NYC and San Francisco Multifamily Loans Post Big Declines

Cracks began to show last month in key multifamily markets like New York City and San Francisco, both of which have seen several sizable loans post major occupancy declines. 

Trepp first noted signs of fraying in the apartment segments in several markets last month, though the apartment CRE segment “in no way” parallels hotel or retail. And new analysis from the firm this month shows that all of the biggest loans with occupancy losses are in the New York and San Francisco markets, with the exception of one sizeable portfolio loan. (On the flip side, there are many markets with no properties below 80%, including cities like Phoenix, Orlando, Minneapolis, and Anaheim.)

But in New York, the largest loans where occupancy at the collateral is less than 80% include Jackson Park in Long Island City, 180 Water Street in FiDi, and The Aire at Central Park West. But there’s good news: Trepp’s Manus Clancy notes that occupancy for the 180 Water Street property has been improving steadily over the past few months, however, and “while this is a trend for one Financial District property, it could serve as an early indicator that occupancy levels are firming up in the NYC MSA,” he writes. 

In San Francisco, two large properties appear on the list: the $1.5 billion Parkmerced loan, which is backed by a complex with more than 3,100 units and posted 76% occupancy last year, and the $384 million NEMA San Francisco loan backed by a 754-unit compex with 72% occupancy (down from 94% the year prior). 

“This is not the ‘retail apocalypse’ or a step towards the 25% delinquency rate in the hotel space over the last year,” Clancy writes. “In fact, as the percentage of the US population that has been vaccinated for COVID-19 has grown and has cities around the US have re-opened, there is evidence of a strong rebound in apartment demand in major MSA.” 

But, Clancy says, “savvy CMBS investors will keep an eye on this going forward for signs of distress in those markets that have seen a meaningful uptick in vacancies since the beginning of COVID-19.”