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CRED iQ Analysis on the Rise of CRE Property Insurance Premiums

By
Chris Aronson
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0

CRED iQ analyzed insurance premiums from 2010 to Q1 2023. Our research aimed to uncover the trends and drivers behind the rise in insurance costs on CRE properties over recent years. Notably, Commercial Property Insurance Premiums experienced a significant increase of 20.4% in Q1 2023.

The increasing occurrence and severity of natural disasters continue to be a major worry in the commercial property insurance sector. These catastrophic events frequently lead to substantial property damage and significant financial hardships for policyholders. In just the initial quarter of 2023, the global economy suffered $77 billion in losses due to natural disasters, with insurers covering a third of that cost, amounting to $22 billion.

CRED iQ’s research team measured the magnitude of these insurance premium hikes and pinpointed the Top 10 Metropolitan Statistical Areas (MSAs) that have witnessed the most substantial increases in premiums for properties on a per unit basis.

CRED iQ has also calculated the historical insurance premium year over year delta again for multifamily on a per unit basis.

Florida stands out as a state where insurance premiums have surged significantly. The heightened exposure in the Commercial Real Estate (CRE) sector is creating financial difficulties for properties facing upcoming insurance policy renewals and seeking new property financing. This is evident when comparing the 5-year percentage change from 2018 to 2022.

CRED iQ has identified a multifamily property in Tampa, Florida, known as The Grand Reserve at Tampa Palms. This property, which comprises 390 units and was constructed in 1999, serves as a prime example of how extreme weather events have led to financial distress over time.

In 2017, according to CRED iQ’s comprehensive financial database, this property had an Insurance Premium of approximately $183,000. However, when we examine the fiscal year 2022, the same property incurred a significant increase, with an insurance cost of $521,000. This represents a staggering 185% rise, translating to an increase from $469 per unit to $1,336 per unit.

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Insurance rates for commercial real estate can be influenced by various factors, including:

1. Market Conditions: Changes in overall market dynamics, like shifts in demand for insurance coverage, can influence insurance rates. High demand due to increased risk factors or market trends can lead to rate hikes.

2. Property Location and Risk Assessment: The property’s location plays a vital role in determining insurance rates. Areas prone to natural disasters or higher crime rates typically result in higher premiums.

3. Property Type and Use: The type and intended use of the property affect rates. Properties with more occupants, hazardous materials, or elevated risk features can lead to higher insurance costs.

4. Claims History: Past insurance claims and losses impact future rates. Frequent claims or significant damages in the property’s history can lead to increased premiums.

5. Construction and Building Materials: The quality of construction and materials used affects rates. Older properties or those with vulnerable materials might have higher premiums.

6. Legal and Regulatory Factors: Changes in regulations or building codes can impact rates. Local, state, or federal shifts in safety standards or insurance requirements can influence costs.

7. Economic Factors: Economic conditions, such as inflation and interest rates, can impact insurance costs. Inflation can raise rebuilding expenses, leading to higher premiums.

8. Trends in Litigation and Liability: An increase in litigation or liability claims in commercial real estate can prompt insurers to raise rates to cover potential payouts.

9. Reinsurance Costs: Insurers use reinsurance to manage large losses. If reinsurance costs rise due to global events, insurers may pass those costs to policyholders.

10. Global Events and Catastrophes: Large-scale events like natural disasters or pandemics can heighten risk and impact insurance rates by affecting the industry’s financial stability.

These expenses are anticipated to continue and could even escalate throughout the remainder of 2023. This is due to the onset of the hurricane season and the ongoing spread of wildfires in the Western U.S. The National Oceanic and Atmospheric Administration (NOAA) has foreseen the possibility of up to 17 named storms forming during the 2023 Atlantic hurricane season, which spans from June 1 to November 30. Among these storms, nine could potentially transform into hurricanes with winds exceeding 74 mph, and four of them might attain significant strength with winds surpassing 111 mph.

According to the latest information from the National Interagency Fire Center (NIFC), there have been approximately 20,000 wildfires that have already consumed over 621,000 acres along the West Coast. While this number is lower than the 10-year average, it serves as an indication of another demanding wildfire season in the upcoming months. Climate experts predict that the ongoing patterns of natural disasters will persist, further intensifying the damages associated with them for the foreseeable future.

Consequently, several reinsurers have acted to restrict their willingness to cover these risks or have even withdrawn their coverage entirely, while rates continue to rise. According to data from the industry, reinsurance treaty renewals on January 1 brought some of the most challenging market conditions in many years. The capacity for additional coverage layers reduced by more than 50%, and policyholders encountered rate hikes ranging from 40% to 100%, depending on their vulnerability to catastrophic events. A similar trend was observed during renewals on June 1, with capacity tightening further and rate increases ranging from 25% to 40%. These developments highlight the ongoing cautious approach prevalent within the reinsurance sector.

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.

CRED iQ August 2023 CMBS Delinquency Report

By
Chris Aronson
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0

The CRED iQ CMBS delinquency rate has continued to rise, reaching 5.07% in August 2023. This represents a 40 basis point (0.40%) increase from a month prior, and an 177 basis point increase since January 2023. Notably, 62% of the newly delinquent loans, based on their outstanding balance, were a result of maturity defaults or refinancing challenges.

CRED iQ’s special servicing rate, equal to the percentage of CMBS loans that are with the special servicer (delinquent or non-delinquent), increased modestly month-over-month to 6.73%, from 6.72%. The special servicing rate has continued to climb YTD 2023. Aggregating the two indicators of distress – delinquency rate and special servicing rate – the overall distressed rate (DQ + SS%) rose to 7.17% – an increase of 14 basis points. Last month’s distressed rate was equal to 7.03%, which was 14 basis points lower that the July 2023 distressed rate. The month-over-month increase in the overall distressed rate mirrors increases in the delinquency and special servicing rates. Distressed rates generally track slightly higher than special servicing rates as most delinquent loans are also with the special servicer.

By property type, distress in the office sector continued to build in August 2023. The office distressed rate for August is 9.36%, which compared to 8% as of July 2023. The month-over-month surge of 136 basis points in office delinquency was equal to a 17% increase. The natural progression of long to intermediate-term rolling leases coupled with ongoing refinancing difficulties at loan maturity have caused the velocity of new delinquencies to accelerate during 2023.

An example of why office delinquency rates have gone up significantly month over month can be seen with 995 Market Street in San Francisco. This loan was part of the LSTR 2016-4 transaction and had a balance of $45 million. On July 21, 2023, it was transferred to Special Servicing, and currently, it’s 30-59 days behind in payments.

What’s important to note here is that the Special Servicer reports that the borrower hasn’t paid for July and has indicated they won’t make any more payments. Unfortunately, this situation is likely to continue as office vacancies increase, and Net Absorption (the rate at which office space is being occupied) continues to decline.

In August, Distressed rates for different types of properties showed the following changes:

  • Retail Distressed rates decreased slightly from 10.74% in July to 10.66% in August, an 8 basis point drop.
  • Multifamily Distressed rate increased slightly, rising by 31 basis points to reach 4.96% in August.
  • Lodging Distressed rate improved slightly in August, dropping by 6 basis points to 7.69%. This improvement is due to increased business and leisure travel, which has now surpassed pre-pandemic levels. 
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CRED iQ’s CMBS distressed rate (DQ + SS%) by property type accounts for loans that qualify for either delinquent or special servicing subsets. This month, the overall distressed rate for CMBS increased to 6.56%. The increase was 13 basis points higher than May’s distressed rate (6.43%), equal to a 2% increase. A severely limited refinancing market for office properties and a ‘higher for longer’ interest rate environment continues to contribute to sustained increases in commercial real estate distress.It’s important to clarify that the delinquency rate is calculated as the percentage of all delinquent loans, whether specially serviced or non-specially serviced, in CRED iQ’s sample universe of $600+ billion in CMBS conduit and single asset single-borrower (SASB) loans

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.

