WASHINGTON, DC–There are good and bad watch lists in the world. Unfortunately, the Washington, DC area — at least its multifamily sector — has found itself on a bad one.
Fitch Ratings in its recent outlook for multifamily singled out a handful of US cities to watch, one of which is Washington, DC because of overbuilding.
This was not the only sign of possible pending distress for the industry in the last few days. Separately, Trepp also reported that five DC area multifamily loans were sent to special servicing.
5 Loans But Not A Lot of Color
Trepp does offer a caveat with its report: the special servicers did not offer a lot of color about the loans in their notes, it said.
It is possible, in other words, that these are one-off situations and not an indictment of the local asset class as a whole.
The largest of the five loans is the $11.8 million Elsinore Courtyard Apartments, a 152-unit apartment complex in the Marshall Heights section of DC.
The asset was built in 1960 and renovated in 2013. In 2015 — the first full year of post-securitization financials — DSCR was 1.23x, Trepp says. That fell to 1.13x for the first three months of 2016, which was the most recent set of financials released by the servicer.
The others are:
- The $9.4 million Oak Hill Apartments, a 108 unit apartment located at 3322 Wheeler Rd., SE. The loan became 30 days delinquent this month.
- The $6.9 million Sayles Place Apartments, a 61-unit apartment building at 2701-2811 Douglas Rd. SE. The loan became 30 days delinquent this month.
- The $6.5 million Fitch Apartments, located at 5218-5220 F St., SE, 5033 Call Pl. and 351 53rd St. The loan became 60 days delinquent this month.
- The $4.8 million Wayne Place Apartments, located at 128-146 Wayne Pl., SE and 166-168 Mississippi Ave. The loan became 60 days delinquent this month.
Stable to Peaking
Without the servicers' notes it is difficult to say why these properties became delinquent but an educated guess suggests it could be their Class B or Class C status.
While some apartment investors are targeting value-add properties as an opportunity to eek out more yield in this space, for the most part this cycle has been all about luxury and distinguished Class A space.
Read Capitol Hill Church-To-Condo Conversion Secures Record Price
Certainly that has been the story in the Washington, DC area. In retrospect it seems — at least per Fitch Ratings — that the region has overindulged a bit too much.
Nationwide is a somewhat different story: the ratings agency says the multifamily market remains strong with demographics on its side. Yet it does believe the sector is approaching its peak.
And it has put a handful of cities on its watch list. These are:
- New York, San Francisco, Boston due to decline in effective rents
- Houston, Dallas due to oil and gas exposure
- Seattle, Nashville, Denver, and Washington DC due to overbuilding
Fitch Ratings and Trepp did not return calls to GlobeSt.com in time for publication.
WASHINGTON, DC–There are good and bad watch lists in the world. Unfortunately, the Washington, DC area — at least its multifamily sector — has found itself on a bad one.
Fitch Ratings in its recent outlook for multifamily singled out a handful of US cities to watch, one of which is Washington, DC because of overbuilding.
This was not the only sign of possible pending distress for the industry in the last few days. Separately, Trepp also reported that five DC area multifamily loans were sent to special servicing.
5 Loans But Not A Lot of Color
Trepp does offer a caveat with its report: the special servicers did not offer a lot of color about the loans in their notes, it said.
It is possible, in other words, that these are one-off situations and not an indictment of the local asset class as a whole.
The largest of the five loans is the $11.8 million Elsinore Courtyard Apartments, a 152-unit apartment complex in the Marshall Heights section of DC.
The asset was built in 1960 and renovated in 2013. In 2015 — the first full year of post-securitization financials — DSCR was 1.23x, Trepp says. That fell to 1.13x for the first three months of 2016, which was the most recent set of financials released by the servicer.
The others are:
- The $9.4 million Oak Hill Apartments, a 108 unit apartment located at 3322 Wheeler Rd., SE. The loan became 30 days delinquent this month.
- The $6.9 million Sayles Place Apartments, a 61-unit apartment building at 2701-2811 Douglas Rd. SE. The loan became 30 days delinquent this month.
- The $6.5 million Fitch Apartments, located at 5218-5220 F St., SE, 5033 Call Pl. and 351 53rd St. The loan became 60 days delinquent this month.
- The $4.8 million Wayne Place Apartments, located at 128-146 Wayne Pl., SE and 166-168 Mississippi Ave. The loan became 60 days delinquent this month.
Stable to Peaking
Without the servicers' notes it is difficult to say why these properties became delinquent but an educated guess suggests it could be their Class B or Class C status.
While some apartment investors are targeting value-add properties as an opportunity to eek out more yield in this space, for the most part this cycle has been all about luxury and distinguished Class A space.
Read Capitol Hill Church-To-Condo Conversion Secures Record Price
Certainly that has been the story in the Washington, DC area. In retrospect it seems — at least per Fitch Ratings — that the region has overindulged a bit too much.
And it has put a handful of cities on its watch list. These are:
- Houston, Dallas due to oil and gas exposure
- Seattle, Nashville, Denver, and Washington DC due to overbuilding
Fitch Ratings and Trepp did not return calls to GlobeSt.com in time for publication.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
