The CRED iQ overall delinquency rate had a sharp decline this month, following a modest decline in the previous month, resulting in the 20th consecutive month-over-month improvement. The delinquency rate, equal to the percentage of all delinquent specially serviced loans and delinquent non-specially serviced loans, for CRED iQ’s sample universe of $500+ billion in CMBS conduit and single-asset single-borrower (SASB) loans was 4.32%, which compares to the prior month’s rate of 4.59%. CRED iQ’s special servicing rate, equal to the percentage of CMBS loans that are with the special servicer (delinquent and non-delinquent), declined month-over-month to 6.91% from 7.06%. The special servicing rate is at its lowest point since May 2020 and has declined for two consecutive months after a temporary increase in November 2021. Aggregating the two indicators of distress – delinquency rate and special servicing rate – into an overall distressed rate (DQ + SS%) equals 6.87% of CMBS loans that are specially serviced, delinquent, or a combination of both. The overall distressed rate declined compared to the prior month rate of 7.01%, which was congruent with the declines in both the delinquency and special servicing rates.
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
On a more granular level, the individual delinquency rate for office retraced to 2.31%, compared to 2.74% in the prior month, after increasing for two straight months. One driver behind this month’s decline in the office delinquency rate was the delinquency cure of the $1.2 billion 245 Park Avenue loan, which was paid current but still remains in special servicing. The delinquency rate for the lodging sector — 8.95% — also decreased compared to the prior month when it was 9.71%. Conversely, the delinquency rate for retail exhibited an increase to 7.73% from 7.52% last month. Over the prior 12 months, hotel delinquency has improved at a much faster pace than retail. As a result, the delinquency rates for hotel and retail are the closest they have been since pre-pandemic.
Despite continued delinquency declines in the lodging sector, many hotel loans continue to miss debt service payments. Notable new delinquencies this month included the $200 million Hyatt Regency Huntington Beach Resort & Spa, secured by a 517-key lodging property in Orange County, CA, and the $21.1 million Hotel Milo loan, secured by a 121-key hotel in Santa Barbara, CA.
Special servicing rates by property type generally remained in line with prior periods with modest changes. The special servicing rates for the lodging and multifamily sectors exhibited nominal declines and the retail, industrial, and self storage property types exhibited relatively small increases in special servicing rates. The special servicing rate for office properties, 3.46%, remained unchanged from the prior month.
CRED iQ also monitors an overall distressed rate (DQ + SS%) by property type to account for loans that qualify for either delinquent or special servicing subsets. The overall distressed rates typically track slightly higher than special servicing rates as most delinquent loans are also with the special servicer. This month, overall distressed rates for retail, office, and industrial increased while lodging, multifamily and self storage declined. Two of the largest loans to transfer to special servicing this month remained current in payment — the $59.6 million Writer Square loan, secured by a mixed-use property in Denver, CO, and the $59.4 million TEK Park loan, secured by an office property in Lehigh Valley, PA. For additional information for these 3 loans, click View Details below:
CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors. Subscribers to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. Our data platform is powered by over $2.0 trillion of CMBS, CRE CLO, SBLL, and GSE Agency loan and property data.
After a slight year-over-year decline in multifamily origination volume in 2020, lending activity sharply increased in 2021. Although final tallies of origination volume for multifamily properties have not been widely reported as of writing, lending was on pace for most of 2021 for double-digit growth compared to the prior year. CRED iQ tracked nearly $150 billion in multifamily originations in 2021, including CMBS conduit, Freddie Mac, Fannie Mae and Ginnie Mae securitizations. Fannie Mae alone financed close to $70 billion in multifamily loans. This sample of 2021 loan originations will likely grow in the near term as 2022 securitization issuance will continue to include loans originated in late-2021.
Gateway markets, such as New York and Los Angeles, were leaders in the total number of multifamily loans originated in 2021 but the Dallas/Ft. Worth MSA had the highest total origination volume by loan balance. More than half of the loan origination activity within Dallas/Ft. Worth came from loans in Fannie Mae securitizations. In total, primary and gateway markets accounted for just over half of all loan originations that were tracked in 2021.
Looking beyond primary markets, an examination of secondary and tertiary market activity highlights areas with high growth potential. Additionally, secondary markets are areas of opportunity for loan originators to branch out and grow lending pipelines.
The Columbus, OH MSA had the most originations among secondary markets with nearly 100 loans totaling $1.1 billion in volume. San Antonio followed with the second-highest number of multifamily loan originations, but loans were significantly larger in size, equating to nearly $2.5 billion in origination volume. San Antonio was the largest of all secondary multifamily markets by aggregate loan origination balance. The average loan origination size for the San Antonio market was approximately $30 million, compared to $12.4 million in Columbus, OH.
Other MSAs included in the Top 10 secondary markets for 2021 multifamily loan originations included Indianapolis, Cincinnati, Tampa, Riverside, Virginia Beach, Oklahoma City, Tucson and Las Vegas. Despite relatively fewer loan originations, Oklahoma City was a standout out in terms of origination volume in 2021, ranking second highest in total origination balance with just under $2.0 billion. With Dallas as a top market for multifamily origination in 2021, Oklahoma City, located just three hours north, likely benefitted from investors expanding their reach into neighboring MSAs.
A trend of loan originations for non-traditional markets was also apparent in 2021. Non-metropolitan Texas exhibited elevated loan origination activity compared to other markets. Non-metropolitan Texas comprises any rural location that does not fall within the boundaries of the 20+ MSAs that CRED iQ tracks within the state of Texas. The presence of non-metropolitan regions on a list for Top Multifamily Origination Markets is further evidence of the expansion and growth of multifamily investment and financing that occurred in 2021.
CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors. Subscribers to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. Our data platform is powered by over $2.0 trillion of CMBS, CRE CLO, SBLL, Ginnie Mae, FHA/HUD, and Agency loan and property data.
This week’s landscape takes us to a view from the golf course at JW Marriott Desert Springs Resort & Spa — a property that secures one of this week’s featured new loan originations.
This week, CRED iQ reviewed the commercial real estate lending landscape and highlighted 5 properties that have secured financing in recent months. The highlighted loan originations featured an in-depth look at a lodging deal with a few structural enhancements prompted by the pandemic as well as 2 multifamily originations and some first looks at commercial mortgage originations that were completed so far in 2022. In certain cases, mortgage loans from properties’ prior financing packages were catalogued in CRED iQ’s system, which enables users to evaluate prior loan terms and pre-origination financial history.