Regional Mall Update: CRED iQ Analysis

By
Michael Haas
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0
King of Prussia Mall

For many years, the commercial real estate market has been predicting the decline of traditional malls due to the rapid growth of E-Commerce and the decreasing revenues generated by traditional mall tenants.

The adage “Only the strong survive” aptly characterizes the situation for American malls. However, it’s worth noting that students still favor physical malls for their back-to-school shopping. In terms of monthly statistics, Outlet Malls have experienced a growth of approximately 18% in volume, while renovated Indoor Malls have seen a monthly increase of around 7%, as reported by Placer.AI.

Industry data indicates American Mall year-over-year increase of around 5% in sales per square foot. Fran Horowitz, the CEO of Abercrombie & Fitch, affirms that the brand remains popular among late teens and early 20s demographics. Even though consumers might research Hollister products online, the data reveals that the majority of transactions continue to occur within physical stores. Abercrombie & Fitch has reported for the 2022 fiscal year online sales represented 44%. So, a majority of shoppers are still purchasing products in Abercrombie & Fitch’s brick and mortar locations.

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An annual assessment of approximately 1,000 malls, and among them, they have improved 250 American malls by effectively filling anchor spaces and enhancing inline tenancy. According to industry statistics, “B” malls have exhibited notable resilience, demonstrating their capacity to regain stability in the aftermath of the pandemic.

Mall operators Simon Properties and Tanger Factory have reaped notable benefits from substantial enhancements to their individual mall portfolios. The recent bankruptcies of retailers such as Bed Bath & Beyond, The Christmas Tree Shop, and Tuesday Morning primarily affected dark spaces within Strip Center malls.

As the process of filling in vacant anchor spaces progresses, there has been a notable trend of Dick’s Sporting Goods occupying a considerable amount of these empty areas. Additionally, in certain instances, vacant spaces are being considered for occupancy by grocery stores. Another approach involves repurposing these large, unoccupied anchor spaces into smaller units, potentially for purposes like gyms or even satellite locations for colleges.

As vacant anchor spaces begin to get leased out, this development also proves advantageous for in-line tenants. Many of these in-line stores have Co-Tenancy clauses in their leases, which allow them to terminate their leases prematurely in the event of an anchor store’s closure.

CRED iQ has conducted a comprehensive assessment of our database encompassing retail properties in the U.S. with outstanding loan balances exceeding $1 million. Based on our analysis, the table below indicates that retail properties exhibit a delinquency rate slightly surpassing 5%. Further insights into our retail assets, categorized by loan payment status, can be found in the detailed breakdown provided below.

While the commercial real estate market has often displayed a negative sentiment towards the Retail Sector, particularly American malls, it’s becoming more apparent that these malls are showcasing a remarkable level of resilience.

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.

Case Study: The Gas Company Tower

By
Michael Haas
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0

In our first of a series of Case Studies, CRED iQ  invited guest analyst Josh Myers, CFA to take a deeper dive into this noteworthy asset from the first half.  What can we learn from this story and what can it tells us about future projections?    We hope you enjoy this case study. 

CRED iQ recently featured The Gas Company Tower (GCT) in the  Valuation Trends in the First Half of 2023 report. GCT was the runner up for the largest declines in property values during the first half. This inauspicious achievement came as GCT was re-appraisal at $270 million in April which is a jaw-dropping $362 million decline from its November 2020 appraisal of $632 million. This new appraisal came after Brookfield DTLA (OTC: DTLAP), the owner of GCT, defaulted on the loan at its February maturity date.

Financial Paradigm –what drove this sharply reduced appraisal?

Let’s start with GCT’s financials to get some context on this new appraisal via CRED iQ.

  • Net operating income (NOI) for the 9-month NOI as of September 2022 totals $18.1 million. 
  • Sidley Austin, the second largest tenant, has decamped from GCT for a downsized spot at 350 South Grand Avenue.
  • With nearly 10% of rental income leaving with Sidley we  estimate that effective gross income (EGI) will drop by 8.2% (base rent and expense reimbursements make up 82% of EGI).
  • With operating expenses making up 32.4% of revenue the 8.2% drop in EGI will result in a NOI drop of just over 12%. Annualizing the 9 months NOI and reducing by 12% we can estimate that the underwritten NOI used in the appraisal is around $21 million which gives us a cap rate of ~7.86% for a spread of ~440bps over the 10-year treasury.

When Brookfield DTLA elected to not exercise the extension option and instead default at the February 2023 maturity date it triggered an updated appraisal of this property. As detailed above the decline in NOI and rise in interest rates caused the sharply reduced appraisal.

Background on GCT

GCT was built in 1991 by a partnership of Maguire Properties and Thomas Properties Group. Maguire Properties, privately owned for 40 years, was an aggressive developer and buyer of Los Angeles real estate since the 1960s and ended up with sole ownership of GCT by the time Maguire went public in 2003 at $19 per share.

GCT made its market debut along with its owner in 2003 via the BALL 2003-BBA2 CMBS transaction as a $230 million loan with an appraised value of $450 million.  The loan was underwritten with a NOI of $35.7 million. Originated in June 2003, the floating rate loan carried a L+82 basis points coupon and initial maturity in July 2007 with a single 1-year extension option. Maguire, refinanced that loan with another CMBS loan, this time a $458 million loan supported by an appraisal of $610 million in June 2006.

Brookfield refinanced GCT in July 2016 by tapping the new single-asset, single-borrower CMBS market for $450 million spread across three different CMBS deals: COMM 2016-GCT, WFCM 2016-C36, and CD 2016-CD1. Riding the post-COVID everything bull market, Brookfield refinanced GCT once again into another SASB deal in 2021, GCT 2021-GCT, with the appraised value of $632 million referred to earlier. 

Brookfield bought Maguire in 2013 bringing GCT into the Brookfield family of assets.  Brookfield was in the early stages of a larger push into the distressed real estate market which ultimately culminated in the 2018 purchase of mall operator General Growth Properties (NYSE: GGP) for $15.3 billion.

Today GCT is an asset of Brookfield Property Partners (NYSE : BPY), the main real estate subsidiary of parent company Brookfield Asset Management (NYSE : BAM).  BPY created a subsidiary, the called  DTLA, to complete this acquisition that was owned 47% by BPY and 53% by institutional investors.

What can the GCT Story Tell us About Brookfield and the Future?

Last year Brookfield raised $14.5 billion for its newest real estate opportunities fund and their CEO has called the current opportunity in real estate the best since 2009. However, they are also facing many problems in their existing portfolios from the recent buying spree. The CEO of Brookfield REIT stepped down in April amidst investor redemptions, falling valuations, and slow fundraising. Brookfield defaulted on GCT and 777 Tower in Los Angeles earlier this year amidst a tighter credit market and tenant departures.

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When Brookfield bought MPG, they vowed to improve the buildings and aggressively court new tenants such as tech companies, but that has not played out at GCT as the tenant roster remains largely unchanged with the Southern Gas Company still the largest tenant despite steadily lowering its footprint over the years from 558,318 square-feet in 2003 to 362,483 square-feet currently. Strategic tenant improvements and leasing capital investments into properties can provide very attractive returns for property owners but the fact that Brookfield has chosen not to make those investments despite amassing a war chest of opportunistic capital does not indicate that Brookfield ever saw much value above the mortgage in GCT. Holding the building in a separate subsidiary whose stock price has steadily declined has also made it difficult to raise external capital to make new investments in the property. Brookfield does not list GCT on its website and with the mortgage now underwater they will likely be asking for a generous forbearance package from the Special Servicer and Operating Advisor to stay in the property.

