📊 Investors Hit Pause in 4Q23 per Burns + CRE Daily Fear and Greed Index. See the full report here.

Yardi Matrix: $525B Wave of Multifamily Loan Maturities by 2029

A recent Yardi Matrix report reveals a staggering $525 billion in multifamily property loans set to mature by 2029.

Yardi Matrix: $525B Wave of Multifamily Loan Maturities by 2029

A recent Yardi Matrix report reveals a staggering $525 billion in multifamily property loans set to mature by 2029.

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Good morning. A new report from Yardi Matrix highlights a looming $525 billion in multifamily property loans set to mature by the end of 2029. Meanwhile, high mortgage rates and strong demand helped drive Manhattan rents to a record high in February.

Today's edition is brought to you by Viking Capital.

Market Snapshot

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10Y Treasury
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SOFR
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*Data as of 3/13/2024 market close.

loan originations

Yardi Matrix Reveals $525 Billion Multifamily Loan Maturity Wave by 2029

A new Yardi Matrix report reveals a staggering $525 billion in multifamily property loans set to mature by 2029, casting a shadow over nearly half of the sector's $1.1 trillion debt portfolio.

Coming due: Over the next five years, more than 58,000 multifamily properties, representing nearly half of the sector's $1.1 trillion in outstanding loans, are on the maturity docket. In the shorter term, nearly $150 billion in loans across 6,800 properties are due by the end of 2025.

Zoom in: Property owners face daunting refinancing conditions, including elevated interest rates, declining property values, and slowing rent growth due to an influx of new units. The burden of maturing debt is unevenly distributed across the US. Atlanta leads with a looming $34.9 billion, followed by Dallas at $26.6 billion, with Denver, Houston, New York City, and Chicago close behind.

On the horizon: Yardi's database reveals that $61.8 billion in loans will mature in 2024, with a peak of $107.3 billion set for 2028. There's a wide range in the timing and source of these loans: nearly half of the debt-fund loans will mature by the end of 2025, and around a quarter of loans from commercial banks and CMBS will do the same. Fannie Mae and Freddie Mac loans make up the bulk of the maturities but with a longer timeline, mostly extending beyond five years.

➥ THE TAKEAWAY 

Why it matters: The financial landscape of multifamily is shifting under the pressure of rising interest rates. Fannie Mae and Freddie Mac loans have seen their delinquency rates increase from 0.1% to 0.4% since before the 2022 rate hikes. The jump in CMBS loan delinquencies is even more pronounced, soaring from 1% to 1.8% in just over a year. With Fitch forecasting CMBS delinquencies potentially hitting $1.3 billion—a figure eclipsing pandemic-related losses—the once beloved sector is facing heightened financial stress.

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✍️ Editor’s Picks

  • Navigating CRE: Hessam Nadji from Marcus & Millichap discusses CRE trends, vacancy rates, and office conversions with Tom Keene and Katie Greifield on Bloomberg Radio.

  • Recession roulette: Since June 2022, the yield curve has continuously inverted, signaling a 65% chance for a potential recession over the next 12 months.

  • Urban uproar: Major U.S. cities face cutbacks as CRE prices plummet, with significant discounts seen in properties across major urban centers like San Francisco.

  • Legal battle: CBRE sues ex-executive for joining competitor Cushman & Wakefield, alleging breach of contract.

🏘️ MULTIFAMILY

  • Luxury living: Affinius Capital plans to add 350 upscale apartments and 10KSF of retail space to a 100-acre mixed-use development in San Antonio.

  • Resi revolution: MetroLoft partners with David Werner to convert a former Pfizer HQ in Long Island to 1.5K rentals, surpassing the 25 Water Street conversion project.

🏭 Industrial

  • Data center kingpins: Blackstone (BX) partners with Aligned Data Centers, providing $600M credit for its new Utah data center, boosting its presence in the sector.

  • Shining light: Prologis (PLD), a top U.S. real estate trust handling 3% of global GDP via its logistics real estate portfolio, made $733M in acquisitions last year.

  • Barrett distribution: Barrett Distribution Centers expands in Dallas with a new 529KSF facility in Forney, TX, supporting various logistics services.

🏬 RETAIL

  • Back online: In February, U.S. retail sales in covered segments increased by 6.9% YoY to $222.65B, with e-commerce surging 10.6%.

  • Discount dilemma: Dollar Tree (DLT) plans to close 1K stores, mainly Family Dollar, citing challenges even as Dollar Tree sales rose 6.3%.

  • Mega-deal: KPR Centers purchased an 8-property retail portfolio for $180M, part of its larger Kimco Realty Corp. (KIM) deal.

🏢 OFFICE

  • Budget brilliance: GSA plans to reduce leased office space by 5MSF, requesting $425M in Biden's $7.3T budget for renovations.

  • Serious downsizing: Salesforce (CRM) reduces its office space by 45% to 900KSF in San Francisco, cutting 700KSF in 1 year.

A MESSAGE FROM CRE DAILY

CRE Daily has partnered with Redwood Living Inc. for a FREE 30-minute webinar on the current state and future outlook of the Build-to-Rent (BTR) market. Register to watch this session for insights into the impact of jobs, wages, and broader economic factors on this booming sector.

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RENTAL MARKET

Manhattan Rents Hit February High Amid Strong Apartment Demand

A robust economy and soaring mortgage rates propelled NYC rents to unprecedented levels (over $4,000 monthly) in February.

Record rents: In Manhattan, the median rent surged to $4,230, up 3% from last year’s $4,095 median rent. Brooklyn followed suit with a median rent of $3,499, also up 3% compared to the previous year, as highlighted in a report by Douglas Elliman and Miller Samuel. 

Borough trends: Despite stagnant rents at $3,239, Northwest Queens witnessed a remarkable rise in lease signings, drawing attention from Manhattan and Brooklyn dwellers and developers. The area registered a record 591 new leases in February, marking an 18% YoY increase. 

Market dynamics: Escalating mortgage rates, currently averaging 6.88% for a 30-year loan, have steered potential buyers towards renting. Manhattan saw a 7.7% rise in new lease signings YoY, while Brooklyn boomed with 62.2% more signings. Manhattan’s rental inventory also saw a notable surge, with nearly 8K units on the market, 33.1% more than in February 2023. 

➥ THE TAKEAWAY

The rising tide: Despite falling rates anticipated later this year, the looming presidential election has created a sense of hesitation among buyers. Landlords are adjusting their strategies as lease concessions in Manhattan dropped to 13%, down from 16% in January and 14.2% last year. But no matter what happens, one thing’s for sure—all roads still lead to NYC.

📈 CHART OF THE DAY

Once again, CRE yields are widening the gap with treasury notes. After interest rates surged in 2022, the yield spread over the 10-year treasury fell from 540 bps in 2020 to about 200 bps. But in 2023, when CRE prices began declining, the yield spread started to widen once more.

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