CRED iQ analyzed a sample of CMBS transactions that have incurred realized losses from liquidations during the 4th quarter of 2023. In our analysis, CRED iQ identified 23 loans with an unpaid balance of $288 million that resulted in a total loss amount of $187 million. Of the 23 workouts resulting in losses, severities for the fourth quarter ranged from 1% to 111%, based on outstanding balances at disposition and liquidation expenses.
Consistent with the earlier quarters in 2023, Q4’s property type, workouts were concentrated in lodging and retail. Lodging workouts accounted for 8 of the 23 distressed resolutions in Q4 2023 and retail workouts accounted for 7 distressed workouts. Distressed workouts for retail properties had the highest total of aggregate realized losses ($131 million) by property type, which accounted for 70% of the total for the quarter. Distressed lodging workouts had the second-highest total of aggregate losses by property type with $26 million, or 14% of the total.
The largest realized loss of the quarter was the WPC Department Store Portfolio in November which notched both the highest loss severity of 111.6% and also the greatest realized loss of $62.7 million. The retail segment held the top three with the Shops at Northern Boulevard in Long Island City New York, and Oak Court Mall in Memphis TN taking second and third place respectively.
Here are two workout examples which took place in Q4 2023.
Kirlin Industries, a 95,000 SF flex office property in the Washington, DC market liquidated with a realized loss of $6.4 million in December 2023. Kirlin Industries was the sole tenant of the property until it vacated in March 2020 without notice, despite its 2029 lease expiration. The loan collateralized by the subject property was added to the watchlist in April 2020 but did not transfer to the special servicer until July 2021. The realized loss to the trust represented a 50% loss severity.
The Fairfield Inn & Suites Kansas City, a 99-room lodging property in Kansas City, MS liquidated with a realized loss of $4.4 million. The limited-service property was included in a September 2023 auction, resulting in a closing date in November 2023. Outstanding debt at the time of disposition totaled $6.5 million, representing a 61% loss severity. The property has been REO since August 2021 and had been in special servicing since October 2020 due to imminent monetary default.
About CRED iQ
CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors. Subscribers use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities.
The platform also offers a highly efficient valuation engine which can be leveraged across all property types and geographies. Our data platform is powered by over $2.0 trillion in transactions and data covering CRE, CMBS, CRE CLO, Single Asset Single Borrower (SASB), and all of GSE / Agency.
