Breakdown of CMBS Realized Losses in Late 2023
Over the past three months, loans secured by CMBS assets were liquidated for realized losses over $400 million, according to CRED iQ data. CMBS transactions incurred approximately $36 million in realized losses in November (via the workouts of distressed assets). October logged $156 million in losses and September came in at $217 million.
By property type, liquidations with sizable realized losses were concentrated in lodging and retail. Lodging liquidations accounted for 12 of the 23 distressed resolutions over this period and retail workouts accounted for seven distressed workouts. Distressed workouts for retail properties had the highest total of aggregate realized losses ($64 million) by property type, which accounted for 25 percent of the total for the period.
Loan level examples
CRED iQ dove deep into the November data to explore the most noteworthy loans of the past three months.
The Mall at Turtle Crossing incurred the largest realized loss in the period of $93 million. The loan is secured by a 385,057-square-foot portion of a 1.1 million-square-foot super-regional mall in Dublin, Ohio, a suburb of Columbus. Outstanding debt at the time of liquidation was $106 million. The loan transferred to special servicing in July2020. The last appraised value was $29.2 million in February 2023, representing a severe decline from $240 million at origination back in 2013.
A loan secured by a 211,000-square-foot portion of a retail portfolio in Brookfield, Wis., saw a realized loss of $21.5 million — securing the asset a second-place finish in November. The unpaid loan balance before liquidation was $19.3 million.
Another Wisconsin retail property, Valley View Mall, was next, incurring an $18.1 million realized loss with a $24.9 million loan at the time of liquidation. The real estate-owned asset consisted of 307,000 square feet of inline space, mall area and the JCPenney anchor space out of the 598,000-square-foot regional mall, with the three other anchors owned by other parties. The separately owned former Sears anchor space was sold and redeveloped with a 95,000-square-foot Hy Vee grocery store. The separately owned Macy’s parcel has been sold to a party that intends to redevelop the site.
The Doubletree Hotel located in Norwalk, Va., incurred a loss of $7.6 million in September 2023. The 265-room hotel had an original appraised value of $30 million at loan origination in 2015, and was reappraised for only $16 million in November 2022.
Mike Haas is the founder and CEO of CRED iQ.