Charlotte, Minneapolis, San Francisco Lead CRE Distress Rates
CRED iQ’s research team explored geographic distress trends across the U.S. in our latest research. We ran our analysis based on current loan balances of all loans CRED iQ tracks within each market, and then calculated the proportion of distressed loans.
Across the top 50 metropolitan statistical areas (MSAs), our team calculated the CRED iQ distress rate for each market (which combines delinquent and/or specially serviced loans).
Charlotte logged the highest level of distress with 24.8 percent of its loans in distress, followed by Minneapolis (23.6 percent), San Francisco (20.1), Trenton, N.J., (17.6) and Tulsa, Okla.(16.3) rounding out the top five MSAs with the highest levels of distress. To provide perspective, the overall distress rate for all loans across every market was 8.8 percent as of July.
Some of the strongest-performing MSAs in the top 50 include Tampa, operating at 2.6 percent distress today, and Orange County and Riverside-San Bernardino in California, as well as Nashville and Austin, all operating under 3 percent.
Among the scope of distressed loans in our analysis, a number are quite noteworthy. These include a $152.3 million loan backed by the 539,813-square-foot Northlake Mall, one of the largest distressed loans backed by a property in the Charlotte market. The loan transferred to the special servicer in November 2019 due to balloon payment default. The loan is nonperforming matured as it only paid through November 2022.
The regional mall in the North Charlotte submarket is 72.4 percent occupied. The property was valued at $253 million at underwriting in September 2014.
Early warning signs
CRED iQ’s early signals of upcoming distress include loans that have been added to the servicer’s watchlist for credit-related issues. Issues resulting in getting added to the servicer’s watchlist include weak financial performance, low occupancy, high tenant rollover and upcoming maturity risk.