Using the CRED iQ platform’s Comps functionality, which features propriety Comps scoring for the CRE loan universe, we compared lending terms and loan structures to get a sense of the trends in the CRE lending environment. Additionally, we provided valuations for each asset to evaluate leverage levels in relation to originators’ LTVs. The CRED iQ valuations factor in a base-case (Most Likely), a downside (significant loss of tenants), and dark scenarios (100% vacant). Base-case valuations for select properties are provided below. For access to the valuation reports as well as full CMBS loan reporting, including detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here.
JW Marriott Desert Springs
884 keys, Full-Service Hotel, Palm Desert, CA
In prior Lending Landscape reports, the CRED iQ team noted the scarcity of hotel originations in 2021. New lodging originations can serve as guidance for new deals for lenders heading into 2022. Such is the case for this $128 million mortgage that was originated by Goldman Sachs on December 22, 2021 and is secured by the JW Marriott Desert Springs Resort & Spa. The loan was used to refinance $123.2 million in existing debt, which included a senior secured loan as well as a mezzanine loan. The loan required an upfront debt service reserve of approximately $6.5 million that is scheduled to be reduced evenly over a 12-month period. The loan sponsor, Tiffany Lam of Kam Sang Co., Inc., also contributed $2.4 million in equity. Additional structures of the loan include a five-year, interest-only term and a 4.995% interest rate. For comparison, the retired senior secured loan had an interest rate of 5.15%.
Using CRED iQ’s Comps functionality, a comparable loan origination was a $100 million mortgage funded in December 2020 by Ares Management Corporation. The floating-rate loan was secured by the La Quinta Resort & Club, a 777-key resort hotel located 10 miles south of the JW Marriott.
The JW Marriott Desert Springs appraised for a value of $306 million ($346,154/key), as of November 17, 2021, which implied an LTV of 42% and a cap rate of 6.66% based on the originator’s underwritten NCF. It is worth noting that the originator’s underwritten NCF was 37% higher than pre-pandemic NCF for full-year 2019 and 138% higher than 2021 NCF. The 2021 NCF was derived from the trailing 11-month period ended November 2021 plus a 1-month forecast of December 2021 performance. The property produced negative net cash flow in 2020. For the full valuation report and loan-level details, click here.
Subject Property
Name
JW Marriott Desert Springs
Address
74-855 Country Club Drive Palm Desert, CA 92260
Property Type
Hotel
Property Subtype
Full-Service
Building Size
884 keys
Year Built
1987
Submarket
Palm Springs
County
Riverside
MSA
Riverside-San Bernardino-Ontario, CA
Origination Date
12/22/2021
Loan Amount
$128,000,000
Interest Rate
5.00%
Valuation
Appraised Value
$306,000,000 ($346,154/key)
Appraisal Date
11/17/2021
Appraisal LTV
41.80%
CRED iQ Base-Case Value
$247,000,000 ($279,393/key)
Westview Apartments
116 units, Multifamily, Hoboken, NJ
Applied Housing Management Co. secured $32.5 million in mortgage debt from NorthMarq on December 1, 2021 to refinance approximately $17.9 million in existing debt on the Westview Apartments affordable housing complex in Hoboken, NJ. The loan was structured with a 10-year term and a 30-year amortization schedule with an interest rate of 2.92%. The loan will be locked out from prepayment for 2 years, and defeasance will be permitted after lockout through the remainder of the loan term until its open period, 4 months prior to maturity. One of CRED iQ’s most relevant comps for this new origination is a $33 million Fannie Mae loan that is secured by Columbian Towers — a 136-unit multifamily property located across the street from Westview Apartments. This comparable loan was originated in October 2016 and has a maturity date of November 1, 2023.
The mortgage debt is secured by fee interest in a 116-unit mid-rise multifamily property located within walking distance of the Hoboken/NJ Transit Terminal at 1 Hudson Place. Of the property’s 116 units, there are 108 affordable units, including 93 units (80% of total unit count) that are leased at rents less than or equal to 50% of area median income (AMI).
The property appraised for $49.4 million, equal to $425,862/unit, as of September 1, 2021, which implied an LTV of 66% and an implied cap rate of 4.83% based on the originator’s underwritten NCF. For the full valuation report and loan-level details, click here.
Subject Property
Name
Westview Apartments
Address
55 Bloomfield Street Hoboken, NJ 07030
Property Type
Multifamily
Property Subtype
Mid Rise
Building Size
116 units
Year Built
1887
Submarket
Hudson Waterfront
County
Hudson
MSA
New York-Northern New Jersey-Long Island, NY-NJ-PA
Origination Date
12/1/2021
Loan Amount
$32,500,000
Interest Rate
2.92%
Valuation
Appraised Value
$49,400,000 ($425,862/unit)
Appraisal Date
9/1/2021
Appraisal LTV
65.70%
CRED iQ Base-Case Value
$46,700,000 ($402,626/unit)
Brickstone Villas
222 units, Multifamily, Killeen, TX
Goldman Sachs funded an $8.3 million mortgage on December 10, 2021 to fund the acquisition of Brickstone Villas in Killeen, TX. The 10-year loan was structured with interest-only debt service payments and an interest rate of 4.14%. The loan will be locked out from prepayment for 2 years, and defeasance will be permitted after lockout through the remainder of the loan term until its open period, 4 months prior to maturity. One of CRED iQ’s highest scoring loan comps is a $10.5 million loan secured by the Century Plaza Apartments, located less than a mile away from Brickstone Villas. The comparable loan was originated in October 2019 and had an interest rate of 4.15%. Despite the similar interest rate, the comparable loan required amortizing payments based on a 30-year schedule.
Brickstone Villas, a garden-style complex, was renovated by seller prior to its sale to the borrower. As a result, reported occupancy figures prior to origination were as low as 76% in 2020. Occupancy recovered to approximately 92% as of November 2021. The property appraised for $13.1 million, equal to $59,000/unit, as of October 25, 2021, which results in an LTV of 63.5% and an implied cap rate of 5.08% based on the originator’s underwritten NCF. For the full valuation report and loan-level details, click here.
Subject Property
Name
Brickstone Villas
Address
2812 Lake Road Killeen, TX 76543
Property Type
Multifamily
Property Subtype
Garden
Building Size
222 units
Year Built
1976
Submarket
Non-Metro TX
County
Bell
MSA
Killeen-Temple-Fort Hood, TX
Origination Date
12/10/2021
Loan Amount
$8,320,000
Interest Rate
4.14%
Valuation
Appraised Value
$13,100,000 ($59,000/unit)
Appraisal Date
10/25/2021
Appraisal LTV
63.50%
CRED iQ Base-Case Value
$13,250,000 ($59,681/unit)
Bankwell HQ
29,500 sf, Suburban Office, New Canaan, CT
One of the first featured originations in 2022 — Citigroup funded an $8.2 million mortgage on January 5th for the acquisition of a single-tenant office building in New Canaan, CT. The interest-only loan was structured with a 10-year term and has an interest rate of 3.74%. The loan will be locked out from prepayment for 2 years, and defeasance will be permitted after lockout through the remainder of the loan term until its open period, 4 months prior to maturity.
