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CRE CLO distress rate jumps to 28% in August, CRED iQ data shows
The increase is concentrated in 2021 and 2022 vintage collateral, with $3 billion in CRE CLO special-servicing balance and $1.7 billion in SASBs now showing distress.
Commercial Observer, citing CRED iQ data, said the CRE collateralized loan obligation distress rate rose from 19 percent in July to 28 percent in August, the largest one-month move among deal types this year. By contrast, the single-asset, single-borrower commercial mortgage-backed securities distress rate has held near 22 percent since June.
The article ties both distress measures to the same two origination years, with 2021 and 2022 vintage loans now accounting for $3 billion of CRE CLO special-servicing balance and $1.7 billion of SASBs. It also notes the problems are concentrated in a handful of identifiable large deals rather than spread across the wider market.
Distress rates for conduit, Freddie Mac and single-family rental loans have barely moved over the past eight months, remaining under 5 percent, while CRE CLO and SASB are the only categories crossing into double digits. The FSRIA 2021-FL3 deal is highlighted as a key contributor, with $353 million of multifamily collateral in special servicing across seven loans, and additional defaults tied to 2026 balloon maturities, including River Crossing in Roswell, Georgia, and Grace Abernathy Apartments in Sandy Springs, Georgia.
Commercial Observer added that several major deals are driving the concentration of distress, with five deals accounting for 38 percent of the CRE CLO special-servicing balance and the 10 largest deals holding 58 percent. It said Texas, Florida and Georgia together carry 44 percent of the distressed balance, and the SASB distress is concentrated in four office and lab deals representing 64 percent of SASB’s $1.7 billion balance.