In the latter half of 2023, commercial real estate distress saw a significant increase, as reported by analytics firm CRED iQ. The rate at which loans were added to the servicer watchlist was approximately 110% faster than in the first six months of the year.
According to December’s remittance reports, over $100 billion worth of loans were added to the servicer watchlist in this period. Additionally, 860 loans were transferred to special servicing during this time frame. In total for that year, there were 23,085 loans on the servicer watchlist.
CRED iQ’s report shows that a total of more than $133 billion worth of loans made it onto their watchlist throughout all of 2023. This is significantly higher compared to only around $25 billion being transferred into special servicing.
One notable example is a loan totaling $525 million (including subordinate debt) that was placed on September’s servicer watchlist due to concerns with its second largest tenant – WeWork. This loan is backed by Midtown Center (pictured), an office tower spanning over 867 thousand square feet located in downtown Washington D.C., where Fannie Mae holds an eight-year lease accounting for about eighty-two percent gross leasable area; however,the government-sponsored enterprise plans on exiting their lease five years early instead.
Commercial real estate distress experienced rapid growth during late-2023 accordingto data from CRED iQ,a leading analytics firm.The pace at which newloanswereaddedtothe servicewatch list increasedbyapproximately110%comparedtothe first halfof theyear.In thesecondhalfalone,nearly$100billionworthofloansweretakenontotheservicewatch list,andanadditional860loanstransferredtospecialservicing.Throughouttheyear,theoverallnumberoftotalwatchlistedloansasreportedinDecemberwas23,o85.Thisamountedtoover$133billionworthofloansbeingaddedtothewatchlist,significantlyhigherthantheapproximately$25billiontransferredtospecialservicing.
One notable example is a $525-million loan, which includes $143 million in subordinate debt. This loan was added to the servicer’s watchlist in September due to concerns regarding its second-largest tenant – WeWork. The property securing this loan is Midtown Center (pictured), an 867,654-square-foot office tower located in downtown Washington D.C.Fannie Mae holds a lease for 82% of the gross leasable area; however,the government-sponsored enterprise plans on exiting their lease five years early instead.