If no deal can be struck and GCT is auctioned off, another one of Brookfield’s subsidiaries could theoretically buy it back at auction. With the DTLAP stock trading just under 15 cents per share Brookfield has little to lose by walking away from the property and a lot to gain from a favorable restructuring of the debt. Brookfield is a very savvy sponsor with deep pockets and many different options at its disposal to do what is best for them and their investors. Unfortunately, that is not always in the best interest of the CMBS lenders. One of the major innovations in the CMBS 3.0 market was the role of the Operating Advisor that would oversee complex workouts like this to give CMBS investors a larger voice in these complex negotiations and manage the often-diverging interest in a CMBS trust.

The rumor of a new 300,000 square-foot lease at GCT that more than replaces the Sidley Austin footprint should be used by the Special Servicer and Operating Advisor in their negotiations with Brookfield. In the past, we have seen unfortunate restructurings of CMBS debt that heavily favor the sponsor only to be followed by a new lease signing like this just months after the forbearance deal is signed. GCT should provide us with a good opportunity to see how successful Operating Advisors can be in negotiating against highly sophisticated borrowers like Brookfield.

Some Takeaways

GCT is a great example of how two decades of falling interest rates and financial engineering have increased property values and enriched property owners but have not necessarily increased the value and utility of these properties. The past twenty years have seen NOI dwindle from nearly $40 million to $20-$25 million today despite valuations increasing from $450 million to $632 million. Whoever is left holding the hot potato now will have to figure out if buildings like this are worth keeping as-is with long-deferred and costly capex finally being invested or if a new use for the property needs to be found.

About the Author

Joshua J. Myers, CFA

After a successful 20+ year investing career, Joshua Myers, CFA launched Cedars Hill Group to bring large market expertise to broader audiences. He primarily serves as an outsourced CIO/CFO for family offices, RIAs, and small-to-medium sized businesses. He started as an assistant trader at Susquehanna Investment Group during the Russian default and LTCM failure in 1998. Afterwards, he was Head of Fixed Income at Penn Mutual Life Insurance during the Global Financial Crisis of 2008-2009. He traded distressed CMBS securities in the aftermath of the GFC at Cantor Fitzgerald and most recently was Chairman of the Board for an oil production company during the COVID pandemic. He is a lifelong student of financial markets and writes about current events with a focus on the art of decision making and cognitive psychology.  

For more market commentary from Josh subscribe to his Substack at Cedars Hill Group (CHG). You can also follow Josh on LinkedIn and X.

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.

Watchlist Triggers for the First Half of 2023

By
Michael Haas
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0

CRED iQ examined loans that were added to the Watchlist in 2023.  Our research team wanted to understand the underlying factors so far year.   

As of the July 2023 remittance reports, CRED iQ has conducted its CRE watchlist analysis for loan and property data. In 2023, the Year-to-Date count of loans on the servicer watchlist has reached approximately 12,000 loans. In the reporting month of July 2023, CRED iQ identified just over 4,600 loans that have been recently added to the watchlist.

  • 36.5% of all Watchlist loans were attributable to DSCR triggers –both fixed rate and floating rate. 
  • Pending Maturity or ARD represented 13.5% of the names on the list—a increase of 4.5% vs all Watchlist accounts in our database
  • Occupancy Decrease (excluding logging) accounted for 9.5%. of loans added to the watchlist in 2023—surprisingly a slight decrease against the overall Watchlist factor of 11.7%. 
  • Major tenant expirations were attributable to 2.3% of Watchlist loans so far this year –a fractional increase of .3% against all Watchlist filings  

One recent example, is 1166 Avenue of the Americas, a 195,375-SF office tower in Manhattan that is encumbered by $130M in debt.  The loan was recently added to the watchlist according to CRED iQ data due to its largest tenants vacating.  The largest tenant, D.E. Shaw, (44% of the GLA) will be moving out as well as Arcesium, 20% of GLA) is actively looking for new office space as its lease expires in June 2024.  The loss of those two tenants could reduce the building’s total revenue by $8-$9M, which will negatively impact its DSCR. 

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What is a Commercial Real Estate Watchlist and Why is it Important?

The Watchlist is a specialized designation that tracks and monitors properties and loans that are experiencing delinquency or non-payment of their financial obligations. This watchlist is particularly relevant for lenders, investors, and real estate professionals who want to keep a close eye on the performance of commercial real estate loans and identify potential risks in their portfolios.

Key features and benefits of a commercial real estate delinquency watchlist include:

  1. Identifying Troubled Assets: The watchlist helps lenders and investors identify properties and loans that are experiencing payment issues, providing early warnings of potential financial distress.
  2. Risk Management: Monitoring delinquencies helps in assessing the overall risk exposure of a commercial real estate portfolio and allows for timely risk mitigation measures.
  3. Decision Making: The watchlist enables lenders to make informed decisions about asset management, loan restructuring, or potential loan sales based on delinquency trends.
  4. Portfolio Diversification: By analyzing delinquencies across different property types, geographic locations, and asset classes, investors can make more informed decisions about portfolio diversification.
  5. Market Insights: Delinquency watchlists offer valuable insights into market trends and economic conditions, as high delinquency rates can signal broader economic challenges.
  6. Mitigating Losses: Early identification of delinquencies allows lenders and investors to take appropriate actions to mitigate potential losses, such as initiating foreclosure or loan workouts.
  7. Loan Servicing: For loan servicers, a delinquency watchlist helps in managing collections and guiding borrowers back to compliance.
  8. Compliance and Reporting: It assists financial institutions in adhering to regulatory requirements and reporting delinquency rates accurately.
  9. Real Estate Market Monitoring: By tracking delinquencies across different property types and regions, real estate professionals can gain insights into emerging market trends and potential investment opportunities.
  10. Asset Valuation: Delinquency information can impact the valuation of commercial mortgage-backed securities (CMBS) and other real estate investment products.

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.

CRED iQ Names Harry Blanchard as Head of Data and Analytics

By
Michael Haas
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0
Former Moody’s Executive Harry Blanchard joins tech-focused CRE data firm, CRED iQ as Head of Data & Analytics

NEW YORK and PHILADELPHIA:  CRED iQ, the fastest growing provider of commercial real estate (CRE) data, analytics and valuation tools is pleased to announce that Harry Blanchard has joined the company as Managing Director, and Head of Data & Analytics. 

Read the official press release here

Harry comes to CRED iQ with a track record of impeccable leadership and executional excellence. His unique experience covers buy-side, sell-side, regulatory, compliance and banking. Harry has served in leadership roles at Moody’s, MetLife and Wells Fargo during his career, and has exceptional knowledge of CRE financial data and analytics. 

“We are thrilled to welcome Harry to the CRED iQ leadership team,” said Mike Haas, Co-Founder and CEO. “Harry’s multi-faceted experience and leadership skills are vital to our future, and I am pumped to watch him help shape our business.”

“I am delighted to be part of the CRED iQ team!  said Harry Blanchard “CRED iQ’s platform delivers exactly what CRE professionals need most: precise data, an efficient experience with multiple perspectives, and powerful valuation and risk tools. I am excited to contribute to this extraordinary platform and help make CRED iQ a must-have for all CRE professionals.”

“Harry understands how to serve clients, and then distill those insights into product strategy” noted Chris Aronson, CRED iQ’s Chief Commercial Officer. “As I learned firsthand, he is also a tremendous teammate. I am thrilled to have him join the CRED iQ family.” 

