Multifamily CMBS Loan Distress Rate Doubles in NYC

The distress rate for commercial mortgage-backed securities (CMBS) loans secured by multifamily properties in New York City has more than doubled over the past two years, according to a report from the Kroll Bond Rating Agency (KBRA).

New York City accounted for 27 percent of the total volume of all multifamily loans securitized last year through CMBS conduit deals, and more than 4.4 times the next-highest city’s volume, the report found.

But the New York City multifamily distress rate — which includes loans that are either delinquent or current but in special servicing — was 14.4 percent by the end of 2024, with most of the distress coming from pre-1974 properties, according to KBRA. That number is more than double the city’s distress rate of 7 percent at the end of 2023.

In addition, the distress rate for all CMBS multifamily loans was 8.5 percent at the end of 2024, with 43 percent of the loans in distress backed by properties in New York City, according to KBRA.

Plus, more than 90 percent of the $1.8 billion multifamily loans in the city in 2024 were subject to some form of rent regulation or part of a housing assistance program. The two programs with the most participation last year were 421a and the Family Homelessness and Eviction Prevention Supplement, according to KBRA.

In terms of boroughs, Manhattan had the highest distress rate at 29.8 percent, followed by Queens with 7.5 percent and Brooklyn with 3.2 percent, the report — which was first reported by The Real Deal — found.

Some of the largest loans driving distress in Manhattan include the $539.5 million of CMBS financing against the Chetrit Group and Stellar Management’s Yorkshire Towers and Lexington Towers on the Upper East Side, as well as the $265 million CMBS loan on Metro Loft Management’s 180 Water Street in the Financial District, according to Trepp, which also reported on KBRA’s data.

Average monthly rents for apartments in Manhattan have also increased 6.4 percent from one year ago to $4,500, while the borough’s vacancy rate decreased by 2.5 percent to 2.4 percent during that same time, Trepp reported.

Isabelle Durso can be reached at idurso@commercialobserver.com.