Despite the presence of a single tenant at the collateral and credit risk weighted heavily on the backend of the 10-year term, the loan was not structured with an anticipated repayment date. The collateral property, a 3-story office building, is leased to Bankwell Financial Group pursuant to a lease that expires in August 2031, which is approximately 4 months prior to loan maturity. The building was renovated prior to Bankwell signing a lease and taking occupancy. The property appraised for a value of $13.5 million, equal to $458/sf, as of October 6, 2021, which resulted in an LTV of 61% and an implied cap rate of 6.66%. For the full valuation report and loan-level details, click here.
Subject Property
Name
Bankwell HQ
Address
258 Elm Street New Canaan, CT 06840
Property Type
Office
Property Subtype
Suburban
Building Size
29,500 sf
Year Built
1983
Submarket
New Canaan
County
Fairfield
MSA
Bridgeport-Stamford-Norwalk, CT MSA
Origination Date
1/5/2022
Loan Amount
$8,200,000
Interest Rate
3.74%
Valuation
Appraised Value
$13,500,000 ($458/sf)
Appraisal Date
10/6/2021
Appraisal LTV
60.70%
CRED iQ Base-Case Value
$12,050,000 ($409/sf)
2374-2386 Grand Concourse
20,420 sf, Retail, Bronx, NY
Another example of a 2022 loan origination came in the form of a $6.8 million mortgage originated by Citigroup on January 6th for the acquisition of a 2-story retail building in Bronx, NY. The interest-only loan had a term of 10 years and an interest rate of 3.61%. The loan will be locked out from prepayment for just over 2 years, and defeasance will be permitted after lockout through the remainder of the loan term until its open period, 3 months prior to maturity. One of CRED iQ’s most relevant loan comps is a $15 million loan secured by 237 East Fordham Road, a 24,000-sf retail building also located in Bronx, NY. The comparable loan was originated in 2017 and had an interest rate of 3.93%.
The collateral property is anchored by Blink Fitness pursuant to a 14,000-sf lease, equal to 69% of the NRA, that expires in May 2029, which is about 2.5 years prior to loan maturity. The property was appraised for $11.5 million, equal to $563/sf, as of December 3, 2021, which resulted in an LTV of 59% and an implied cap rate of 5.93%. For the full valuation report and loan-level details, click here.
Subject Property
Name
2374-2386 Grand Concourse
Address
2374-2386 Grand Concourse Bronx, NY 10458
Property Type
Retail
Property Subtype
Urban Infill
Building Size
20,420 sf
Year Built
1924
Submarket
Bronx
County
Bronx
MSA
New York-Northern New Jersey-Long Island, NY-NJ-PA
Origination Date
1/6/2022
Loan Amount
$6,825,000
Interest Rate
3.61%
Valuation
Appraised Value
$11,500,000 ($563/sf)
Appraisal Date
12/3/2021
Appraisal LTV
59.30%
CRED iQ Base-Case Value
$9,347,000 ($458/sf)
For full access to our loan database and valuation platform, sign up for a free trial below:
CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors. Subscribers to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. Our data platform is powered by over $2.0 trillion of CMBS, CRE CLO, SBLL, Ginnie Mae, FHA/HUD, and Agency loan and property data.
The iconic 20% off coupon will be available for use at fewer locations starting in February 2022 following the release of 37 locations by Bed Bath & Beyond that are slated for closure. The closures are the latest development in the retailer’s plan to close approximately 200 locations, which was originally announced in July 2020. The full list of closures can be found here.
CRED iQ examined the list and identified store locations that served as collateral for CMBS loans. At least 8 properties securing more than $300 million in outstanding debt were identified within CRED iQ’s CMBS universe that had exposure to impending Bed Bath & Beyond closures. Two of the loans are secured by properties that feature Bed Bath & Beyond as the largest tenant. Several of the closing stores had lease expirations scheduled for the end of January 2022, including the largest CMBS loan with exposure — the $133.5 million Waterfront at Port Chester. Many of Bed Bath & Beyond’s leases with near-term expirations likely have a low probability of renewal given the retailer’s closure initiatives and recent operational struggles.
The largest Bed Bath & Beyond storefront slated for closures is the 50,000-sf location at Atlanta’s Perimeter Square, which secures a $35 million loan. Bed Bath & Beyond’s lease size at this location is nearly twice of size of the retail chain’s average footprint and accounts for 27% of the property’s NRA. The lease was scheduled to expire in January 2025 so Bed Bath and Beyond may have the ability to auction the lease or sublease the dark space for the remainder of its term. The loan was originated in October 2018, less than 4 years ago. The property’s second largest tenant, Havertys Furniture, has a 44,000-sf lease, accounting for 24% of the property’s NRA, that is scheduled to expire in July 2022. If Bed Bath & Beyond and Havertys Furniture both vacate or go dark, then third-largest tenant TJ Maxx will be able to terminate its lease or pay reduced rent.
A list of all CMBS loans with exposure to Bed Bath and Beyond’s February closures appears below and includes links to free previews for each property on CRED iQ’s platform. CRED iQ subscribers also have access to updated valuations for each property, that account for the immediate loss of Bed Bath & Beyond as a tenant. CRED iQ valuations factor in a base-case (most likely), a downside (significant loss of tenants), and dark scenarios (100% vacant).
Bed Bath & Beyond is one of several retailers that announced store closures over the past couple of months. On a larger scale, Bed Bath & Beyond closed more than 500 locations between year-end 2018 and year-end 2020. Year end is an opportune time for retailers to assess the performance of store fleets to identify underperformers, while still capitalizing on an end-of-year surge of holiday sales. Pharmacy chains CVS Health and Rite Aid both announced store closure initiatives in late-2021. All three major pharmacy retailers — Walgreens, CVS, and Rite Aid — have reduced physical store counts since 2018. Additionally, department store chain Macy’s continued to follow through with its pre-pandemic store optimization plan to close approximately 125 locations by announcing the permanent closure of six of those locations in early-2022. For a silver lining, not all retailers have been closing stores and optimizing locations. Dollar General, Dollar Tree, and TJ Maxx have opened more store locations on a net basis since 2018.
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 to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. Our data platform is powered by over $2.0 trillion of CMBS, CRE CLO, SBLL, Ginnie Mae, FHA/HUD, and Freddie Mac loan and property data.