Harry will operate out of CRED iQ’s New York City offices set to open in the Fall –joining a growing leadership team based in Manhattan.

About CRED iQ

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CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors lenders and advisors.

Powered by over $2.0 trillion in transactions and data CRED iQ provides actionable data to commercial real estate lenders, brokers, and investors. CRED iQ’s customers use the platform to identify and evaluate opportunities for leasing, lending, refinancing, distressed debt, and acquisition opportunities.

Valuation Trends in the First Half of 2023

By
CRED iQ
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0

CRED iQ examined 190 appraisals of major properties across all assets classes to determine the impact of current market conditions on asset values. 

The most notable declines in valuation were dominated by retail and office properties.  Some key takeaways:

  • Across $ 10 billion in assets CRED iQ noted an average of 41.2% decline in valuation from the original appraised value.
  • By segment, retail properties experienced the highest decline in value at 57% led by several large malls.
  • The office sector was close behind with an average valuation decline of 48.7%
  • Self-Storage remained robust with no properties reporting a decline in valuation from specially serviced assets.
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Here are the most notable properties that made our list:

229 West 43rd Street, New York City

This 248,457 square foot retail condo in Times Square topped our list with a jaw dropping $386 million valuation decline.  

Gas Company Tower, Los Angels CA

This massive 1,377,053-sf office tower came in a close second on our list.  Originally valued at $632 million the current value is $270 million–a decline of $362 million. 

Average Drop in Valuations for Specially Serviced Loans during the first 6-months of 2023. Source: CRED-iQ.com

Woodbridge Center, Woodbridge NJ

This regional mall spanning 1.1 million square feet saw their valuation decrease by $366 million to $86 million (76.5%) earning them the number three spot. 

Wells Fargo Center, Denver

This 1.2 million square foot office tower in Upper Downtown Denver dropped $188 million in value which ranked them fifth on our list. 

JW Marriott, Chicago

The only non-retail or office property that made our Top 10 was this 610-room hotel in the Chicago Loop area that experienced a $136 million decline.  

Overall, the analysis highlights the need for continued monitoring of real estate assets and their exposure to changing market conditions. The appraisals were based on sales and leasing data from CRED iQ, and other reliable sources. In conclusion, the current market conditions are having a significant impact on the valuation of commercial real estate properties across all asset classes. Retail and office properties are being hit the hardest while self-storage remains resilient. It is crucial to continuously monitor real estate assets and their exposure to changing market conditions.

About CRED iQ

CRED iQ is a commercial real estate data, analytics, and valuation platform designed to unlock investment, financing, and leasing opportunities. CRED iQ provides real-time property, loan, tenant, ownership, and valuation data for over $2.0 trillion of commercial real estate.

Distressed Commercial Real Estate Loan Workouts and Payoffs – June 2023

By
CRED iQ
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0

CMBS transactions incurred approximately $41 million in realized losses during June 2023 via the workouts of distressed assets. CRED iQ identified 14 workouts classified as dispositions, liquidations, or discounted payoffs in June 2023. Of the 14 workouts, five were resolved without a principal loss. Of the nine workouts resulting in losses, severities for the month of June ranged from 1% to 90%, based on outstanding balances at disposition. Aggregate realized losses in June 2023 were more than 5x higher than May 2023 due, in part, to a higher volume of distressed workouts including two notable retail workouts. The aggregate realized loss total of $40.7 million was lower than the average aggregate monthly CMBS loss total for the trailing 12 months, which was equal to approximately $101 million.

By property type, workouts were concentrated in lodging and retail. Lodging workouts accounted for five of the 14 distressed resolutions in June 2023 and retail workouts accounted for four distressed workouts. Distressed workouts for retail properties had the highest total of aggregate realized losses ($25 million) by property type, which accounted for 60% of the total for the month. Distressed lodging workouts had the second-highest total of aggregate losses by property type with $11.1 million, or 27% of the total.

The two largest individual losses were associated with REO retail properties. First, the Romeoville Towne Center, a 108,242-SF community center located 40 miles southwest of Chicago, IL, liquidated with a $13.4 million loss. Outstanding debt at the time of disposition totaled $17.1 million, equal to a 78% loss severity. The property had been REO since February 2019 and had been in special servicing since 2014. Second, a 155,309-SF big-box retail outparcel of the Potomac Mills Mall in Woodbridge, VA known as Square 95, was liquidated with a $10.1 million loss. Outstanding debt on the property totaled $22.1 million prior to disposition, equal to a 46% loss severity.

The largest individual loss severity involved a suburban Chicago office property, 2250 Point Boulevard. The 80,978-SF office building transferred to special servicing in July 2020 and became REO in November 2021. Outstanding debt prior to disposition totaled $5.5 million and the liquidation resulted in a realized loss of $5 million, equal to a 90% severity.

The largest workout by outstanding balance was a $220 million mortgage secured by 693 Fifth Avenue, a 96,514-SF mixed-use (retail/office) property located in Midtown Manhattan, NY. Prior to the loan’s transfer to special servicing in May 2022, the property primarily generated revenue from its retail component, including ground-floor space formerly leased to Valentino. The retail space was backfilled by Burberry in April 2023 and the loan was paid off in June 2023 without incurring a principal loss.

Excluding defeased loans, there was approximately $5.2 billion in securitized debt among CMBS conduit, and Single-Borrower Large-Loan securitizations that was paid off or liquidated in June 2023, which was approximately a 53% increase compared to $3.4 billion in May 2023. In June, 2% of the loan resolutions were categorized as dispositions, liquidations, or discounted payoffs, which was in line with the prior month. Loan prepayment remained subdued in June — approximately 8% of the loans were paid off with prepayment penalties.

Retail had the highest total of outstanding debt payoff by property type in June with approximately 30% of the total by balance. Lodging had the next highest percentage of outstanding debt payoff with 25% of the total. The $540 million loan secured by the Miracle Mile Shops retail complex in Las Vegas, NV was among the largest mortgages to pay off in June 2023.

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.

CRED-iQ-CMBS-June-2023-Distressed-Workouts-and-PayoffsDownload

Commercial Real Estate Market Delinquency Tracker – June 2023

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CRED iQ
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CRED iQ monitors distressed rates and market performance for nearly 400 MSAs across the United States, covering over $900 billion in outstanding commercial real estate (CRE) debt. Distressed rates (DQ + SS%) include loans that are specially serviced, delinquent, or a combination of both. Distressed rates and month-over-month changes for data reported as of June 2023 are presented below for the 50 largest MSAs, broken out by property type for a granular view of distress by market-sector.

Of the 50 largest MSAs tracked by CRED iQ, there were 35 markets that exhibited month-over-month increases in the percentages of distressed CRE loans, equal to 70% of the Top 50 markets. Of the markets with comparatively higher levels of CRE distress to the prior month, the average increase was approximately 61 basis points. Notable markets with the largest increases in distress included Minneapolis (+10.6%), Washington, DC (+2.5%), and Charlotte (+2.0%). The sharp increase in CRE distress for the Minneapolis market further separates the MSA as an outlier for distressed commercial real estate properties. The Minneapolis MSA has the highest percentage of distressed CRE loans among the Top 50 markets, equal to 33.6%. CRE distress in Minneapolis is nearly 3x higher than Chicago (11.5%), which has the second-highest level of distress among the Top 50 markets.

