US apartment-loan delinquencies hit highest since 2016

The delinquency rate on securitized US apartment mortgages reached 8.1 percent in October, the highest since 2016, dragged up by a $210 million interest-only loan on The Cove at Tiburon, a 283-unit waterfront complex across the bay from San Francisco. The five-year mortgage was written in 2020, securitized and sold to investors who treated ultra-low interest rates as a permanent feature. It went delinquent when it was not paid off in October.

Behind that single loan sits roughly $2.3 trillion in multifamily debt, of which Fannie Mae and Freddie Mac hold about $1.2 trillion — leaving US taxpayers on the hook for around half the market. The rest is spread among banks, insurers, real estate funds and holders of commercial mortgage-backed securities, and every one of those groups has been absorbing defaults as higher rates make it impossible to refinance fixed-rate balloon payments or service variable-rate loans pegged to SOFR.

At issuance, Morningstar DBRS shadow-rated the Tiburon loan investment grade, citing the property's prime waterfront location, superior amenities and limited competition within the submarket. Occupancy then slid from 91.9 percent in June 2022 to 80.2 percent by March 2024, and average rent fell from $5,852 to $5,789, with new leases signed at lower rates to hold vacancies down. By October, rental income no longer covered operating expenses plus interest at current rates, and the loan could not be refinanced. It had already been modified and extended once, in November 2025; Trepp, which tracks the securitized market, reports talks underway to stretch it another six months.

The same arithmetic has reached downtown Los Angeles. Bridge Investment Group, an alternative asset manager owned by Apollo, is stuck with a defaulted $360 million loan on The Beaudry, a 64-floor, 785-unit tower that Brookfield developed for about $600 million and opened in 2023 — saltwater pool, spa, rooftop lounge, full-swing golf simulator. At today's interest rates the loan cannot be refinanced.

The last time multifamily delinquencies ran this high, in 2016, the emblematic default was the $3 billion loan on the Stuyvesant Town–Peter Cooper Village campus — 11,250 apartments in Manhattan — and the property's acquirers paid it off. This time the talks are about another six months.