This week, the CRED iQ team will be in attendance at CREFC’s Conference in Miami. Feel free to drop us a line if you want to talk the latest in commercial real estate analytics or simply browse some vacant retail storefronts along Lincoln Road.
In this week’s WAR Report, CRED iQ calculated real-time valuations for 5 distressed properties that have transferred to special servicing within the past 2 months. Among these is a Times Square retail property and 2 office properties with evidence of tenants vacating in favor of higher quality alternatives. The 2 highlighted office properties contributed to recent increases in CRED iQ’s office sector delinquency rate, which saw its second consecutive increase to 2.74%. Click the link below for a list of all office properties.
CRED iQ valuations factor in a base-case (most likely), a downside (significant loss of tenants), and dark scenarios (100% vacant). For full access to the valuation reports as well as full CMBS loan reporting, including detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here.
1551 Broadway
25,600 sf, Retail and LED Signage, Times Square, NY[View Details]
This $180 million loan transferred to special servicing on November 15, 2021 shortly after a 60-day forbearance expired. The loan was originally scheduled to mature in July 2021, but the borrowing entity, a co-ownership between Wharton Properties (90%) and SL Green (10%), was unable to secure fund to take out the debt. The 60-day forbearance was granted at loan maturity to allow additional time for refinancing. Potentially complicating matters is a $103.8 million mezzanine loan that was funded in 2017.
The loan is secured by a 3-story, 25,600-sf retail building located in Times Square. Included as collateral is 14,500 sf of LED signage that spans an additional 4 stories on top of the building. The property is entirely leased by American Eagle Outfitters pursuant to a lease that expires in February 2024. The retail store was temporarily closed during the pandemic and media reports have indicated the possibility of American Eagle vacating at lease expiration. Reports of the space being marketed to prospective tenants started emerging in early 2020. The property is one of the best positioned within Times Square. The average daily pedestrian count along Broadway, between W 46th Street and W 47th Street, was 175,153 during December 2021, which was slightly higher than 2019 pre-pandemic levels and more than 140% higher than 2020 levels.
American Eagle paid annualized total base rent of $21.3 million in 2021. Prior to loan origination, a little over 50% of total base rent was attributed to the LED signage. For the full valuation report and loan-level details, click here.
This $29.3 million loan transferred to special servicing on November 16, 2021 due to the lease expiration of the collateral property’s largest tenant, Hamilton Lane. The loan is secured by a 4-story, 113,115-sf office building in Bala Cynwyd, PA, approximately 5 miles northwest of Center City Philadelphia. Hamilton Lane occupied 52,045 sf and accounted for 39% of the building’s GLA. The former tenant vacated One Presidential in favor of Seven Towers Bridge, a new headquarters in Conshohocken, PA. Hamilton Lane leased space at two other office properties in Bala Cynwyd and cited a need to consolidate its employees into one location; although, a flight to quality appeared to also play a factor. Seven Tower Bridge is a newly constructed development with superior amenities than One Presidential. In addition to One Presidential losing its largest tenant, Novak Francella LLC, accounting for 11% of the GLA, vacated at lease expiration in July 2021.
LNR, as special servicer, will discuss potential workouts with the borrower, Keystone Property Group. Foreclosure or receivership are possibilities given low occupancy at the collateral and uncertain leasing opportunities for such a large space. Altogether, Hamilton Lane left 3 large vacancies in the Bala Cynwyd submarket. CRED iQ estimates occupancy at the property to be approximately 31%.
One potential complication for workout is a $3.6 million subordinate mortgage that was originated by The Bancorp Bank. The payment waterfall for the senior and subordinate components of the mortgage was structured as pro-rata, but the transfer to special servicing shifted the waterfall to a sequential pay structure. For the full valuation report and loan-level details, click here.
This $11.8 million loan transferred to special servicing on November 12, 2021 due to imminent monetary default. The loan is secured by leasehold interest in a 28-story office tower in the Baltimore, MD CBD. The property’s largest tenant, law firm Silverman Thompson, is vacating at lease expiration in February 2022 in favor of 400 East Pratt Street, which overlooks the Inner Harbor. Silverman Thompson’s lease accounted for 10% of the property’s GLA. The second-largest tenant at the property, Alperstein & Diener, accounts for 4% of the GLA and has a lease expiration in April 2022.
The property’s two ground leases will be considerations for workout negotiations. The property’s main ground lease expires in 2112. A second ground lease covers parking access to the building and expires in 2033. Annual ground rent was last reported to be approximately $375,000.
Occupancy at 201 North Charles has steadily declined for 3 consecutive years from 80% in 2019 to 70% in 2021 as the CBD has fallen out of favor with office tenants. Many high-profile tenants, including T. Rowe Price, have moved or are planning moves to nearby Harbor Point — again continuing with the theme of flight to quality mentioned with One Presidential. CRED iQ’s estimated occupancy for the property is 60%. For the full valuation report and loan-level details, click here.
This $4.5 million loan transferred to special servicing on December 3, 2021 following the loss of the collateral property’s anchor tenant, ShopRite. The loan is secured by a 54,876-sf neighborhood center in Newburgh, NY, approximately 70 miles north of Manhattan along the Hudson River. ShopRite terminated its lease at the property and vacated in September 2021. The tenant occupied 41,676 sf, accounting for 76% of the GLA, pursuant to a lease that was scheduled to expire in June 2025. However, ShopRite had a termination option at any time as long as six months’ notice was provided. Replacement with another grocery tenant may be plausible, but servicer commentary for the loan indicates significant levels of deferred maintenance. The property’s second-largest tenant is Family Dollar with a lease that expires in 2037 and accounts for 15% of the GLA. Assuming the absence of any co-tenancy clauses tied to ShopRite’s lease termination, CRED iQ’s estimated occupancy is equal to 24%. For the full valuation report and loan-level details, click here.
5,800 sf, Mixed Use (Retail/Multifamily), Manhattan, NY[View Details]
This $3.0 million loan transferred to special servicing on November 26, 2021. The loan is secured by a 4-story, 5,800-sf mixed-use property located in the Upper East Side of Manhattan, NY. The building contains 6 multifamily units and a ground-floor retail unit. The retail unit was previously occupied by TD Ameritrade pursuant to a lease that expired in March 2021, but the tenant went dark as early as July 2020. Additionally, the borrower has been unresponsive with providing the servicer updated financials for the property. The latest set of financials available were from 2018. For the full valuation report and loan-level details, click here.
CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors. Subscribers to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. Our data platform is powered by over $2.0 trillion of CMBS, CRE CLO, SBLL, Ginnie Mae, FHA/HUD, and Freddie Mac loan and property data.