Of the 15 markets that exhibited month-over-month improvements in distressed rates, St. Louis (-2.7%) and Pittsburgh (-1.3%) had the sharpest declines. The distressed rate for the St. Louis MSA improved substantially after a $155 million mortgage secured by West County Center was modified with a two-year maturity extension. West County Center is a 743,945-SF regional mall located in Des Peres, MO and its mortgage failed to pay off at maturity in December 2022. The loan was paid current as part of the modification. The St. Louis MSA, and more specifically the St. Louis – Retail market-sector, had the largest declines in distress among the markets and sectors monitored by CRED iQ.

For a more granular analysis of the Top 50 markets, CRED iQ further delineated individual markets’ distressed rates by property type for a comprehensive view by market-sector. The office and mixed-use sectors exhibited continued volatility, accounting for six of the 10 largest increases in distress by market-sector. Washington, DC-Office (+10.6%), St. Louis-Office (+10.3%), and Chicago-Office (+5.6%) were among the market-sectors with the sharpest month-over-month increases in CRE distress. The Chicago-Office market-sector alone had more than $450 million in newly distressed CMBS loans as of June 2023, including the special servicing transfer of a $310 million mortgage secured by River North Point, a 1.3 million-SF office property located in Chicago’s Central Business District. Suburban Chicago office properties also transferred to special servicing due to credit issues — a $56 million loan secured by the 869,120-SF Riverway office complex and a $26 million mortgage secured by 9525 West Bryn Mawr Avenue, a 246,841-SF office building, both transferred to special servicing in May 2023. These suburban office properties are located in Rosemont, IL, approximately 20 miles northwest of Chicago. The Chicago MSA is the fourth-largest office market, based on aggregate outstanding securitized debt, monitored by CRED iQ.

The market-sector with highest month-over-month increase in distress was Charlotte-Retail, which saw its distressed rate surge to 24.5% of outstanding debt that is delinquent or specially serviced. A $151  million mortgage secured by 647,511 SF of the Carolina Place Mall in Pineville, NC defaulted at its maturity in June 2023 and transferred to special servicing.

In summary, the Minneapolis MSA has the highest overall distressed rate — equal to 33.6% — and has maintained this position for over a year. Chicago (11.5%), Milwaukee (9.9%), Cleveland (9.8%), and Birmingham, AL (8.8%) comprise the remaining markets with the highest rates of distress. The Salt Lake City MSA (0.0%) has the lowest level of distress among the Top 50 MSAs for the second consecutive month.

View commercial real estate distressed rates broken out by market and property type below:

