Maturity Defaults on the Rise in 2023
CRED iQ’s research team drilled down into the 2023 maturity data to study both the depth and trends of maturity defaults. Our examination of the recent special servicer transfers clearly reveals that defaults are on the rise. Out of all outstanding maturity defaults within CMBS, over 50 percent occurred in this year alone.
As we reported earlier this year in our report titled 2023 CRE Maturity Outlook: The Year Ahead, CRED iQ’s database has approximately $162 billion in commercial mortgages expiring in 2023, including loans securitized in CMBS conduit trusts, single-asset single-borrower (SASB) and commercial real estate collateralized loan obligations, as well as multifamily mortgages securitized through government-sponsored entities. This year features the highest volume of scheduled maturities for securitized CRE loans over a period of 10 years ending 2032.
By securitization type, the SASB securitization subset of nearly $100 billion comprises the majority (61 percent) of maturities in 2023. However, roughly 94 percent of that balance is tied to floating-rate loans that have extension options available, providing no assurances of refinancing or new origination opportunities.
CMBS conduit loans account for the second-highest total of loans with 2023 maturity dates (approximately $29 billion in 2023), accounting for 18 percent of total scheduled maturities. This group of loans provides for diverse observation across property type, building class, and geographic location.
Breaking down 2023 conduit maturities by property type, retail has the highest concentration with 42 percent of outstanding debt and is followed by office with 22 percent. Lodging has the third-highest concentration with 14 percent of the outstanding balance of maturities in 2023.
The rising interest rate environment has significantly impacted the performance of CRE loans across the board and maturity defaults are on the rise. Some key takeaways from these trends include:
• As a percentage of all maturity defaults, 52 percent of them occurred this year.
• The maturity default percentage of all specially serviced loans amounted to 32.3 percent.
• The maturity default percentage of loans that transferred to the special servicer in 2023 totaled 44.1 percent, an 11.9 percent increase from the overall totals.
• $41 billion of loans are actively with the special servicer, of which $16 billion occurred this year alone.
• The second most common reason for a transfer to a special servicer in 2023 has been imminent monetary default.
Harry Blanchard is managing director and head of data and analytics at CRED iQ.