Early signs of multi-family credit stress may be a thing. Anyone else seeing this?

Multi-family credit has been as good as it gets for the last few years. We may be starting to see a reversion to the mean
h/t @rcwhelan
https://www.theinstitutionalriskanalyst.com/single-post/2017/11/20/Is-Multifamily-Lending-a-Threat-to-US-Banks

Moar multi-family credit termites
#CMBS

More color on the $BKU comment on multi-family
After renovation, property isn't leasing up according to plan

NMHC reports 10th straight quarter of looser rental markets
http://www.calculatedriskblog.com/2018/04/nmhc-apartment-market-tightness-index.html?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

Hmmm...smart money looking to sell $1B multi-family portfolio

Very interesting comments from $APTS CEO on older multi-family assets.
"We can't earn a return from maintenance capex like new roof or parking lot."
Do cap rates of older MF properties provide a margin of safety for this unavoidable capex? #cre

Another weak MF report $AIV

Apt complex in Cincy suburbs showing deteriorating results as new builds downtown draw tenants, with ripple effect on surrounding rents and occupancy.
Costar seems to think things will improve, but Cincy population has been virtually flat since 2010. Stay tuned. #multifamily

More detail on Towerview Aparments in Cincinnati

$WFC concerned about frothy transactions in CRE

Looks like we have our first significant multi-family lending fraud of the cycle.
Curiously, no word from $ABR about the indictments which became public last week.

The defendants are sponsors of projects that serve as collateral for over 150 CMBS loans totaling $1.7B according to Morgan Stanley. Stay tuned.

Home page of the mortgage broker, Aurora Capital Advisors, that handled the origination of the fraudulent multi-family CMBS loans discussed earlier this week. Can't make it up:

We may have found the Rizwan Qureshi of commercial mortgages in the US

May registered the lowest y/y rent increases for apartments since 2010
https://www.rentcafe.com/blog/rental-market/rentcafe-apartment-market-report-may-2018/

Norhtpointe Apartments, Euclid, OH (nr Cleveland)
Occupancy 69% due, in part, to rat infestation
Owner unwilling to support cash flow shortfall
Foreclosure proceedings in progress
#multifamily

Some very odd trends in expense line items.
Perhaps fraud is involved. #multifamily

$AVB pulls the ripcord on Manhattan multifamily after rents roll over
h/t @SMulholland_
https://www.bloomberg.com/news/articles/2018-06-18/avalonbay-is-said-to-offer-a-50-stake-in-manhattan-apartments

Still moar apartments coming to Brooklyn...busiest month for permits since 2015

"Cleveland's multifamily boom not slowing yet"
Cleveland metro population still falling, downtown must be drawing people from the burbs.....probably going to be some MF defaults out there
http://www.rejournals.com/cleveland-s-multifamily-boom-not-slowing-yet-20180618

Seattle rent growth goes negative as new multifamily supply overwhelms demand. 40% of newly built units are vacant.
h/y @ByRosenberg https://www.seattletimes.com/business/real-estate/free-amazon-echo-2-months-free-rent-2500-gift-cards-seattle-apartment-glut-gives-renters-freebies/

NYC condo investors competing with multifamily rentals
h/t @OshratCarmiel

Reis: Q1 apartment vacancy rate (in large cities) is up 50bp y/y:

Commentary from Reis on multifamily market:

More here: http://www.calculatedriskblog.com/2018/06/reis-apartment-vacancy-rate-increased.html?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

$BKU references an increase in non-accrual multifamily loans as primary driver of lower coverage ratio for NPLs

$BKU 's NYC multifamily loan book saw $215MM run off in Q2 due to "few opportunities to lend at good risk adjusted returns"

$STWD takes $22MM impairment on $171MM NYC multifamily (condo conversion) loan. Claim that $15MM related to timing of cash flows - DCF calc (project is taking longer to sell out) and that they won't lose money on the loan. Claim prices of condos close to underwritten values

That said, $STWD CEO Sternlicht says will see "all kinds of problems" in very high end NYC multifamily - cites Steinway condo deal on 57th street as example.

