Multifamily Maturity Wall Forces Owners to Choose Between Losses and Lenders
Apartment owners must refinance or repay $757 billion in loans between now and 2028, with $300 billion maturing in 2026 alone, according to the Mortgage Bankers Association. The 2025 maturity volume of $310 billion set a record for the sector. Owners who borrowed at roughly 3% in 2020 and 2021 now face rates near 6%, doubling their debt service on properties acquired during the pandemic buying frenzy. Blackstone defaulted on a $90 million loan for a Dallas apartment building it purchased in 2021, and syndicator S2 Capital has racked up $400 million in defaults across its Sunbelt portfolio.
Delinquency rates for multifamily loans in commercial mortgage-backed securities jumped from 1% in October 2023 to 7.1% this year, the largest increase of any major property type, according to Morgan Stanley. About 3% of loans maturing this year that cannot be extended are in some form of distress, the highest level in five years, Trepp reports. Lenders extended loan maturities for years on the hope that rent growth would return and the Federal Reserve would cut rates, but creditors are now pressing borrowers to sell, recapitalize, or hand back keys. TruAmerica Multifamily Investments CEO Bob Hart said he is considering selling a Raleigh, North Carolina property rather than refinancing from 3.5% to 6%.
Apartment values have fallen more than 20% from their 2022 peak, and distressed-property buyers report discounts of roughly 40% on foreclosed assets. AvalonBay Communities and Equity Residential agreed to a $69 billion merger in May, citing a desire to rely less on expensive debt and use more internal revenue for projects. Developers have pulled back on new construction and shifted to acquiring distressed properties at steep markdowns. Some renters have faced rent increases or deferred maintenance as landlords try to meet debt obligations, prompting rent strikes organized by the Tenant Union Federation.
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