CRED iQmonitors distressed rates (DQ + SS%) and market performance for nearly 400 MSAs across the United States, covering over $900 billion in outstanding CRE debt. Distressed rates for the current month and month-over-month changes are presented below, by property type, for the 50 largest markets. This month, distress in the office sector became more apparent, accounting for four of the 10 largest percentage increases in distress by market-sector. Conversely, the hotel and lodging sectors continue to exhibit improvement — nine of the 10 biggest improvements by market-sector distress were for retail or lodging.
The Chicago market exhibited notable increases in distress this month, which was largely caused by the transfer of two loans to special servicing. The $100 million 135 South LaSalle loan transferred to special servicing due to insufficient cash flow following the departure of Bank of America from the collateral property at lease expiration in July 2021. The collateral is a 44-story, 1.3 million-sf office tower, but is classified by servicer data as mixed-use (other) due to a ground-floor retail component. Additionally, the $240 million 181 West Madison loan transferred to special servicing this month due to the bankruptcy of the sponsor, HNA Group. The collateral is a 50-story office tower located in the Central Loop of the Chicago CBD. This is the second consecutive month that Chicago office has appeared as a market-sector with one of the 10 largest month-over-month increases in distress.
The Raleigh office market exhibited the second largest month-over-month increase in distress following the delinquency of the $20.8 million Brier Creek Corporate Center I & II loan. Occupancy at the collateral property declined to 24% after its largest tenant, biopharmaceutical company UCB, vacated at lease expiration in March 2021.
The Top 5 distressed markets remained unchanged from the prior month. The Minneapolis MSA has the highest overall distressed rate at 23.1%. New Orleans (15.28%), Louisville (14.19%), Cleveland (11.76%), and Milwaukee (10.98%) round out the list of markets with the highest rates of distress. Following an increase in distress within the Allentown MSA, Sacramento (0.54%) now has firm position as the market with the lowest percentage of distress among the Top 50 MSAs.
New York-Northern New Jersey-Long Island, NY-NJ-PA MSA
$6,416.1
5.5%
-0.3%
Hotel
$1,619.4
43.1%
-1.7%
Industrial
$07.5
0.5%
0.0%
Multifamily
$511.6
1.5%
-0.2%
Office
$1,285.2
3.2%
0.3%
Other
$1,488.8
6.7%
-0.6%
Retail
$1,503.7
11.2%
-2.4%
Self Storage
$0.0
0.0%
0.0%
Orlando-Kissimmee, FL MSA
$250.4
2.3%
-1.5%
Hotel
$161.2
5.7%
-0.7%
Industrial
$0.0
0.0%
0.0%
Multifamily
$01.9
0.0%
0.0%
Office
$47.1
9.5%
-0.1%
Other
$0.0
0.0%
0.0%
Retail
$40.2
4.7%
-15.7%
Self Storage
$0.0
0.0%
0.0%
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA
$860.9
4.7%
-0.6%
Hotel
$346.0
38.7%
-1.7%
Industrial
$0.0
0.0%
0.0%
Multifamily
$110.2
1.2%
-0.1%
Office
$131.5
3.4%
0.8%
Other
$47.8
3.5%
-0.2%
Retail
$225.5
9.5%
-3.8%
Self Storage
$0.0
0.0%
0.0%
Phoenix-Mesa-Scottsdale, AZ MSA
$409.4
2.3%
0.0%
Hotel
$38.9
2.3%
-0.1%
Industrial
$10.2
2.1%
-0.1%
Multifamily
$0.0
0.0%
0.0%
Office
$23.7
1.1%
0.0%
Other
$180.5
25.5%
0.9%
Retail
$156.1
7.4%
0.1%
Self Storage
$0.0
0.0%
0.0%
Pittsburgh, PA MSA
$141.2
2.9%
-0.3%
Hotel
$110.0
39.9%
-1.8%
Industrial
$0.0
0.0%
0.0%
Multifamily
$0.0
0.0%
0.0%
Office
$15.3
1.6%
-0.1%
Other
$08.0
2.1%
0.0%
Retail
$07.8
1.2%
0.0%
Self Storage
$0.0
0.0%
0.0%
Portland-Vancouver-Beaverton, OR-WA MSA
$483.3
6.9%
-1.1%
Hotel
$471.5
44.1%
-13.9%
Industrial
$0.0
0.0%
0.0%
Multifamily
$10.2
0.2%
0.0%
Office
$01.6
0.6%
0.0%
Other
$0.0
0.0%
0.0%
Retail
$0.0
0.0%
0.0%
Self Storage
$0.0
0.0%
0.0%
Raleigh-Cary, NC MSA
$43.7
1.2%
-2.0%
Hotel
$11.9
3.8%
-18.0%
Industrial
$0.0
0.0%
0.0%
Multifamily
$0.0
0.0%
0.0%
Office
$20.8
6.7%
6.7%
Other
$0.0
0.0%
0.0%
Retail
$10.9
3.0%
-6.1%
Self Storage
$0.0
0.0%
0.0%
Richmond, VA MSA
$128.9
3.8%
-0.5%
Hotel
$39.4
15.1%
-2.7%
Industrial
$06.8
5.4%
0.3%
Multifamily
$0.0
0.0%
0.0%
Office
$0.0
0.0%
0.0%
Other
$0.0
0.0%
0.0%
Retail
$82.6
15.8%
-2.4%
Self Storage
$0.0
0.0%
0.0%
Riverside-San Bernardino-Ontario, CA MSA
$366.2
3.8%
-0.3%
Hotel
$82.4
20.7%
2.3%
Industrial
$0.0
0.0%
0.0%
Multifamily
$0.0
0.0%
-0.2%
Office
$0.0
0.0%
0.0%
Other
$0.0
0.0%
0.0%
Retail
$283.7
13.1%
0.3%
Self Storage
$0.0
0.0%
0.0%
Sacramento-Arden-Arcade-Roseville, CA MSA
$30.4
0.5%
-0.1%
Hotel
$05.8
1.6%
0.0%
Industrial
$0.0
0.0%
0.0%
Multifamily
$0.0
0.0%
0.0%
Office
$10.9
1.9%
0.2%
Other
$0.0
0.0%
0.0%
Retail
$13.7
1.7%
0.0%
Self Storage
$0.0
0.0%
-3.1%
Salt Lake City, UT MSA
$47.2
1.3%
-0.3%
Hotel
$47.2
16.3%
-2.8%
Industrial
$0.0
0.0%
0.0%
Multifamily
$0.0
0.0%
0.0%
Office
$0.0
0.0%
0.0%
Other
$0.0
0.0%
0.0%
Retail
$0.0
0.0%
0.0%
Self Storage
$0.0
0.0%
0.0%
San Antonio, TX MSA
$153.1
2.4%
-0.3%
Hotel
$02.9
0.8%
-3.9%
Industrial
$0.0
0.0%
0.0%
Multifamily
