By Bisnow
Despite high occupancy and rent growth, some are warning of an incoming “Red October” for owners of multifamily properties due to the nature of financing for the asset class.
Multifamily landlords face a “hydrogen-bomb scenario,” Peter Sotoloff, a founding member of Blackstone’s property debt business, told The Wall Street Journal, crediting the situation to an increase in interest rates and borrowing costs set to hit the industry harder than most.
Morningstar in a paper released last month said multifamily is the largest real estate category, comprising 18.5% of market value — office makes up 15.5% of market value — and warned that real estate loans in the sector are looking “especially wobbly.”
While rising interest rates affect all asset classes, Morningstar cited three reasons they pack a particular punch for multifamily developers and landlords.
