“In April, Trepp reported that data from CMBS services indicated that there were signs of ‘fraying’ in the apartment segment in some major US markets,” wrote Manus Clancy, senior general manager of Trepp. “Certainly, the distress in the commercial apartment real estate segment is in no way comparable to the hospitality or retail segments in terms of defaults and declining income or profit. occupation due to the pandemic.
“This month we’re back with a follow-up to see what the multi-family market looks like now that most borrowers have submitted financial data for the year 2020 or numbers for the first quarter of 2021.
“In April 2021, Trepp reported that the overall apartment occupancy rate had declined by only one or two percentage points in total over the past year. However, there was a significant gap from market to market. There was a significant number of markets where there were no properties where the occupancy rate had fallen below 80%. This included many large US markets like Phoenix, Orlando, Minneapolis, and Anaheim. There were also markets that showed significant occupancy declines, and we highlighted five markets where more than 10 percent of loans had occupancy of. less than 80 percent.
“This month we wanted to look at individual loans, looking for the biggest loans in the private label CMBS market where occupancy is less than 80 percent in a given property.
“The numbers highlight that some markets like New York and San Francisco have seen large loans show steep declines in occupancy. With the exception of one large portfolio loan, all of the larger loans where the occupancy rate has fallen below 80% are in the MSAs of New York or San Francisco.
“In New York City, some of the larger loans with collateral occupancy rates below 80% include:
“The 180 Water Street loan is particularly interesting. Watchlist comments indicate a steady improvement in occupancy rates over the past few months: 59% in December 2020; 63% in January 2021; 70 percent in March; 80 percent in April. While this is a trend for a Financial District property, it could serve as an early indicator that occupancy levels are firming up in the New York MSA.
“In the San Francisco MSA, two large properties appear on the list. Parkmerced’s $ 1.5 billion loan is backed by a complex of more than 3,100 units. For 2020, the occupancy rate fell to 76% (compared to 94% during the securitization). DSCR (NCF) was 0.86 times in 2020. The NEMA San Francisco loan of $ 384 million is backed by a complex of 754 units. For 2020, the occupancy rate fell to 72% (compared to 94% in 2019). DSCR (NCF) was 0.84x in 2020.
“The large portfolio loan that we referred to is the $ 481 million MFP portfolio loan that we covered daily in our client journal. TreppWire newsletter earlier this year. The loan is backed by 43 apartments across the Midwest and Southern United States and the ratings support the JPMCC 2019-MFP single-borrower agreement. The occupancy rate of this portfolio at the end of 2020 was 76% and the DSCR (NCF) was 1.06x.
“As we noted above, this is not the retail apocalypse or a step towards the 25 percent delinquency rate in the hotel space over the past year. In fact, as the percentage of the U.S. population that has been vaccinated against COVID-19 has increased and cities across the United States have reopened, there is evidence of a strong rebound in demand for apartments in the United States. main MSAs.
“But savvy CMBS investors will be keeping an eye on this going forward for signs of distress in markets that have seen a significant increase in job vacancies since the onset of COVID-19.”