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Multifamily CMBS Won’t Be Undercut by New Rent Regs
The newly-enacted tenant protection legislation set to take effect across New York City and state won’t negatively affect U.S. CMBS multifamily loans or deals these loans are securitized in, according to Fitch Ratings. The ratings agency said securitized commercial mortgages in its rated portfolio have a total exposure of $5 billion across 193 properties citywide.
Fitch said curbing the rate at which landlords can raise rents on rent-stabilized units in New York City properties may mean lower NOI growth. However, that slowdown won’t occur to the degree that it mars deal performance.
At worst, said Fitch’s Huxley Someville, “property values may decline if the new law deters investment and reduces investor appetite for rent-stabilized apartments. If that scenario plays out, there may be increased refinancing risk for those highly leveraged borrowers.” However, Fitch’s stressed valuations average 40% below current market values, so future refi risk would likely be marginalized.
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