Minneapolis Leads MSAs in CMBS Distress
CRED iQ’s research team explored geographic distress trends across the U.S. in our latest research. We ran our analysis based upon current loan balances of all of the commercial mortgage-backed securities (CMBS) loans that CRED iQ tracks within each market, and then calculated the proportion of loans that are distressed.
Across the top 50 metropolitan statistical areas (MSAs), our team calculated the CRED iQ distress rate for each market (which combines delinquent and specially serviced loans).
Minneapolis logged in at No. 1 with 49.7 percent of the area’s loans in distress. Rounding out the top five MSAs with the highest levels of distress were Providence, R.I. (45.4 percent); Rochester, N.Y. (35.7 percent); Portland-Beaverton, Ore., and Vancouver, Wash.(32.9 percent); and Chicago (28.9 percent). To provide perspective, the overall distress rate for all loans across every market was 10.8 percent as of February.
Some of the strongest performing MSAs in the top 50 include San Juan and Salt Lake City (0 percent distress today), while San Diego, Columbus, Sacramento, Jacksonville, Las Vegas and Kansas City all are operating under 3 percent.
Loan highlight
The $1.28 billion Workspace CMBS loan is backed by a 147-
property portfolio consisting of mostly office and flex space throughout the country. Minneapolis is one of the portfolio’s top five markets, backing 13 percent ($166.4 million) of the loan. There are 19 total properties in Minneapolis, including 13 offices and six flex properties.
The loan transferred to the special servicer due to imminent monetary default, as the loan has a July 2025 maturity date. The loan was late, but less than 30 days delinquent as of the February 2025 remittance period. The portfolio is divided into two components. One of those components makes up 20.3 percent of the total mortgage balance, having three one-year extension options at underwriting. The other component (79.7 percent of the loan) doesn’t have any extension options.
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 that cause loans to be flagged as possibly troubled include weak financial performance, low occupancy, high tenant rollover and upcoming maturity risk, among other reasons.
Mike Haas is the founder and CEO of CRED iQ.
