$200 Million Is What Houston's Maturing Apartment Loans Need to Refinance

SOFR rose from 3.62% to 3.85% on Sept. 17, the day after the Federal Reserve voted 12 to 0 to raise its target range to 3-3/4 to 4 percent. CRED iQ calculated on Oct. 15 that the move alone pushed 178 more apartment loans, with $4.0 billion of balance, below its refinance test and added $846 million to the equity their owners will need.

Houston's part of the total is $200 million.

CRED iQ re-tested $136 billion of Fannie Mae, Freddie Mac, conduit and fixed-rate single-borrower CMBS apartment loans maturing from October 2026 through December 2028. Each loan was re-sized at 1.25x debt service coverage on 2025 net operating income with 30-year amortization.

Houston has $3.7 billion of those loans. CRED iQ found that 30% of them, holding 37% of the balance, can't refinance without fresh equity.

That is a smaller hole than in Dallas-Fort Worth ($478 million on $5.2 billion), Atlanta ($398 million), Denver ($368 million) or Phoenix ($299 million). In Atlanta, 55% of the maturing balance falls short, and in Denver it's 51%.

Nationally the shortfall is $6.8 billion. The median loan that fails needs 15% of its balance, about $25,000 per apartment, to refinance.

Why the 2021 and 2022 loans fail

Loans written in 2021 and 2022 carry a median coupon of 3.35%, and 57% of their $18.5 billion balance fails the test. For loans written from 2016 through 2018, the figure is 19%.

Income does most of the sorting. Loans that pass have seen median NOI rise 31% since underwriting, while the ones that fail are down a median 12%.

Houston's rents haven't helped. RealPage chief economist Carl Whitaker wrote Oct. 13 that Houston rents didn't grow at all in the third quarter, with Class A up 1%, Class B down 1.9% and Class C down 5.4%.

Demand is holding up better than rent. The Greater Houston Partnership counts 33,600 more jobs than a year ago, and Cushman & Wakefield put Houston fifth in the country with 26,000 units absorbed through the third quarter.

The rate test keeps moving

After the September hike, CRED iQ tested loans at coupons of 5.46% for Freddie Mac, 5.59% for Fannie Mae and 6.46% for conduit and single-borrower loans.

Northmarq's Oct. 20 rate sheet quoted a 10-year Freddie Mac loan at 65% leverage at 6.18% to 6.33%, and 10-year CMBS at 6.98% to 7.38%, with the 10-year Treasury at 5.13%. A borrower refinancing this month would likely face a bigger gap than the study shows.

SOFR has not come back down. The New York Fed published 3.88% for Oct. 21.

Who brings the $200 million

The hardest version of the answer came from S2 Capital. The Real Deal reported Oct. 14 that S2 refinanced and modified $1.2 billion of loans on 26 Sun Belt properties, cancelling foreclosure sales that threatened 12 of them; the Weston Medical Center Apartments in Houston, with an $84 million loan, had been on its foreclosure list.

S2 closed most of its gap with more debt. Offering documents cited by The Real Deal show $968 million of modified loans plus $228.6 million of new financing against a $1.26 billion purchase price, an average loan-to-value ratio of 95%.

Other capital is coming in with more equity. Spirit Investment Partners and Strategic Value Partners bought Resia Ten Oaks, a 573-unit west Houston property built in 2024, with acquisition financing from Oaktree Capital Management that JLL arranged, REBusinessOnline reported Oct. 1.

Apollo funds are putting $1.34 billion of equity into a $2 billion venture with UDR covering 19 communities and 7,059 units, Commercial Observer reported Oct. 21. Neither company named the markets.

Owners who can wait are still waiting. At a GlobeSt. forum in San Diego on Oct. 21, Hamilton Zanze CEO Kurt Houtkooper said, "If I don't need to sell, I am not going to sell," and StarPoint Properties CEO Paul Daneshrad said selective buyers could find good opportunities, "But tremendous, no."

Gabe Lerner, an executive vice president at Lincoln Property Co., told Bisnow on Oct. 19 that he expects about half of the loans maturing each year to end up lender-owned.

What it means for owners and investors

For an owner holding a 2021 or 2022 loan, the refinance runs through NOI. CRED iQ found on Oct. 8 that Texas apartment insurance premiums fell 8.4% in 2025, though insurance still took $5.37 of every $100 of revenue, up from $2.92 in 2019.

For preferred-equity and rescue lenders, a $200 million gap spread across $3.7 billion of Houston loans means working one loan at a time, and the 2021 and 2022 vintage is where to start looking.

Pricing gives buyers little cushion so far. RealPage, using MSCI data, put the national apartment cap rate at 5.4% for an eighth straight quarter, with an average price of $228,777 per unit.

Remember the Sept. 17 jump at the top? S2's new fund assumes SOFR stays under 4.1% for five years and that rent growth turns positive in its first year, on top of that 95% leverage, which is about as little room for error as rescue capital gets.

Distress is still rising nationally. Trepp put the multifamily CMBS delinquency rate at 8.04% in September and the multifamily special servicing rate at 8.54%.

What to watch next

The Fed decides on Oct. 28. CRED iQ estimates each further quarter-point rise adds roughly $1.0 billion to the national gap, and one more hike would take it to $7.7 billion.

Blackstone's $1.3 billion Sun Belt loan from 2021 missed its Oct. 9 maturity with $517.7 million and six properties left, and Morningstar reports the firm got three more months to sell them.

Apollo and UDR expect to close on Oct. 29, the day after the Fed decision, at a cap rate CRE Daily put near 6.0%.