Four asset classes posted $4.6B in new distress in August as the rate of distressed commercial real estate loans rose for three straight months, according to a report from Cred iQ.
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Distress is emerging outside of the multifamily and office sectors, with industrial, hospitality, retail and self-storage loans making up the $4.6B. However, the overall number is lower than first reported because of a $678.1M loan extension.
The distress rate was 10.78% in July, up from 10.11% in April, per Cred iQ. Early August numbers indicate that distress will increase for a fourth consecutive month.
The same is true for special servicing, which rose from 9.73% to 10.02% from April to July, and delinquency, which rose from 8.08% to 8.67% during the same period.
“A limited refinancing environment combined with elevated interest rates continues to push loans past maturity across property types, not only the office and multifamily loans that typically dominate distress coverage,” Cred iQ said in its report.
Overall hospitality distress reached $1.2B this month, per Cred iQ. The new distress largely came from the $325M loan for the Hyatt Regency New Orleans, which transferred to special servicing on a payment default, as well as the $362.5M loan for The Ritz-Carlton Sarasota, which is newly delinquent after missing its September maturity while continuing to pay.
Braemar Hotels & Resorts Inc. announced in June that it planned to sell The Ritz-Carlton Sarasota and two hotels in Yountville, California, to affiliates of KSL Capital Partners in a $437.5M cash deal.
Retail distress overall reached $951.4M this month, with Fresno Fashion Fair Mall in California and Harlem USA in Manhattan transferring to special servicing on imminent maturity default. Distress also emerged for loans on malls in Iowa, Pennsylvania and Mississippi.
There is $124M in self-storage distress, traced almost entirely back to a 91-property Prime Storage portfolio and a 39-property U-Haul portfolio, the Cred iQ report states.
Cred iQ reported that industrial distress overall reached $1.4B this month, including a $687.1M loan for CyrusOne’s 45-megawatt data center in Carrollton, Texas, that a servicer classified as “performing matured.” CyrusOne said the loan secured an extension and didn’t mature, skewing Cred iQ’s numbers.
The loan was set to mature on Aug. 9, and the borrower exercised the first of three extension options to push out its maturity to August 2027, per a Tuesday update from Cred iQ.
The servicer responded to inquiries from creditors on Tuesday, saying the loan extension closed Aug. 10.
The Carrollton data center secured its $687.1M CMBS loan in July 2024, when CyrusOne said the loan was the first colocation/enterprise data center single-asset, single-borrower securitized financing since the 2008 financial crisis.
UPDATE, SEPT. 2, 10:16 A.M. CT: This article has been updated with further information about the loan extension for CyrusOne's data center.
UPDATE, SEPT. 1, 9:50 A.M. CT: This article has been updated with comments from CyrusOne disputing the Cred iQ report.
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