Commercial real estate distress isn't over, short seller Carson Block, according to a media report on Thursday.

Debt tied to apartment complexes in the Southeast U.S. is "the shoe that hasn't really dropped yet, but we think will," he said in an interview with Bloomberg News.

Investors increased exposure to the multifamily market after interest rates dropped dramatically during the pandemic, making the bet that work-from-home trends would boost rents. Some of the biggest beneficiaries were cities including Austin, Tampa, and Nashville.

Almost $76B of apartment complex loans are at risk, Bloomberg said, citing MSCI Real assets, as landlords took on floating-rate loans to renovate properties. Since then, rates have risen markedly to the highest borrowing costs in decades.

"A lot of these things were purchased with ultra-cheap money," Block said in the interview. Now, "financing costs are massively up."

Much of the risk has moved to Wall Street, as debts were packaged into commercial real estate collateralized loan obligations. The percentage of those instruments that are under some form of distress stands at more than 12%, Bloomberg said, citing CRED iQ.

Block didn't mention specific companies during the interview.

Some stocks that have exposure to multfamily debt include Arbor Realty Trust (NYSE:ABR), Starwood Property Trust (NYSE:STWD), and Brightspire (NYSE:BRSP). ABR stock slipped 0.3%, STWD +0.5%, BRSP +0.9% in Thursday morning trading.

Apartment REITs are trading in the green. Equity Residential (EQR) +0.9%, Independence Realty Trust (IRT) +1.2%, and AvalonBay Communities (AVB) +1.0%.