Manhattan apartment sellers taking an ax to asking prices.
3BR in Tribeca listed at less than price paid by seller in 2015.
h/t @OshratCarmiel

Rent growth now below 1% in most major markets, ~1/3 show declining rents.
What margin of safety is there in multi family properties bought with LSD cap rates?
https://www.bloomberg.com/news/articles/2018-09-07/rental-glut-sends-chill-through-the-hottest-u-s-housing-markets

Multi family loans are the worst performing asset class in post 2009 CMBS

Rents on Manhattan apartment leases signed in August down 2% y/y
Concessions offered on 35% of leases vs 24% a year ago.
Vacancy rate down to 1.58% vs 2.27% y/y #Multifamily
h/t @OshratCarmiel

Still moar price cuts on NYC condo and coop listings - the most in 12 years for the first week of September
h/t @OshratCarmiel

Price cuts on NYC apartment listings.
Up and to the right, but not in a good way

Are Chinese banks bailing out a bunch of EB-5 investors in the 125 Greenwich St. condo project? Odd to see so many Chinese banks in one deal when outflows of money being discouraged. https://therealdeal.com/2018/09/21/125-greenwich-supertall-closes-on-473m-debt-package/

Tax evasion, EB-5 investors. This thing has more hair on it than Johnny Damon in a Red Sox uniform.

Manhattan apartment sales dropped 11% y/y in Q3, listings are their highest level since 2011

All this supply is having a predictable impact on Manhattan apt prices, median down 4.5% y/y

Q4 promises to be worse, as signed contracts for Manhattan apts were the lowest for a Q3 since 2008.

$AVB pulls the rip cord on Manhattan multi family assets:

"Only a blip"
We'll see how this one ages
#multifamily

8 Spruce Street aka "New York by Gehry" a "trophy multifamily property" says Fitch, w/ 3.64% cap rate
Now losing some of its shine in soft rental market
NOI down ~10% in last 2 yrs even w/ occ up a tick
3.87% loan coupon - "Anticipated repayment date" 11/1/24
I'll take the over

Softer multifamily markets are not just a coastal thing, now appearing in flyover country. The downtown Des Moines area has seen a 45% increase in rental units in the last three years, vacancy rates have gone from 2% to 10+%. Concessions of up to 3 months rent being offered.

$EQR call notes:

70-75% of new leases in NYC and DT SFO getting 2 months free rent.

Q2 occupancy ~flat w some concession increase
Turnover up materially in Aug & Sept put pressure on occupancy and rents
Oct - modest uptick in renewals an applications
Too soon to call a bottom

2/70% of the concessions offered were in NYC/SFO/BOS
Most applicants in these markets are "deal seekers"
ie, in-market tenants seeking lower rents

Suburban market concessions rare, pricing generally flat

Their tenants still have jobs, just don't want to live in urban core now

3/ $EQR Notes:

NYC - people still leaving, NJ most popular destination
Deal seekers=75% Q3 move-ins, up 15% y/y
UWS & UES better than rest of Manhattan
Occupancy 90%, 88% for studios
Furnishing some studios for ST office rentals, some hourly
October activity a little stronger

4/ $EQR Notes

SFO - "most challenged market", escalating concessions
Occ 93%, DT SFO=87%
DT SFO 5% discount to Oakland vs 15% premium pre-Covid
South Bay threatened by new supply
Slight uptick in Oct renewals

5/ $EQR Notes

Seattle - 95% occ, elevated turnover in Capital Hill, CBD
Protests/CHAZ impacting Capital Hill market
Now seeing concessions in these market
House prices continuing to rise rapidly
Expect quick rebound when things turn

https://twitter.com/BarbarianCap/status/1324124384257331202

That creaking sound you hear is $JPM tightening the credit spigot for Manhattan condos and coops.

Max LTV on jumbos will be 70% going forward down from 80%

Other NYC lenders tightening the screws on new build condos.

Requiring cash reserve escrows and limiting back door pricing concessions.

30% price cuts over next two years?

Nominal studio rents in Manhattan are down 17% y/y to $2,245, effective rents (adj for free rent) are $2,069

Median Manhattan rent at 10 year low in November at $2,743

Brooklyn rents down 8%, NW Queens/LIC down 21%

1BR rent changes in the 17 most expensive market (from Wolf Street)

2 Cooper Square, 143 unit MF in NYC (East Village) goes 30 days delinquent.

22K ft Crunch Fitness on the ground floor.

2 Cooper Square was built in 2010, acquired by current sponsors David Werner and Isaac Kassirer in Sept 2019 for $100MM

There is a ground lease and preferred equity in the deal. Things could get spicy.

Crunch was about 15% of the rent roll, I'm guessing they haven't paid in a while.

$4K per month for a studio also isn't happening in this market.

Stay tuned.

One57 condo sells at 50% haircut to its 2014 purchase price (from developer)

$ARI owns a big slug of mezz debt on a project just down the street. At last report, their exit strategy was an "inventory loan" YMMV