CRE CLO Distress Rate Hits Record 13.8% in December
As 2025 starts to unfold, we wanted to calibrate our outlook for the year by looking backward. This week, we explore how the commercial real estate collateralized loan obligation (CLO) ecosystem performed during December, along with full-year 2024.
The CRED iQ CRE CLO distress rate added 60 basis points in December, reaching a new high of 13.8 percent. Underpinning the distress rate, December’s delinquency rate came in largely flat at 11.8 percent, while the special servicing rate increased 180 basis points, reaching 9 percent.
The CRED iQ distress rate includes any loans reported 30 days delinquent or worse, past their maturity, specially serviced, or a combination of these. We also examined the most recent property-level net operating income figures and compared them to underwritten expectations.
CRED iQ’s analysis revealed that 61.9 percent of CRE CLO loans are operating below a 1.00 debt service coverage ratio (DSCR) net cash flow, up from 59.2 percent the previous month. Net cash flow is a key variable in calculating a loan’s DSCR, which determines the strength and creditworthiness of a given loan.
Payment status
Looking across payment status in December, 33.7 percent of loans are performing matured (up 180 basis points from November). The data also showed 31.6 percent of loans were nonperforming matured (down from 38.4 percent the previous month), meaning 65.3 percent of the CRE CLO loans in our study are past their maturity dates, down from 70.3 percent in the prior report. Delinquent loans that have not passed their maturity date accounted for 20.1 percent of the distressed loans, up from 19.5 percent in the previous month.
Regional analysis
Our analysis broke out CRE CLO assets to their respective metropolitan statistical areas to understand how the distress has manifested at the MSA level.
Month-over-month, Kansas City moved into the No. 3 position with 45.5 percent of their loans currently in distress.
Indiana’s Indianapolis-Carmel area remains in first place with a 70.6 percent distress rate — while trimming 270 basis points from the November print (73.3 percent) of their CRE CLO loans in some form of distress.
Columbus, Ohio, moves into second place with a flat December print of 46.7 percent. Richmond, Va., fell out of the top three.
Analysis scope and methodology
CRED iQ consolidated all of the loan-level performance data for every outstanding CRE CLO loan to measure the underlying risks associated with these transitional assets. Our team examined $64.3 billion in active CRE CLO loans. Many of these loans were originated in 2021 at times when cap rates and interest rates were low and valuations high, and these loans are now starting to run into maturity issues given the spike in rates.
Some of the largest issuers of CRE CLO debt over the past five years include MF1, Arbor, LoanCore, Benefit Street Partners, Bridge Investment Group, FS Rialto and TPG. The vast majority of the $79.1 billion in CRE CLO loans are structured with floating rates, with three-year loan terms equipped with extensions if certain financial hurdles are met.
Mike Haas is the founder and CEO of CRED iQ.