$04.9
0.1%
0.0%
Office
$0.0
0.0%
0.0%
Other
$0.0
0.0%
0.0%
Retail
$143.7
16.3%
-0.1%
Self Storage
$01.5
1.0%
0.0%
San Diego-Carlsbad-San Marcos, CA MSA
$216.4
1.9%
-0.1%
Hotel
$79.3
3.9%
0.0%
Industrial
$0.0
0.0%
0.0%
Multifamily
$0.0
0.0%
-0.2%
Office
$0.0
0.0%
0.0%
Other
$20.7
3.2%
-0.1%
Retail
$116.4
9.7%
-0.2%
Self Storage
$0.0
0.0%
0.0%
San Francisco-Oakland-Fremont, CA MSA
$307.6
1.3%
-0.1%
Hotel
$189.6
8.2%
-0.4%
Industrial
$0.0
0.0%
0.0%
Multifamily
$21.0
0.3%
0.0%
Office
$18.8
0.2%
0.0%
Other
$30.6
1.7%
-0.9%
Retail
$47.7
3.7%
0.1%
Self Storage
$0.0
0.0%
0.0%
San Jose-Sunnyvale-Santa Clara, CA MSA
$104.5
0.8%
-0.3%
Hotel
$89.8
4.5%
-1.6%
Industrial
$0.0
0.0%
0.0%
Multifamily
$0.0
0.0%
0.0%
Office
$14.7
0.2%
0.0%
Other
$0.0
0.0%
-0.6%
Retail
$0.0
0.0%
0.0%
Self Storage
$0.0
0.0%
0.0%
Seattle-Tacoma-Bellevue, WA MSA
$144.5
0.8%
-0.5%
Hotel
$137.8
9.0%
-6.7%
Industrial
$0.0
0.0%
0.0%
Multifamily
$0.0
0.0%
0.0%
Office
$0.0
0.0%
0.0%
Other
$0.0
0.0%
0.0%
Retail
$06.7
0.4%
0.0%
Self Storage
$0.0
0.0%
0.0%
St. Louis, MO-IL MSA
$414.7
9.9%
0.3%
Hotel
$58.3
20.5%
0.0%
Industrial
$0.0
0.0%
0.0%
Multifamily
$23.2
1.4%
0.1%
Office
$107.6
19.4%
0.2%
Other
$26.2
5.1%
-1.0%
Retail
$199.4
19.7%
-0.2%
Self Storage
$0.0
0.0%
0.0%
Tampa-St. Petersburg-Clearwater, FL
$292.8
3.2%
-0.3%
Hotel
$21.8
1.9%
-1.2%
Industrial
$0.0
0.0%
0.0%
Multifamily
$02.6
0.0%
0.0%
Office
$23.9
4.2%
0.7%
Other
$0.0
0.0%
0.0%
Retail
$244.5
26.0%
-1.2%
Self Storage
$0.0
0.0%
0.0%
Tucson, AZ MSA
$171.8
5.9%
0.2%
Hotel
$01.4
0.6%
0.1%
Industrial
$0.0
0.0%
0.0%
Multifamily
$0.0
0.0%
0.0%
Office
$0.0
0.0%
0.0%
Other
$0.0
0.0%
0.0%
Retail
$170.4
25.2%
0.7%
Self Storage
$0.0
0.0%
0.0%
Virginia Beach-Norfolk-Newport News, VA-NC MSA
$121.8
2.9%
-2.3%
Hotel
$09.4
2.0%
-3.2%
Industrial
$21.2
13.4%
0.3%
Multifamily
$0.0
0.0%
0.0%
Office
$0.0
0.0%
0.0%
Other
$0.0
0.0%
0.0%
Retail
$91.3
11.7%
-8.3%
Self Storage
$0.0
0.0%
0.0%
Washington-Arlington-Alexandria, DC-VA-MD-WV MSA
$828.4
3.0%
-0.1%
Hotel
$51.0
5.5%
0.6%
Industrial
$11.2
2.0%
0.0%
Multifamily
$01.3
0.0%
0.0%
Office
$366.3
5.7%
0.3%
Other
$249.7
12.8%
-0.3%
Retail
$149.0
5.7%
-0.4%
Self Storage
$0.0
0.0%
0.0%
Grand Total
$26,843.8
4.1%
-0.4%
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 to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. Our data platform is powered by over $2.0 trillion of CMBS, CRE CLO, SBLL, Ginnie Mae, FHA/HUD, and Freddie Mac loan and property data.
The CRED iQ overall delinquency rate had a modest decline this month, which marks its 18th consecutive improvement. The delinquency rate, equal to the percentage of all delinquent specially serviced loans and delinquent non-specially serviced loans, for CRED iQ’s sample universe of $500+ billion in CMBS conduit and single-asset single-borrower (SASB) loans was 4.59%, which compares to the prior month’s rate of 4.62%. Additionally, CRED iQ’s special servicing rate, equal to the percentage of CMBS loans that are with the special servicer (delinquent and non-delinquent), declined month-over-month to 7.06% from 7.32%, after a brief increase in the prior month. The special servicing rate has declined 11 out of the 12 previous months. Aggregating the two indicators of distress – delinquency rate and special servicing rate – into an overall distressed rate (DQ + SS%) equals 7.18% of CMBS loans that are specially serviced, delinquent, or a combination of both. The overall distressed rate declined compared to the prior month rate of 7.58% given both declines in the delinquency and special servicing rates.
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, the delinquency rate for office notably increased to 2.74%, compared to 2.18% in the prior month. The increase in office delinquency was carried by two loans secured by Chicago office buildings — 181 West Madison and 135 South LaSalle. The $100 million 135 South LaSalle loan, which was featured in CRED iQ’s July 20, 2021 WAR Report, became delinquent due to insufficient cash flow after the collateral property’s largest tenant, Bank of America, vacated at lease expiration. The $240 million 181 West Madison loan became delinquent following the bankruptcy filing of the loan sponsor, HNA Group. The $1.2 billion 245 ParkAvenue loan had a similar fate last month.
New delinquencies pushed the office delinquency rate to its highest level in 12 months. Both of the newly delinquent Chicago office loans transferred to special servicing this month, resulting in the second consecutive increase in the office special servicing rate.
Lodging continues to have the highest delinquency (9.71%) and special servicing (14.16%) rates among property types, followed by retail delinquency (7.52%) and special servicing (12.23%) rates. Both lodging and retail exhibited improvements compared to the prior month, which is a trend that has been consistent over the past year as those loans continue to be worked out and resolved.
