- Ready Capital sold $20M in loans at $0.70 on the dollar and has $450M more in contract, expected to sell at even steeper discounts.
- Multifamily properties, particularly those bought during the 2020–2022 boom, are driving the discount as values plunge and delinquencies rise.
- Executives believe the worst may be over for multifamily, but uncertainty remains, leading them to maintain current loss reserves.
According to The Real Deal, Ready Capital, a significant multifamily syndicator lender, is selling distressed loans at steep discounts.
As It Happened
On a recent earnings call, the New York-based lender revealed that it has already sold $20M in loans this year at 70 cents on the dollar. Additionally, another $450M in loans are under contract to be sold in Q3, with some expected to trade at just 50 cents on the dollar.
These sales are part of a broader effort by Ready Capital to offload troubled debt as the multifamily sector faces a significant downturn. The loans being sold include both office and multifamily debt, but the multifamily sector is driving the biggest discounts.
Market in Decline
The multifamily market has been hit particularly hard, as the values of properties purchased during the market frenzy of late 2020 to early 2022 have plummeted. Rising interest rates and slowing rent growth have only compounded investor challenges.
Many of Ready Capital’s borrowers took on short-term floating-rate debt, and as these loans came due, delinquencies spiked. The cost of replacing protective rate caps has surged as interest rates climbed, further straining borrowers already struggling with overvalued assets and unfinished renovation plans.
Ready Capital has been proactive in addressing these issues, selling loans and modifying terms for borrowers who need more time to execute. In Q1, 10% of its $6.6B bridge loan portfolio, heavily used by multifamily syndicators, was delinquent. But through sales and modifications, the delinquency rate was reduced to just under 6% by the end of Q2.
Cautious Optimism
On their earnings call, Ready Capital executives expressed cautious optimism that the worst may already be in the rearview mirror for the multifamily market.
Chief Credit Officer Adam Zausmer noted that while delinquency levels might remain volatile over the next 12–18 months, he believes the most challenging period is likely behind them. However, CFO Andrew Ahlborn indicated the firm is not yet ready to reduce its loss reserves.
Ready Capital’s approach reflects a broader trend in the multifamily sector, where rising interest rates, over-leveraged properties, and market volatility are driving adjustments.