MSA – Property Type DQ/SS
(millions) 		DQ/SS
(%)		Monthly
Change
Allentown-Bethlehem-Easton, PA-NJ MSA$76.52.4%-0.1%
Allentown – Hotel$0.00.0%0.0%
Allentown – Industrial$0.00.0%0.0%
Allentown – Multifamily$0.00.0%0.0%
Allentown – Office$57.618.5%0.0%
Allentown – Other$0.00.0%0.0%
Allentown – Retail$18.85.1%0.0%
Allentown – Self Storage$0.00.0%0.0%
Atlanta-Sandy Springs-Marietta, GA MSA$528.01.9%-0.1%
Atlanta – Hotel$80.83.2%0.0%
Atlanta – Industrial$0.00.0%0.0%
Atlanta – Multifamily$2.50.0%0.0%
Atlanta – Office$414.419.8%0.7%
Atlanta – Other$0.00.0%0.0%
Atlanta – Retail$30.31.9%-0.8%
Atlanta – Self Storage$0.00.0%0.0%
Austin-Round Rock, TX MSA$107.21.1%0.2%
Austin – Hotel$69.37.7%1.4%
Austin – Industrial$0.00.0%0.0%
Austin – Multifamily$0.00.0%0.0%
Austin – Office$0.00.0%0.0%
Austin – Other$4.11.3%0.0%
Austin – Retail$33.84.5%0.0%
Austin – Self Storage$0.00.0%0.0%
Baltimore-Towson, MD MSA$393.84.1%0.0%
Baltimore – Hotel$65.214.4%0.3%
Baltimore – Industrial$0.00.0%0.0%
Baltimore – Multifamily$5.10.1%0.0%
Baltimore – Office$65.57.4%-0.2%
Baltimore – Other$11.45.5%0.0%
Baltimore – Retail$246.523.4%0.1%
Baltimore – Self Storage$0.00.0%0.0%
Birmingham-Hoover, AL MSA$267.98.8%0.1%
Birmingham – Hotel$10.37.6%0.0%
Birmingham – Industrial$0.00.0%0.0%
Birmingham – Multifamily$0.00.0%0.0%
Birmingham – Office$93.420.1%0.3%
Birmingham – Other$0.00.0%0.0%
Birmingham – Retail$164.223.6%0.7%
Birmingham – Self Storage$0.00.0%0.0%
Boston-Cambridge-Quincy, MA-NH MSA$156.70.8%0.0%
Boston – Hotel$19.31.2%-0.1%
Boston – Industrial$0.00.0%0.0%
Boston – Multifamily$0.00.0%0.0%
Boston – Office$49.30.7%0.0%
Boston – Other$0.00.0%0.0%
Boston – Retail$88.18.0%2.4%
Boston – Self Storage$0.00.0%0.0%
Bridgeport-Stamford-Norwalk, CT MSA$196.94.7%0.0%
Bridgeport – Hotel$37.220.3%-3.2%
Bridgeport – Industrial$17.814.2%0.0%
Bridgeport – Multifamily$0.00.0%0.0%
Bridgeport – Office$132.111.1%0.0%
Bridgeport – Other$9.83.3%-0.1%
Bridgeport – Retail$0.00.0%0.0%
Bridgeport – Self Storage$0.00.0%0.0%
Charlotte-Gastonia-Concord, NC-SC MSA$657.78.6%2.0%
Charlotte – Hotel$47.05.4%0.1%
Charlotte – Industrial$0.00.0%0.0%
Charlotte – Multifamily$0.00.0%0.0%
Charlotte – Office$276.329.3%-1.8%
Charlotte – Other$100.329.5%0.5%
Charlotte – Retail$234.224.5%16.1%
Charlotte – Self Storage$0.00.0%0.0%
Chicago-Naperville-Joliet, IL-IN-WI MSA$3,340.711.5%1.5%
Chicago – Hotel$738.539.3%-0.9%
Chicago – Industrial$8.60.2%0.0%
Chicago – Multifamily$85.60.9%0.0%
Chicago – Office$2,021.524.4%5.6%
Chicago – Other$215.68.6%0.2%
Chicago – Retail$270.98.8%-0.9%
Chicago – Self Storage$0.00.0%0.0%
Cincinnati-Middletown, OH-KY-IN MSA$189.74.9%0.1%
Cincinnati – Hotel$86.230.1%-0.8%
Cincinnati – Industrial$0.00.0%0.0%
Cincinnati – Multifamily$0.00.0%0.0%
Cincinnati – Office$58.512.9%1.0%
Cincinnati – Other$6.73.5%0.8%
Cincinnati – Retail$38.37.3%-0.8%
Cincinnati – Self Storage$0.00.0%0.0%
Cleveland-Elyria-Mentor, OH MSA$417.39.8%-0.5%
Cleveland – Hotel$84.248.7%-0.1%
Cleveland – Industrial$0.00.0%0.0%
Cleveland – Multifamily$0.00.0%0.0%
Cleveland – Office$145.215.9%-2.2%
Cleveland – Other$180.445.4%0.0%
Cleveland – Retail$7.61.1%0.0%
Cleveland – Self Storage$0.00.0%0.0%
Columbus, OH MSA$194.83.2%0.0%
Columbus, OH – Hotel$18.17.4%0.4%
Columbus, OH – Industrial$0.00.0%0.0%
Columbus, OH – Multifamily$5.70.1%0.0%
Columbus, OH – Office$57.18.8%0.4%
Columbus, OH – Other$0.00.0%0.0%
Columbus, OH – Retail$114.013.7%0.0%
Columbus, OH – Self Storage$0.00.0%0.0%
Dallas-Fort Worth-Arlington, TX MSA$326.10.9%0.0%
Dallas – Hotel$118.83.4%0.0%
Dallas – Industrial$0.00.0%0.0%
Dallas – Multifamily$10.50.0%0.0%
Dallas – Office$143.44.7%0.0%
Dallas – Other$10.20.5%0.0%
Dallas – Retail$43.22.2%0.1%
Dallas – Self Storage$0.00.0%0.0%
Denver-Aurora, CO MSA$848.25.4%0.0%
Denver – Hotel$17.22.0%-0.1%
Denver – Industrial$0.00.0%0.0%
Denver – Multifamily$0.00.0%0.0%
Denver – Office$691.033.1%0.4%
Denver – Other$93.810.6%0.7%
Denver – Retail$46.23.6%0.2%
Denver – Self Storage$0.00.0%0.0%
Detroit-Warren-Livonia, MI MSA$252.82.4%0.0%
Detroit – Hotel$83.712.9%0.1%
Detroit – Industrial$18.82.9%0.0%
Detroit – Multifamily$1.20.0%0.0%
Detroit – Office$3.70.2%0.0%
Detroit – Other$0.00.0%0.0%
Detroit – Retail$145.49.8%-0.2%
Detroit – Self Storage$0.00.0%0.0%
Hartford-West Hartford-East Hartford, CT MSA$197.68.1%0.2%
Hartford – Hotel$0.00.0%0.0%
Hartford – Industrial$0.00.0%0.0%
Hartford – Multifamily$1.00.1%0.1%
Hartford – Office$71.526.5%0.0%
Hartford – Other$0.00.0%0.0%
Hartford – Retail$125.141.5%2.8%
Hartford – Self Storage$0.00.0%0.0%
Houston-Sugar Land-Baytown, TX MSA$1,270.24.9%0.7%
Houston – Hotel$426.447.1%3.6%
Houston – Industrial$32.73.5%0.0%
Houston – Multifamily$104.30.7%0.5%
Houston – Office$576.117.0%2.6%
Houston – Other$87.314.9%0.0%
Houston – Retail$43.41.1%0.0%
Houston – Self Storage$0.00.0%0.0%
Indianapolis-Carmel, IN MSA$126.12.3%0.0%
Indianapolis – Hotel$42.17.9%0.2%
Indianapolis – Industrial$0.00.0%0.0%
Indianapolis – Multifamily$9.70.3%0.0%
Indianapolis – Office$59.610.4%0.8%
Indianapolis – Other$0.00.0%0.0%
Indianapolis – Retail$14.84.3%0.0%
Indianapolis – Self Storage$0.00.0%0.0%
Jacksonville, FL MSA$174.33.3%0.0%
Jacksonville – Hotel$24.46.2%0.2%
Jacksonville – Industrial$0.00.0%0.0%
Jacksonville – Multifamily$0.00.0%0.0%
Jacksonville – Office$38.16.7%-0.2%
Jacksonville – Other$0.00.0%0.0%
Jacksonville – Retail$111.933.7%4.4%
Jacksonville – Self Storage$0.00.0%0.0%
Kansas City, MO-KS MSA$332.25.8%0.1%
Kansas City – Hotel$28.112.2%0.0%
Kansas City – Industrial$0.00.0%0.0%
Kansas City – Multifamily$2.50.1%0.0%
Kansas City – Office$232.521.9%1.0%
Kansas City – Other$20.810.3%-0.2%
Kansas City – Retail$48.48.7%2.9%
Kansas City – Self Storage$0.00.0%0.0%
Las Vegas-Paradise, NV MSA$407.11.8%-0.8%
Las Vegas – Hotel$30.30.3%0.0%
Las Vegas – Industrial$0.00.0%0.0%
Las Vegas – Multifamily$0.00.0%0.0%
Las Vegas – Office$0.00.0%0.0%
Las Vegas – Other$130.023.6%-17.6%
Las Vegas – Retail$246.77.1%0.3%
Las Vegas – Self Storage$0.00.0%0.0%
Los Angeles-Long Beach-Santa Ana, CA MSA$2,264.84.4%0.1%
Los Angeles – Hotel$164.93.3%0.3%
Los Angeles – Industrial$0.00.0%0.0%
Los Angeles – Multifamily$31.70.2%0.1%
Los Angeles – Office$1,118.59.1%0.0%
Los Angeles – Other$53.31.6%-0.5%
Los Angeles – Retail$896.414.5%-0.2%
Los Angeles – Self Storage$0.00.0%0.0%
Louisville/Jefferson County, KY-IN MSA$22.00.7%0.0%
Louisville – Hotel$0.00.0%0.0%
Louisville – Industrial$0.00.0%0.0%
Louisville – Multifamily$6.90.5%0.0%
Louisville – Office$0.00.0%0.0%
Louisville – Other$0.00.0%0.0%
Louisville – Retail$15.13.5%0.5%
Louisville – Self Storage$0.00.0%0.0%
Memphis, TN-AR-MS MSA$87.73.7%0.0%
Memphis – Hotel$22.510.7%0.2%
Memphis – Industrial$0.00.0%0.0%
Memphis – Multifamily$0.00.0%0.0%
Memphis – Office$0.00.0%0.0%
Memphis – Other$5.314.7%0.0%
Memphis – Retail$59.916.0%-0.8%
Memphis – Self Storage$0.00.0%0.0%
Miami-Fort Lauderdale-Pompano Beach, FL MSA$404.21.6%0.2%
Miami – Hotel$59.61.1%0.0%
Miami – Industrial$0.00.0%0.0%
Miami – Multifamily$0.00.0%0.0%
Miami – Office$98.33.7%2.0%
Miami – Other$0.00.0%0.0%
Miami – Retail$246.24.5%0.0%
Miami – Self Storage$0.00.0%0.0%
Milwaukee-Waukesha-West Allis, WI MSA$238.79.9%-0.2%
Milwaukee – Hotel$16.510.3%0.0%
Milwaukee – Industrial$0.00.0%0.0%
