Multifamily refinance rates are 41% above maturing loans

New multifamily loans are pricing at 5.69%, 41% above the 4.04% average on loans maturing in the third quarter of 2026, according to Newmark research reported by Connect CRE on Nov. 2.

Newmark put multifamily cap rates at an average 5.5%, leaving the new-loan rate 19 basis points above the yield at which properties are being valued. The 41% figure compares the coupon on debt being retired with the rate on the debt replacing it, not a move in the benchmark index over any one period. Newmark calls the cap-rate relationship negative leverage. A loan priced above the cap rate dilutes rather than adds to a leveraged return, and Newmark said it has been common in multifamily over the past few months.

For a lender or allocator underwriting an apartment refinancing, that gap sets the size of the equity check. A sponsor rolling a 4.04% loan into 5.69% debt on the same balance faces 41% more debt service against unchanged income. The shortfall comes from reserves, fresh equity or a preferred-equity layer, which is where the structured-capital bid on apartments is being set.

Roughly 39% of multifamily properties sold traded below their previous inflation-adjusted purchase price, up from 6% at the end of 2021, according to Newmark's Joe Biasi, Will Levy and Mike Wolfson.

The wave of maturities has yet to cause the expected rise in distress, the analysts wrote, though they said sales prices show signs of pressure. Their warning concerns benchmark rates: "With loan spreads already narrow, multifamily borrowers have limited protection against further increases in benchmark rates."

On Oct. 28 Newmark arranged $104 million of senior financing from Blackstone-managed funds for Hendricks Commercial Properties' Lexington center, as Private Real Estate Daily previously reported.