Dive Brief:

• Just over a year and a half after origination, the loans backing the Cypress Village Apartments in Saint Ann, Missouri, and The Abington in Memphis, Tennessee, moved into special servicing, according to a Sept. 30 Morningstar report shared with Multifamily Dive. 
• The borrowers were Pinchos D. Shemano and Heyme Bleier, according to David Putro, associate managing director at Morningstar Credit. Shemano did not return an email from Multifamily Dive as of publication time. “It was a newish loan — just closed in February 2025,” he told Multifamily Dive in emailed comments.
• The problems at the Cypress Village Apartments and The Abington helped push the multifamily distress rate up 40 basis points, according to a press release from credit rating agency KBRA. The overall 30-day-plus delinquency rate among KBRA-rated U.S. private label CMBS rose 9 bps to 7.7% in September, per the release.

Dive Insight:

Many multifamily watchers are rightfully focused on the health of apartment loans originated in 2021 and 2022 — before interest rates rose. But the 330-unit Cypress Village Apartments and 384-unit The Abington show that newer loans are also facing issues.

The loans had several problems, including outstanding payment shortfalls, cash management issues, deposit account control agreement compliance failures, unresolved insurance deficiencies and uncured lien and title matters at both properties, according to Morningstar.

Servicer commentary also pointed to PILOT (payment in lieu of taxes issues), noting various citations for damaged roofs, siding, fascia, windows and parking lots. As a result, the properties were losing residents. “Occupancy had already fallen from 90% at closing to 65% by the end of 2025,” Putro said.

As more financially strapped owners struggle to pay loans, they have fewer resources to put back into their properties to address deferred maintenance, apartment executives have told Multifamily Dive. 

For investors, buying those properties comes with risks. “You don't want to mess with those deals, and there's so much deferred maintenance that it's almost like they need to be reset, probably in half,” Knightvest Founder and CEO David Moore told Multifamily Dive.

But even owners of newer properties are facing cash-flow issues, said Danny Fishman, CEO and co-founder of GAIA Real Estate.

“A lot of people that refinanced their properties in the last three years and put in interest reserves have exhausted the interest reserves,” Fishman told Multifamily Dive. “They hoped their interest rate would go down and the market would be stronger, but it didn’t happen.”

Fishman expects more of those properties to start hitting the market soon. “I think we are starting to see more distress in the industry,” he said. “Those [debt] funds saved them and basically they were kicking the can another year too. And I think that comes to an end.”

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