Off to the Races: CRED iQ Launches Real-Time Distress Alerts

Data, analytics, and valuation firm CRED iQ has been publishing a series of alerts about CRE delinquencies and distress.

Now the company has taken a next step, creating a service it calls CRED iQ’s Daily Distress Alerts. “As soon as any property, loan or portfolio hits key credit triggers that signal a potential or imminent default (such as a missed payment, increased number of days delinquent or transfer to the Special Servicer) a real-time alert, fully equipped with pertinent data is sent directly to CRED iQ subscribers via email,” describes a press release.

The company says that it reported almost $4 billion in maturity defaults this year, and it’s not even at the calendar’s halfway point. “Of the 50 largest MSAs tracked by CRED iQ, the overwhelming majority exhibited month-over-month increases from March to April in the percentage of distressed CRE loans,” it said. “The distress trend is clearly accelerating.”

CRED iQ claims to track every property type in every market, which is part of their normal course of business. Identifying potential distress situations isn’t a far jump, especially as the company can run and publish a monthly analysis without full details.

That distress might be increasing shouldn’t be a surprise to anyone who follows the CRE markets. Many properties that were financed or refinanced before or into the pandemic benefited from exceedingly low interest rates compared to historical norms. The flood of capital from easy monetary policy intended to stimulate the economy resulted in tremendous transaction volumes and lenders competing with one another to gain business. The latter led to competition on terms like high-leverage LTV that won’t be available now.

Many loans coming due now face more stringent lending policies and higher financing rates. Owners face one of several choices: adding capital to qualify for a new loan, selling in the near-term, doing a workout with the lender, handing the property back to the lender if such a deal is possible, or going through a full and formal default.

What CRED iQ is doing might be duplicating what others do, although possibly in a quieter fashion. Many companies in CRE have or are switching to using more data and automating processes to help sort through large amount of information to identify opportunities, problems, trends, and other observations and deductions.

Using such services is clearly where the industry is going. The question for investors, developers, and owners will be which particular service to use. Over time, this might even become something closer to commodity services, at which point pricing competition will come into play. Until then, and possibly beyond, expect vendors to tout their special insights and comparison shop carefully.