Milwaukee – Multifamily$0.00.0%0.0%
Milwaukee – Office$117.421.6%-1.2%
Milwaukee – Other$0.00.0%0.0%
Milwaukee – Retail$104.924.0%-0.3%
Milwaukee – Self Storage$0.00.0%0.0%
Minneapolis-St. Paul-Bloomington, MN-WI MSA$2,833.433.6%10.6%
Minneapolis – Hotel$258.744.6%-1.4%
Minneapolis – Industrial$2.60.5%0.5%
Minneapolis – Multifamily$9.80.3%0.0%
Minneapolis – Office$989.147.4%43.6%
Minneapolis – Other$173.235.1%1.6%
Minneapolis – Retail$1,400.074.5%0.0%
Minneapolis – Self Storage$0.00.0%0.0%
Nashville-Davidson-Murfreesboro-Franklin, TN MSA$54.40.9%-0.1%
Nashville – Hotel$51.33.5%0.1%
Nashville – Industrial$0.00.0%0.0%
Nashville – Multifamily$0.00.0%0.0%
Nashville – Office$0.00.0%0.0%
Nashville – Other$0.00.0%0.0%
Nashville – Retail$3.10.4%-0.5%
Nashville – Self Storage$0.00.0%0.0%
New Orleans-Metairie-Kenner, LA MSA$118.13.4%0.1%
New Orleans – Hotel$56.54.8%-0.5%
New Orleans – Industrial$0.00.0%0.0%
New Orleans – Multifamily$14.41.8%0.5%
New Orleans – Office$26.95.2%0.0%
New Orleans – Other$14.69.6%0.0%
New Orleans – Retail$5.60.9%0.0%
New Orleans – Self Storage$0.00.0%0.0%
New York-Northern New Jersey-Long Island, NY-NJ-PA MSA$8,519.96.6%0.3%
New York City – Hotel$934.424.4%0.8%
New York City – Industrial$120.02.8%-0.1%
New York City – Multifamily$1,404.73.9%0.8%
New York City – Office$2,064.24.4%1.0%
New York City – Other$1,833.48.1%0.0%
New York City – Retail$2,163.217.4%-2.9%
New York City – Self Storage$0.00.0%0.0%
Orlando-Kissimmee, FL MSA$102.71.0%0.0%
Orlando – Hotel$13.50.5%0.0%
Orlando – Industrial$0.00.0%0.0%
Orlando – Multifamily$0.00.0%0.0%
Orlando – Office$61.011.5%0.0%
Orlando – Other$0.00.0%0.0%
Orlando – Retail$28.23.2%0.0%
Orlando – Self Storage$0.00.0%0.0%
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA$1,201.35.8%0.7%
Philadelphia – Hotel$117.013.8%0.1%
Philadelphia – Industrial$18.50.6%0.3%
Philadelphia – Multifamily$54.90.6%0.0%
Philadelphia – Office$530.613.8%2.6%
Philadelphia – Other$439.435.4%2.3%
Philadelphia – Retail$41.11.9%0.5%
Philadelphia – Self Storage$0.00.0%0.0%
Phoenix-Mesa-Scottsdale, AZ MSA$297.81.5%0.2%
Phoenix – Hotel$54.13.0%-0.1%
Phoenix – Industrial$3.00.3%0.3%
Phoenix – Multifamily$0.00.0%0.0%
Phoenix – Office$79.93.6%1.3%
Phoenix – Other$26.92.9%0.8%
Phoenix – Retail$133.86.2%0.1%
Phoenix – Self Storage$0.00.0%0.0%
Pittsburgh, PA MSA$236.35.2%-1.2%
Pittsburgh – Hotel$8.24.8%0.0%
Pittsburgh – Industrial$0.00.0%0.0%
Pittsburgh – Multifamily$21.91.0%-1.3%
Pittsburgh – Office$88.78.1%-2.0%
Pittsburgh – Other$104.830.0%-3.0%
Pittsburgh – Retail$12.72.6%0.0%
Pittsburgh – Self Storage$0.00.0%0.0%
Portland-Vancouver-Beaverton, OR-WA MSA$356.74.1%0.4%
Portland – Hotel$295.633.2%-0.1%
Portland – Industrial$0.00.0%0.0%
Portland – Multifamily$38.10.9%0.9%
Portland – Office$12.82.7%-3.8%
Portland – Other$10.12.1%2.1%
Portland – Retail$0.00.0%0.0%
Portland – Self Storage$0.00.0%0.0%
Raleigh-Cary, NC MSA$21.80.6%0.0%
Raleigh – Hotel$15.35.8%-0.2%
Raleigh – Industrial$0.00.0%0.0%
Raleigh – Multifamily$0.00.0%0.0%
Raleigh – Office$0.00.0%0.0%
Raleigh – Other$6.64.1%0.5%
Raleigh – Retail$0.00.0%0.0%
Raleigh – Self Storage$0.00.0%0.0%
Richmond, VA MSA$153.84.8%0.1%
Richmond – Hotel$0.00.0%0.0%
Richmond – Industrial$0.00.0%0.0%
Richmond – Multifamily$0.00.0%0.0%
Richmond – Office$0.00.0%0.0%
Richmond – Other$10.47.3%-1.6%
Richmond – Retail$143.432.8%1.2%
Richmond – Self Storage$0.00.0%0.0%
Riverside-San Bernardino-Ontario, CA MSA$283.82.4%0.0%
Riverside – Hotel$29.56.2%-0.2%
Riverside – Industrial$0.00.0%0.0%
Riverside – Multifamily$1.40.0%0.0%
Riverside – Office$0.00.0%0.0%
Riverside – Other$0.00.0%0.0%
Riverside – Retail$252.913.0%0.4%
Riverside – Self Storage$0.00.0%0.0%
Sacramento-Arden-Arcade-Roseville, CA MSA$25.00.5%0.2%
Sacramento – Hotel$0.00.0%0.0%
Sacramento – Industrial$0.00.0%0.0%
Sacramento – Multifamily$0.00.0%0.0%
Sacramento – Office$14.21.8%1.0%
Sacramento – Other$10.82.8%-0.2%
Sacramento – Retail$0.00.0%0.0%
Sacramento – Self Storage$0.00.0%0.0%
Salt Lake City, UT MSA$0.00.0%-0.1%
Salt Lake City – Hotel$0.00.0%-1.9%
Salt Lake City – Industrial$0.00.0%0.0%
Salt Lake City – Multifamily$0.00.0%0.0%
Salt Lake City – Office$0.00.0%0.0%
Salt Lake City – Other$0.00.0%0.0%
Salt Lake City – Retail$0.00.0%0.0%
Salt Lake City – Self Storage$0.00.0%0.0%
San Antonio, TX MSA$186.52.8%0.0%
San Antonio – Hotel$16.45.0%-1.3%
San Antonio – Industrial$0.00.0%0.0%
San Antonio – Multifamily$0.00.0%0.0%
San Antonio – Office$56.114.1%0.9%
San Antonio – Other$0.00.0%0.0%
San Antonio – Retail$114.014.7%-0.1%
San Antonio – Self Storage$0.00.0%0.0%
San Diego-Carlsbad-San Marcos, CA MSA$63.50.6%0.0%
San Diego – Hotel$56.64.4%1.5%
San Diego – Industrial$0.00.0%0.0%
San Diego – Multifamily$4.10.1%0.0%
San Diego – Office$0.00.0%0.0%
San Diego – Other$0.00.0%0.0%
San Diego – Retail$2.90.2%0.0%
San Diego – Self Storage$0.00.0%0.0%
San Francisco-Oakland-Fremont, CA MSA$1,291.24.9%0.0%
San Francisco – Hotel$209.47.1%0.0%
San Francisco – Industrial$0.00.0%0.0%
San Francisco – Multifamily$450.85.6%0.0%
San Francisco – Office$458.04.5%0.1%
San Francisco – Other$135.34.3%-0.2%
San Francisco – Retail$37.83.4%-1.5%
San Francisco – Self Storage$0.00.0%0.0%
San Jose-Sunnyvale-Santa Clara, CA MSA$198.71.0%0.3%
San Jose – Hotel$35.00.5%0.0%
San Jose – Industrial$0.00.0%0.0%
San Jose – Multifamily$6.40.2%0.0%
San Jose – Office$157.42.0%0.6%
San Jose – Other$0.00.0%0.0%
San Jose – Retail$0.00.0%0.0%
San Jose – Self Storage$0.00.0%0.0%
Seattle-Tacoma-Bellevue, WA MSA$110.00.5%0.2%
Seattle – Hotel$35.72.6%0.0%
Seattle – Industrial$0.00.0%0.0%
Seattle – Multifamily$51.90.7%0.7%
Seattle – Office$0.00.0%0.0%
Seattle – Other$22.41.4%0.0%
Seattle – Retail$0.00.0%0.0%
Seattle – Self Storage$0.00.0%0.0%
St. Louis, MO-IL MSA$108.72.6%-2.7%
St. Louis – Hotel$1.70.5%0.0%
St. Louis – Industrial$0.00.0%0.0%
St. Louis – Multifamily$3.20.2%0.0%
St. Louis – Office$61.614.1%10.2%
St. Louis – Other$13.92.9%0.1%
St. Louis – Retail$28.33.2%-17.0%
St. Louis – Self Storage$0.00.0%0.0%
Tampa-St. Petersburg-Clearwater, FL MSA$210.31.9%0.5%
Tampa – Hotel$58.87.8%-0.3%
Tampa – Industrial$7.02.9%2.9%
Tampa – Multifamily$1.20.0%0.0%
Tampa – Office$59.48.0%3.1%
Tampa – Other$42.912.9%6.5%
Tampa – Retail$41.06.2%0.2%
Tampa – Self Storage$0.00.0%0.0%
Tucson, AZ MSA$155.74.6%0.1%
Tucson – Hotel$0.00.0%0.0%
Tucson – Industrial$0.00.0%0.0%
Tucson – Multifamily$0.00.0%0.0%
Tucson – Office$0.00.0%0.0%
Tucson – Other$0.00.0%0.0%
Tucson – Retail$155.719.4%-0.7%
Tucson – Self Storage$0.00.0%0.0%
Virginia Beach-Norfolk-Newport News, VA-NC MSA$182.73.8%0.0%
Virginia Beach – Hotel$14.83.3%0.0%
Virginia Beach – Industrial$0.00.0%0.0%
Virginia Beach – Multifamily$0.00.0%0.0%
Virginia Beach – Office$0.00.0%0.0%
Virginia Beach – Other$4.43.5%0.0%
Virginia Beach – Retail$163.518.9%0.4%
Virginia Beach – Self Storage$0.00.0%0.0%
Washington-Arlington-Alexandria, DC-VA-MD-WV MSA$1,861.75.9%2.5%
Washington, DC – Hotel$40.63.6%-0.1%
Washington, DC – Industrial$0.00.0%0.0%
Washington, DC – Multifamily$0.00.0%0.0%
Washington, DC – Office$1,614.821.1%10.6%
Washington, DC – Other$63.54.9%-2.6%
Washington, DC – Retail$142.84.3%0.1%
Washington, DC – Self Storage$0.00.0%0.0%
Grand Total$32,053.54.5%0.6%

