Students at colleges and universities across the United States have been home since March when the COVID-19 crisis forced school officials to shut down campuses and move classes online. With an uncertain fall semester looming, the student housing submarket—which had already been facing issues in some regions due to overbuilding and competition—is seeing higher-than-average delinquency and special servicing rates compared to other parts of the multifamily sector, according to Trepp’s Student Housing Multifamily Report.
Kelvin Lin, Trepp research analyst, said in prepared remarks the COVID-19 outbreak is raising concerns about whether students will return and increasing doubts about whether some owners will be able to make timely payments.
The Trepp report notes there has been an uptick in delinquency rates on student housing properties over the past five years. It reached 10.8 percent in April up from 4.1 percent in April 2016. The short-term effects of the coronavirus outbreak are seen even more in the loans that are categorized as (A) “in grace period” or (B) “late beyond grace period” but less than 30 days behind payment. This serves as an early indicator of loans that could become delinquent. For the student housing sector, the rate climbed to 4.7 percent over the past month from 1.3 percent in March when the outbreak began.
Trepp listed the top loans classified with A or B status including The Buckingham in Chicago with a $45.3 million balance; Skyloft Austin in Austin, Texas, with a $36 million balance, and Sol y Luna in Tucson, Ariz., with a $25 million balance. Rounding out the list was the UniSquare Portfolio in Indiana and Pennsylvania with a nearly $21 million balance.
Trepp reported Kentucky and Missouri had recorded the largest delinquency rates (59 percent and 100 percent respectively) among student housing properties. It did note, however, that the relatively small CMBS balance in those states “makes it hard to gauge the severity of these rates.”
In April, the non-agency multifamily CMBS sector tied with the office sector for the second-lowest delinquency rate across all property types. In general, the multifamily sector has posted relatively low delinquency rates. But Trepp notes student housing has carved up a larger percentage of the delinquency share over time. When compared to other multifamily types, the student housing distress rates are higher on average with a higher delinquency rate (10.8 percent versus 0.9 percent), special servicing rate (11.6 percent versus 0.9 percent), and watchlist percentage (15.4 percent versus 11.5 percent).
Looking forward, Trepp stated the performance of the student housing submarket will largely be contingent on whether schools reopen their campuses for the 2020-2021 school year. While it does appear there has been evidence of an impact due to the coronavirus outbreak, the full impact has not yet been seen in the CMBS servicer data.
“With several forbearance and moratoriums being set in place around the country, the future of the market is still up in the air,” according to Trepp.
Despite that uncertainty, it is expected the market should rebound once there is more clarity on the pandemic’s impact on student housing, the report noted.
An earlier version of this story stated that Aspen Heights Partners owned three properties listed by Trepp among the top largest delinquent student housing loans. Aspen is no longer the owner of these properties and this information has been removed.