plummeted in the Alamo City, and looming loan maturities are typically the driving force behind the few transactions that occur.

Sales totaled $163 million in the fourth quarter, marking a 92 percent year-over-year decline, the San Antonio Business Journal reported, citing CoStar Group. 

The city’s multifamily sector has been in a downward spiral since the second quarter of 2022, when sales peaked at $2 billion. Apart from a brief surge in the third quarter of 2023, the city has seen consecutive quarter-over-quarter declines since its 2022 peak.

“Multifamily residential transactions are way down from normal levels,” Daniel Khalil, CoStar’s South Texas analyst, told the outlet. “Even compared to pre-pandemic quarters, sales in the fourth quarter of 2023 were pretty low.”

Nearly all of the sales over the past few years have been driven by loan maturities, said Will Balthrope, executive director with Marcus & Millichap subsidiary Institutional Property Advisors.

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Apartment landlords are unlikely to offload a property unless a loan is coming due, prompting them to either sell assets at a discount or pursue refinancing — an increasingly difficult maneuver given the tight lending environment that’s hindered real estate deals across much of the nation since last year.

The outcome of such sales largely depends on when the property was purchased. Balthrope noted that properties bought before 2021 likely see appreciation benefits, while those acquired in 2022 face challenges due to a 15 to 20 percent decline in apartment values nationwide.

The market price per unit for apartments in San Antonio has dropped 16.5 percent, from $163,439 in the second quarter of 2022, to $136,049, the outlet reported.

This decline, coupled with increasing interest rates and equity requirements from lenders, makes it challenging for deals to materialize. Declining occupancy rates further pressure landlords to lower rental rates, impacting potential returns.

Despite these challenges, Balthrope remains optimistic about San Antonio’s resilience as a thriving Sun Belt market. For apartment landlords interested in selling, he suggests casting a wide marketing net to secure the best possible prices.

—Quinn Donoghue