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.

CRED-iQ-Market-Delinquency-Tracker-June-2023Download

June 2023 Delinquency Report

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DQ = All delinquent CMBS loans in the conduit and SASB universe, including specially serviced and non-specially serviced loans
SS = All specially serviced CMBS loans in the conduit and SASB universe, including current, delinquent and REO
DQ + SS = All distressed CMBS loans in the conduit and SASB universe that are delinquent, specially serviced, or a combination of both

The CRED iQ delinquency rate for CMBS for June 2023 increased for the fifth consecutive month to 4.40%. The delinquency rate was 20 basis points higher than the prior month’s rate of 4.20%, equal to a 5% increase. CMBS delinquency is at its highest level since the end of 2021. Over $4 billion in aggregate CMBS debt was reported as newly delinquency as of June 2023, and over 80% of newly delinquent loans by outstanding balance was attributed to maturity defaults or refinancing issues. The delinquency rate is equal to the percentage of all delinquent specially serviced loans and delinquent non-specially serviced loans, for CRED iQ’s sample universe of $600+ billion in CMBS conduit and single asset single-borrower (SASB) loans. CRED iQ’s special servicing rate, equal to the percentage of CMBS loans that are with the special servicer (delinquent and non-delinquent), increased month-over-month to 6.21%, from 6.01%. The special servicing rate has climbed in five out of six months so far in 2023. Aggregating the two indicators of distress – delinquency rate and special servicing rate – into an overall distressed rate (DQ + SS%) equals 6.56% of CMBS loans that are specially serviced, delinquent, or a combination of both. Last month’s distressed rate was equal to 6.43%, which was 13 basis points lower than the June 2023 distressed rate. The month-over-month increase in the overall distressed rate mirrors increases in the delinquency and special servicing rates. Distressed rates generally track slightly higher than special servicing rates as most delinquent loans are also with the special servicer.

DQ = All delinquent CMBS loans in the conduit and SASB universe, including specially serviced and non-specially serviced loans
SS = All specially serviced CMBS loans in the conduit and SASB universe, including current, delinquent and REO
DQ + SS = All distressed CMBS loans in the conduit and SASB universe that are delinquent, specially serviced, or a combination of both

By property type, distress in the office sector continued to build in June 2023. The office delinquency rate increased to 4.60%, which compared to 3.98% as of May 2023. The month-over-month surge of 62 basis points in office delinquency was equal to a 16% increase. Comparing data across the trailing 12 months, the delinquency rate for office is nearly 2.5X higher than July 2022. The natural progression of long to intermediate-term rolling leases coupled with ongoing refinancing difficulties at loan maturity have caused the velocity of new delinquencies to accelerate during the first half of 2023.

One of the largest contributors to the spike in office delinquency during June 2023 was the maturity default of a $691 million mortgage secured by a 2.1 million-SF office portfolio in Rosslyn, VA. In addition to the senior mortgage, financing for the Rosslyn Office Portfolio also included $150 million in mezzanine debt. The floating-rate loan transferred to special servicing shortly after its initial maturity date in May 2023. The loan was structured with three, one-year extension options but the borrower was constrained in its ability to execute an extension and refinancing was even less plausible.

The delinquency rate for lodging properties exhibited a similar one-month surge to the office sector. Hotel delinquency for June 2023 measured at 5.34%, up from 4.55% in May. The increase is June is attributed to several untimely maturity defaults, including Holiday Inn – 6th Avenue, a 226-key hotel in Manhattan, NY that secures a $72.8 million mortgage. The loan failed to pay off at maturity, but the borrower requested a two-year extension. Rounding out delinquency rates for remaining property types, retail delinquency (7.37%) declined from May to June. Multifamily delinquency (1.87%) and industrial delinquency (0.33%) were flat month over month while self-storage delinquency was negligible.

From the perspective of special servicing rates, distress in the office sector maintained position as the dominant theme. The office special servicing rate as of June 2023 was 7.95%, which represented a 31% increase from May 2023’s office special servicing rate of 6.08%. Maturity defaults and refinancing risk are forces that need to be worked though — both of these reasons were the primary citations for newly transferred office loans. A high-profile example included a $310 million mortgage secured by the 1.3 million-SF River North Point office property in Chicago, IL.

Aside from the office sector, the special servicing rate for retail loans declined to 9.95%, compared to 11.04% as of May 2023. The special servicing rate for loans secured by lodging properties (6.33%) also declined compared to May 2023. The special servicing rates for multifamily (4.31%) and industrial (0.47%) both exhibited month-over-month increases. There was no self-storage specially serviced inventory.

DQ + SS = All distressed CMBS loans in the conduit and SASB universe that are delinquent, specially serviced, or a combination of both

CRED iQ’s CMBS distressed rate (DQ + SS%) by property type accounts for loans that qualify for either delinquent or special servicing subsets. This month, the overall distressed rate for CMBS increased to 6.56%. The increase was 13 basis points higher than May’s distressed rate (6.43%), equal to a 2% increase. A severely limited refinancing market for office properties and a ‘higher for longer’ interest rate environment continue to contribute to sustained increases in commercial real estate distress.

For additional information about two of this month’s largest loans that became distressed, click View Details below:

[View Details][View Details]
LoanRiver North PointHoliday Inn – 6th Avenue
Balance$310 million$72.8 million
Special Servicer Transfer Date5/11/2023NAP

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.

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