According to new analysis from Trepp, Illinois tops the list for home student loans, with the percentage of loans overdue more than 30 days more than double the national average.
Illnois also ranks high in the low DSCR and occupancy categories, says Trepp’s Stephen Buschbom. He’s keeping tabs on the $26 million One North and One South loan to Champaign.
“Financial data shows that the struggle is not just COVID-related, as DSCR has been negative since 2019,” Buschbom writes. “According to Watchlist feedback, the borrower has invested over $4 million to renovate the property, but leasing has been extremely difficult as there are several other new student housing communities that have started to indulge a aggressive competition for a reduced share of tenants, resulting from a sharp decline. among international students who were historically a major driver of demand in this market.
Illinois is followed by Tennessee, which has a crime rate more than five times the national average. Buschbom points to a loan that is REO to Johnson Cit: Monarch 815 at East Tennessee State ($30 million).
“The REO Status Report comments indicate that the property is on track to stabilize after numerous costly repairs and years of struggling to resolve a significant backlog of issues, not the least of which was the completion of a foreclosure proceeding against the original borrower (service officer comments indicate red flags beginning just 2 years after the securitization of the loan),” he says.
Louisiana comes third, with a small sample size. East Baton Rouge’s University Edge, at $23.4 million, accounts for nearly a quarter of the loan balance with a DSCR
Ohio completes the top five, where a University Edge loan was transferred to the special servicer in March 2022 due to default.
“A proposal for a modification was then made in July, but in September the borrower indicated that the proposal would not work and that they would like to cooperate in the sale of the asset,” notes Buschbom.
Texas, Connecticut, Georgia, Michigan and Kansas follow to finish in the top 10 states in Trepp’s rankings.
“Only time will tell if some of the recurring stress themes that have plagued student housing loans in recent years resurface given that this subsector is fiercely competitive and requires very diligent property management as vacation rental and The capital-intensive nature of this beast (high turnover costs) can quickly spiral out of control, especially when inflationary pressure lingers in the background,” says Buschbom.