As rents have plateaued and construction loans are maturing, new development is becoming an increasing trouble spot in the apartment industry.
Recently, UDR assumed the ownership interest of a 173-unit lease-up property in Oakland, California, built by developer Mill Creek Residential after the Atlanta-based developer told the REIT it would not fund its share of a capital call.
Industry observers expect more developers to face stress as their properties hit the market. “We do think that attractive acquisition opportunities are going to start merging later this year into 2025,” said Eric Bolton, CEO of MAA, on the REIT’s February earnings call. “Merchant builders continue to struggle with their lease-ups that are more likely than not below what they underwrote.”
But the issues aren’t just limited to development. Some owners, particularly in large coastal cities, have been hit with the double whammy of eviction moratoriums and the migration of residents out of central business districts, suppressing both revenue and occupancies. Owners of rent-controlled properties in New York are also struggling after the passage of a 2019 rent law.
Here, Multifamily Dive rounds up the problem loans that have come to light since January 2023. Please check this page for regular updates.