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
CRED iQ also monitors an overall distressed rate (DQ + SS%) by property type to account for loans that qualify for either delinquent or special servicing subsets. The overall distressed rates typically track slightly higher than special servicing rates as most delinquent loans are also with the special servicer. This month, overall distressed rates for office and self-storage increased while lodging, retail, multifamily, and industrial declined. The 3 largest loans to transfer to special servicing this month were also delinquent. Two of those loans are secured by the aforementioned office properties located in the Chicago, IL MSA. The third loan, and 2nd largest transfer, was the $180 million 1551 Broadway loan, which is secured by Times Square retail. For additional information for these 3 loans, click View Details below:
CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors. Subscribers to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. Our data platform is powered by over $2.0 trillion of CMBS, CRE CLO, SBLL, Ginnie Mae, FHA/HUD, and Freddie Mac loan and property data.
In our first WAR Report for 2022, CRED iQ examines the impact of commercial real estate values following a December 21, 2021 announcement by Rite Aid disclosing the closure of 63 stores, some of which have already been shuttered. The announcement follows a similar initiative by CVS Health, which CRED iQ detailed in its December 14, 2021 WAR Report. Rite Aid has already identified store locations that will be closed and began its initiative in November 2021; although, the firm has not disclosed specific locations. The store closure initiative was driven by a need to improve profitability for the company and, as such, unproductive stores in less desirable locations are at risk of being shuttered.
Rite Aid closures are not a new development for commercial real estate investors. The retailer has exited several markets in past years and notably sold approximately 2,000 stores to Walgreens in 2017. Many of the acquired stores were redundant (located within 1 mile) with Walgreens’ incumbent operations and were subsequently closed. In many cases, Walgreens honored Rite Aid’s lease terms to maintain control of the space and limit competition; but examples of subleases came in the form of an agreement with Dollar Tree, O’Reilly Auto Parts, or local wine and spirits shops.
CRED iQ leveraged its platform to identify properties leased to Rite Aid, including single-tenant net lease properties and multi-tenant retail properties. CRED iQ identified 185 properties securing $1.7 billion in outstanding mortgage debt with Rite Aid as tenant. About half of the 185 properties are single tenant or net lease properties. Classifying properties by lease expiration date, CRED iQ was further able to isolate properties with Rite Aid lease expirations over the next 3 years as shown in the table below:
Lease Expiration Year
# of Properties
Aggregate Outstanding Balance ($000’s)
2021 or Earlier
3
$1,227
2022
2
$2,937
2023
5
$9,214
2024
7
$12,155
For a copy of the comprehensive list of all CMBS properties with Rite Aid as a tenant — including nearly 100 single tenant locations, please reach out to Shane Beeson (shane@cred-iq.com) or click the link below.
[2] a complete list of all Rite Aid locations in the US (more than 2,400) and
[3] a list of former Rite Aid locations. Following the 2017 Walgreens acquisition of nearly 2,000 Rite Aid stores, many rent rolls have not been updated to reflect new tenant names. As such, data reported for many properties still indicate Rite Aid is a tenant, whereas the location has since been converted to a Walgreens. A few of these examples were highlighted below and show timely examples of the aftermath of a net lease retail closure.
This week’s WAR Report focuses specifically on singlet tenant properties. Single tenant properties lease to Rite Aid generally trade at higher capitalization rates than their CVS or Walgreens counterparts. Location within a region of commerce is also a key factor and many Rite Aids had inferior locations compared to competing pharmacies. This was magnified in the 2017 acquisition by Walgreens that resulted in several Rite Aid closures. Featured properties below include single tenant retail locations with near-term lease expirations or former Rite Aid locations that secure loans in special servicing.
CRED iQ valuations factor in a base-case (expected lease renewal at in-place rent), a downside (lease renewal at 50% reduction in rent), and dark scenarios (100% vacant). Select valuations are provided for the properties below. For full access to the valuation reports including all 3 valuation scenarios as well as full CMBS loan reporting, with detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here.
This specially serviced property in Murfreesboro, TN is physically vacant but is leased to Walgreens through September 2028. The property has an allocated loan amount of $3.1 million and is part of a 5-building net lease portfolio that secures a $10.1 million mortgage. Rite Aid was the initial tenant at loan origination, but the lease was assumed by Walgreens as part of its 2017 acquisition. Walgreens subsequently closed the store due to its proximity to a superior store location less than a half mile away. The superior Walgreens location is positioned at a nearby signalized intersection, which has more frequent cross traffic and is closer to an interchange with Interstate 24. The portfolio loan transferred to special servicing on June 21, 2021 due to non-compliance with a cash management trigger, likely related to the vacant building. Walgreens has made the vacant building available for sublease; however, use restrictions generally preclude other pharmacy operations. For the full valuation report and loan-level details, click here.
This REO property, which has outstanding debt of $2 million, was formerly occupied by Rite Aid pursuant to a lease that expired in September 2018. Rite Aid’s operations at the store were acquired by Walgreens in 2017, similar to the Murfreesboro location above. Walgreens favored another location less than a mile away and did not renew the 315 Arsenal Street lease at expiration. The 11,699-sf freestanding retail property then became economically and physically vacant. The building has been with the special servicer, LNR Partners, since 2016 and title to the property was acquired in May 2019. In May 2021, a lease was signed with O’Reilly Auto Parts, which is expected to open in early 2022. The property will likely be marketed for sale once the new tenant is operational. For the full valuation report and loan-level details, click here.
This freestanding retail building leased to Rite Aid through August 2022. The property has an allocated loan amount of $1.5 million and is part of a 2-building net lease portfolio that secures a $3.2 million mortgage. Scheduled loan maturity is a little more than a year after Rite Aid’s lease expiration at the 1714 Norton Street location. The property is located in the town of Irondequoit, which is approximately 3 miles north of the Rochester, NY CBD. This particular Rite Aid location is about a mile away from Rochester General Hospital and faces intense pharmacy competition in the surrounding region. There are 3 Walgreens and 1 CVS within 2 miles of the property. The nearest Rite Aid is about 1.5 miles away, located more proximate to the Rochester CBD. For the full valuation report and loan-level details, click here.
This freestanding Rite Aid in Wilkes-Barre secures a $1.4 million loan and is located approximately 20 miles southwest of Scranton, PA. Rite Aid’s lease expires in March 2022, which is a significant concern. A second Rite Aid Pharmacy is located less than a half mile away and the competitive Rite Aid is located more central to the urban center, within the Public Square retail corridor of Wilkes-Barre. However, the 155 East Northampton Street location has drive-through amenities that are not available at the Public Square location. Loan maturity is scheduled for June 1, 2025. For the full valuation report and loan-level details, click here.
