The commercial real estate sector was abuzz this week by the news that the investment behemoth Blackstone is liquidating a large multifamily portfolio to pay back the remainder of a loan after missing its maturity payment on Oct. 9.

The portfolio originally included 21 multifamily properties with 6,671 units when it was acquired in 2021 for $1.3 billion. Many of the properties were located in the fast-growing Sun Belt, where apartments at the time were in high demand.

Today, the loan, which has a remaining balance of $517.7 million, has been whittled down to cover six properties totaling 1,842 units located in Tampa, Fla., Atlanta, San Antonio, Denver and Seattle. Blackstone had earlier sold many of the properties to pay down the loan by 60%, according to news services. Blackstone also defaulted in June on a $90 million loan for an apartment building in Dallas that the firm bought in 2021.

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Blackstone’s moves are the latest signs of growing trouble in the multifamily housing sector. One of the darlings of commercial real estate during the pandemic, multifamily housing was being built at record rates in recent years and much of that construction was in the Sun Belt, where the population has boomed since 2020.

Many property owners were able to secure loans for those complexes when mortgage rates were near record lows of around 3% in 2020 and 2021. But now, those loans are coming due in a much different environment.

Multifamily developers owe more than $1.8 trillion in debt, and about $757 billion in loans are set to mature between now and 2028, according to the Mortgage Bankers Association. Nearly $300 billion in loans are due this year, while another $223 billion is due next year.

But refinancing is going to be expensive. Developers who originally took out loans at around 3% are now seeing rates range from 5.5% or higher, depending on the type of loan. For many property owners trying to refinance with rates at 6% or more, they may have to contribute a large amount of money into the deal or consider selling.

While vacancy rates have remained low, the demand for apartments has begun to cool as more inventory comes on the market and fewer people are opting to move. In the third quarter, rent growth was up 2.3% year over year. It was the strongest growth since the first quarter of 2023, but less than half the growth rate from before the pandemic, according to Cushman & Wakefield.

The changing environment has led to creditors pressuring some developers who are struggling with debt levels. But considering Blackstone’s troubles, even the largest operators are facing difficulties. Loan delinquency rates for multifamily projects are also on the rise.

“I’m not saying it’s going to get as bad as office, but it’s creating a challenge for an asset class that has been probably one of the stronger-performing asset classes over the last 25, 30 years,” Joseph Bachkosky of Rialto Capital told Bisnow.