As multifamily distress ripples through the Sun Belt, Arbor Realty Trust, a top lender in the field, has been in the industry’s cross hairs for its many loans at risk of default. One short-seller betting against Arbor called it the “worst of the worst.”
By one measure, however, that dubious distinction actually belongs to Starwood Property Trust. Two other big-name firms were in worse shape than Arbor as well.
A report by commercial real estate platform CRED IQ analyzed commercial real estate collateralized loan obligations issued by the 21 most active firms in the space. CRE CLOs are debt securities backed by short-term, floating-rate loans — the kind of debt multifamily syndicators used to gobble up apartment complexes in the South and Southwest.
As a percentage of total debt, Starwood had the highest delinquency rate at about 13 percent. Greystone followed at 11.2 percent and Fortress Investment Group was third at 10.7 percent.
Arbor came in fourth with 10 percent of its portfolio delinquent.
Greystone pushed back on the report, saying the commercial real estate loans in its CLOs are all performing.
“There are no delinquent loans in any CRE CLO issued or managed by Greystone or its affiliates.” Ross Gusler, who heads finance and capital markets for the firm, said in a statement.
The other firms did not comment in time for publication.
Arbor, which acknowledged elevated delinquencies on a late February earnings call, does top CRED IQ’s list of lenders with the most delinquent debt by dollar volume at $782 million.
The lender foreclosed on syndicator Jay Gajavelli’s Applesway Investment last year for defaulting on a $229 million loan. Last month, Arbor filed to foreclose on a $38 million loan backed by a Houston rental property owned by another syndicator, Elevate’s Jorge Abreu.
Starwood, by comparison, has much less outstanding debt; it came in 10th out of CRED IQ’s analysis of the top 21 CRE CLO issuers.
In the tally of lenders with the most delinquencies by dollar volume, Ready Capital was second. The New York-based lender paused interest payments to some investors in one CLO pool late last year as a result of growing delinquencies. Properties owned by GVA, a syndicator with a portfolio rivaling that of Tides Equities, accounted for $55 million of that delinquent debt.
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Ready Capital did not respond to a request for comment.
Just 3 percent of CRE CLOs issued by MF1 Capital — Tides’ favored lender — was delinquent. Still, MF1 topped the charts for the highest outstanding debt balance of the 21 lenders at $11 billion, according to CRED IQ.
MF1 has negotiated multiple workouts with Tides, which claimed in September to have modified “nearly all” of its distressed debt. Tides later fell delinquent on loans made by Ready Capital.
MF1 declined to comment.