This physically vacant building in Flemington, NJ secures a $1.4 million loan and was formerly occupied by Rite Aid until the store was acquired by Walgreens in 2017. Walgreens assumed the lease, which is scheduled to expire in October 2023. Walgreens operates a pharmacy located directly across the street and shuttered operations at the 78 Church Street location in July 2018. The property is now dark and the lease likely will not be renewed. The loan transferred to special servicing in November 2018, shortly after the Walgreens operations closed; however, updated commentary indicates the loan may return to the master servicer in the near term. Loan maturity is scheduled for October 2023. For the full valuation report and loan-level details, click here.
CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors. Subscribers to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. Our data platform is powered by over $2.0 trillion of CMBS, CRE CLO, SBLL, Ginnie Mae, FHA/HUD, and Freddie Mac loan and property data.
The CRED iQ team made the most out of 2021 by providing market constituents with commercial real estate analytics, loan and property data, as well as fresh takes on commercial real estate trends and new cycles. CRED iQ’s WAR Report (Weekly Asset Review) is among its most popular reads, providing in-depth analysis on a variety of topics including distressed asset valuations and credit risk analysis. CRED iQ’s commentary on commercial mortgage origination trends has gained popularity this year as well, examining lender terms and loan structures for new originations. Lastly, our CRED DQ report — featuring CMBS delinquency and special servicing rates as well as market delinquency tracking — has been featured in several widely recognized media outlets.
The team here at CRED iQ looks forward to providing more great content in 2022!
One of our most popular WAR Report posts that featured a regional mall located in Lancaster, PA and 2 mixed-used properties located in Lower Manhattan.
CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors. Subscribers to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. Our data platform is powered by over $2.0 trillion of CMBS, CRE CLO, SBLL, Ginnie Mae, FHA/HUD, and Agency loan and property data.
This week, CRED iQ looks to the year ahead in commercial real estate and examines commercial mortgages with maturity dates scheduled in 2022. CRED iQ’s database has approximately $97 billion in commercial mortgages that are scheduled to mature in 2022, including loans securitized in CMBS conduit trusts, single-asset single-borrower deals (SASB), and CRE CLOs, as well as multifamily mortgages securitized through government-sponsored entities. The SASB subset of nearly $50 billion comprises the majority of scheduled maturities in 2022; however, approximately 83% of that balance is tied to floating-rate loans that have extension options available, providing no assurances of refinancing or new origination opportunities.
For this charting session, we focus on 2022 maturing loans that have been securitized in CMBS conduit transactions, which totals approximately $19 billion. This group of loans provides for a more diverse observation of loans across property type, class, and geographic location. Breaking down 2022 maturities by property type, retail has the highest concentration with 38% of outstanding debt and is followed by office with 24%. Lodging has the third-highest concentration with 14% of the outstanding balance of scheduled maturities in 2022. Property type concentrations for 2022 maturities shadow the makeup of 2012 vintage conduits, which were only a few years removed from the great financial crisis and consist primarily of 10-year mortgages that are coming due this year. Within 2012 vintage conduit deals, concentrations in multifamily loans were smaller due to the post-crisis re-emergence of Freddie Mac securitizations, which provided for greater volume in retail, office, and lodging loans.
From a monthly perspective, the second half of 2022 has the highest concentration of scheduled maturities. Many CRE professionals recently experienced the time compression of closing new deals by year-end 2021 and the trope holds true with December 2022 having the highest total of scheduled maturities, $2.8 billion, out of any month. October 2022 is second-highest with $2.5 billion in scheduled maturities and is following by July 2022 with $2.3 billion. Loans generally have 3 to 4-month open periods so lenders often have opportunity to provide refinancing earlier than stated maturity dates.
Approximately 14% of the 2022 scheduled maturity debt is already delinquent or in special servicing, which portends maturity defaults, delayed payoffs, or extended workouts. Furthermore, an additional 4% of the total debt has received some type of forbearance in 2020 or 2021 to provide COVID-19 relief. Cure statuses vary among loans with forbearance agreements, and many loans have not been able to recover to pre-pandemic performance levels with the relief that had been provided. Such examples include a $55.6 million loan secured by Southpark Mall in Colonial Heights, VA, which was granted forbearance in July 2020. The loan is scheduled to mature in June 2022, but a timely payoff appears unlikely given its most recent transfer to special servicing in February 2021.
Factors for a timely payoff at maturity can differ by property type. Lodging and non-essential retail had the most pronounced adverse impacts from the pandemic, whereas cracks in the office sector are appearing for lower-tier assets.
Retail
Retail is the property type that contributes most to potential 2022 maturity risk — of the $7.3 billion in conduit retail loans scheduled to mature in 2022, loans totaling $2 billion have already transferred to special servicing. Much of the distress is attributed to outsized loans backed by regional malls, which were a popular securitization choice for 2012 vintage conduits. From another angle, the average size of a retail loan that is scheduled to mature in 2022 was about $16.8 million but the average size of a distressed retail loan maturing in 2022 is approximately $44.1 million.
Stabilization is a key issue for lodging loans with near-term maturities. For a successful maturity resolution, stable collateral performance is a primary consideration for refinancing. Recovery and stabilization within this sector may be facing headwinds as the Omicron COVID variant continues to sweep across the country. Hotel loans accounting for 23% of the aggregate balance of scheduled lodging maturities have had forbearance agreements in 2022, highest of any property type by a wide margin. The repayment of forbearance and the replenishment of reserves accounts will be a consideration for monitoring lodging loans scheduled to mature in 2022.
Although office loans have relatively low delinquency and special servicing rates compared to lodging and retail, many office properties are being evaluated with a high level of scrutiny. With nearly $4.5 billion in office CMBS debt coming due in 2022, lenders are focused on several credit factors including lease rollover. CMBS office loans with 2022 maturity dates are secured by more than 538 million square of office space, of which 76 million square feet, or 14% of total GLA, is attached to leases that expire within the next 12 months. Office properties with high concentrations of near-term lease rollover present issues with long-term refinancing due to uncertainty of cash flows should tenants vacate or renew at lower rates.
Aside from a focus on 2022 maturities, the year ahead brings plenty of opportunities within the CRE industry. Looking back — there is $18.9 billion in outstanding debt with a scheduled maturity date in 2021 that still needs to be worked out as well as several billion in REO assets that are on track to be liquidated. Looking ahead to 2023 — CRED iQ’s early estimates indicated nearly $154 billion in scheduled maturities; however, the aggregate total is fluid when considering loan extensions and potential prepayments throughout 2022.
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 to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. Our data platform is powered by over $2.0 trillion of CMBS, CRE CLO, SBLL, Ginnie Mae, FHA/HUD, and Agency loan and property data.
