Some Student Housing Loans in Trouble
Digested from Trepp
As new student communities open, some of those built after The Great Recession face issues.
While Fannie Mae and Freddie Mac dominate the conventional apartment market, many student housing borrowers utilize Commercial Mortgage Backed Securities (CMBS) loans. As enrollments at some schools decline, there could be problems with some of those loans.
Trepp’s Manus Clancy and Catherine Liu report that there is almost $4.5 billion in private-label CMBS student housing debt across 250 loans that are currently outstanding, which represents more than 11 percent of the total multifamily balance. As of August, approximately $331 million in student housing loans were delinquent. Almost all of these problematic loans were issued in 2010 or later.
“The student housing delinquency rate of 7.36 percent is far above the post-crisis level for any major [commercial] property category, including the much-scrutinized retail sector, which has attracted much of the industry’s concern,” Clancy and Liu write.
Another $123.3 million in loans are current but with the special servicer. In all, $1.53 billion worth of student housing loans were made on properties constructed in 2010 or later. Some of those communities are now in trouble as they’re having trouble maintaining occupancy levels and strong rents as they face new competition.
“The housing options that find it hardest to compete are those complexes that were amenity-rich 10 years ago and remain pricey, but now seem dated,” Clancy and Liu wrote.