The sector added 130 Basis Points this month – Reaching a New Record
The CRED iQ CRE CLO distress rate added 130 basis points in January – reaching a new high of 15.1%. A year ago, the distress rate was only 8.6% but has been steadily rising as these floating rate loans are failing to pay off at their maturity dates. Underpinning the distress rate, December’s delinquency rate came in largely flat at 11.7%; while the special servicing rate saw a slight decrease from 9.0% to 8.8% following a 180-basis point increase last month.
The CRED iQ distress rate includes any loan reported 30 days delinquent or worse, past their maturity, specially serviced, or a combination of these. We also examined the most recent property-level net operating income figures and compared them to underwritten expectations.
Payment Status
Looking across payment status in December, 33.4% of loans are performing matured (mostly flat to last month). 25.6% of loans were non-performing matured (down from 31.6% last month); therefore, 59% of the CRE CLO loans in our study are past their maturity dates, (down from 65.3% in last month’s report). About 18.8% of the CRE CLO loans are current. Combining Late/Grace Period + less than 30 days delinquent, the percentage increases to 22.1%.
Delinquent loans that have not past their maturity date accounted for 22.1% of the CRE CLO delinquent loans — up from 20.1% in the previous month.
Analysis Scope & Methodology
CRED iQ consolidated all of the loan-level performance data for every outstanding CRE CLO loan to measure the underlying risks associated with these transitional assets. Our team examined $75.6 billion in active CRE CLO loans. Many of these loans were originated in 2021 at times where cap rates were low, valuations high, low interest rates, and are starting to run into maturity issues given the spike in rates.
Some of the largest issuers of CRE CLO debt over the past five years include MF1, Arbor, LoanCore, Benefit Street Partners, Bridge Investment Group, FS Rialto, and TPG. The vast majority of the $79.1 billion in CRE CLO loans are structured with floating rates with 3-year loan terms equipped with loan extension options if certain financial hurdles are met.
About CRED iQ
CRED iQ is a market data provider that offers a robust suite of data and software solutions tailored for commercial real estate and finance professionals.
With over $2.3 trillion of CRE loans, CRED iQ delivers instant access to a comprehensive range of financial data and analytics for millions of properties in every market. CRED iQ’s data and analytical capabilities are instrumental in helping investors, lenders and brokers make informed and strategic decisions critical to their business.
