The share of distressed CMBS loans in special servicing rose last month to a 12-year peak, as the albatross of older office debt continues to weigh on performance metrics. More than 42 percent of the loans under the control of special servicers last month were backed by offices, up from slightly more than 41 percent the prior month.
Bracewell’s Alex Dimock, who last month co-launched the firm’s commercial real estate special-situations practice, told Green Street those troubled bonds – issued from 2014 to 2017 and now either past due, or about to be – were originated in an “entirely different economic environment.”
“Imagine we have a time machine,” Dimock said, “and could go back to those originators and tell them that at maturity, interest rates would be two to three times higher, Class-A office would be struggling due to the fallout from a global pandemic, and a war in Iran would cause inflationary pressures and oil [prices] to rise to a near all-time high.”
