Minneapolis, Stamford Top Latest CRE Distress Rate List
CRED iQ’s research team explored distress trends across the country in our latest geographic study. Our analysis is built upon current balances of all of the loans that CRED iQ tracks within each market and then calculates the proportion of loans that are distressed. We then compared these results with our previous report from Aug. 29 to reveal near-term trends.
Our report yields the CRED iQ Distress Rate (which combines delinquent and/or specially serviced loans) for the top 50 metropolitan statistical areas (MSAs) with the highest amount of distress out of the 65 largest commercial real estate markets.
Minneapolis now leads the top MSAs with 36.2 percent of its loans in distress. The former No. 2 market soared to the No. 1 spot after logging a stunning increase of 1,260 basis points from August.
Stamford, Conn., with 32.2 percent of CRE loans in distress, landed in second place and saw the largest increase in our study from August, when distress in the city stood at just 7.7 percent. A significant factor in Stamford’s increase was the default of the Stamford Plaza Portfolio.
Tulsa, Okla. (26.4 percent), Hartford, Conn. (25.9 percent) and Portland, Ore. (25.3 percent) round out the top five cities for CRE distress rates. Former No. 1 Charlotte dropped to No. 6 with a 24.6 percent distress rate, compared to 24.8 percent in August. Adding some perspective, the overall distress rate for all loans across every market was 9.1 percent as of our Oct. 3 report.
As we look deeper at metro areas experiencing the most distress, we see that the office segment is a major factor. Ninety-three percent of distressed loans in Stamford are from the office segment, while Trenton, N.J., has 91 percent, and Tulsa has 88 percent.
In some MSAs, more than half of the markets’ distress emanates from the retail segment, including Minneapolis (83 percent) and Birmingham, Ala. (55 percent). Hotel drives the most distress in Portland (77 percent), while Nashville’s distress primarily stems from multifamily (81.9 percent).
CRED iQ’s signals of upcoming distress include loans that have been added to the servicer’s watchlist for credit-related issues. Weak financial performance, low occupancy, high tenant rollover, and upcoming maturity risk are among the reasons that a loan might be flagged as possibly in trouble.
Loan distress spotlight
The 982,483-square-foot Stamford Plaza Portfolio backs a $246.6 million loan that defaulted at its August 2024 maturity. Consequently, the loan transferred to the special servicer in August.
The portfolio consists of four adjacent office towers in Downtown Stamford. Most recently, the portfolio was 71 percent occupied and performing with a debt service coverage ratio of 0.69, below the break-even point. The collateral was valued at $427.2 million at underwriting in June 2014.
Mike Haas is the founder and CEO of CRED iQ.
