Kroll Bond Rating Agency Publishes CMBS Research: “For Now, Supply Concerns Bypass Securitized Multifamily”

NEW YORK--()--Kroll Bond Rating Agency (KBRA) releases a research report, “For Now, Supply Concerns Bypass Securitized Multifamily.”

By a number of measures, the multifamily sector has posted strong performance in the post-recession era. Employment growth, demographic trends, and a lack of affordable single-family housing have been the primary catalysts for the sector’s continued strength.

Multifamily market conditions have been softening, but the effects have varied by property classification and market. While class-A multifamily is experiencing cyclically high levels of construction, supply for classes B and C remains fairly muted. This bodes well for $132.3 billion of multifamily loans that have been securitized since 2010 in 346 Freddie Mac K-Series transactions and CMBS conduit transactions, as KBRA’s analysis indicates that nearly 80% of the underlying collateral ($103.9 billion) is class B or class C.

While the class-B/C supply-and-demand balance has been favorable at a national level, local market conditions vary. To further examine the dynamics within individual markets, KBRA considered various data points including employment, housing affordability, domestic and international migration, and demographic composition. Along with these variables, we also looked at inventory and construction levels, as well as current and historical vacancy rates. The information was used to derive a ranking system based on these supply and demand factors for individual metropolitan statistical areas (MSAs).

The 59 MSAs included in our study population had observable data points for all of the supply and demand factors listed above. In total, collateral securing 5,428 loans was present across the selected MSAs with a total unpaid principal balance of approximately $86 billion. Rankings were assigned to the MSAs based on their relative market attractiveness using an MSAs individual supply and demand factors.

After stratifying the rankings, we determined that 34% of the aggregate securitized principal balance is situated in MSAs that we designate top tier, easily outweighing the 7% in the bottom tier. The majority (59%) fell somewhere in between, although 23% was part of the lowest ranked mid-tier. Five of the top tier MSAs included Colorado Springs, Los Angeles, Phoenix, San Francisco, and Seattle. Five of the bottom tier MSAs included Baltimore, Birmingham, Cleveland, Hartford, and Houston.

To view the report, please click here.

About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Contacts

Analytical:
Kroll Bond Rating Agency
Larry Kay, 646-731-2452
Senior Director
lkay@kbra.com
or
Eric Thompson, 646-731-2355
Senior Managing Director
ethompson@kbra.com

Contacts

Analytical:
Kroll Bond Rating Agency
Larry Kay, 646-731-2452
Senior Director
lkay@kbra.com
or
Eric Thompson, 646-731-2355
Senior Managing Director
ethompson@kbra.com