CMBS loan losses are down, according to Trepp. A total of $75.7 million across 10 loans were resolved with $47.3 million in total losses for October. That was down from the previous month when the losses hit $139.5 million. The average loss severity was 62.52%.

Looking over the last 12 months, October had the lowest disposed loan amount at $75.7 million. The largest amount was in January 2024, at $828.4 million. January also had the largest incurred loss amount of $523.2 million. The highest loss severity was 81.47% in April 2024, followed by 75.96% in December 2023 and 74.33% in June 2024. There’s been a general increase in the 12-month moving average loss severity, starting at 55.99% in November 2023 and rising to 65.90% in October 2024.

The 12-month average disposed balance moved from $266.3 million to $253.6 million. The 12-month moving average loss severity edged down from 63.54% to 63.25% in October.

The 12-month moving average disposed balance in millions started moving upward from November 2023 to July 2024 and then started moving down. The upward part was heavily influenced by some particularly heavy months. January 2024, of course, but also March 2024, with $466.3 million, and May 2024, when it was $369.4 million.

There were five large loan losses in October. The Horizon Outlet Shoppes Portfolio loan was the largest to resolve at $34.4 million, comprising a $17.8 million piece and a $16.6 million one. The total loss was $26 million. Liquidation proceeds were $12.3 million, and expenses were almost $4 million. Originally it was a $54.7 million portfolio including three outlet malls across Burlington, Washington; Freemont, Indiana; and Oshkosh, Wisconsin. Together the three properties were 550,000 square feet. They started with a debt service coverage ratio (DSCR) of 1.42x based on net cash flow. That began to slide in 2017. By 2018, DSCR was 1.10x, then 0.91x in 2019, and 0.39x in 2021. Occupancy dropped from 86% in 2015 to 53% by 2021. It transferred to special servicing in 2020 and became REO in 2021. The lender sold off two of the properties, leaving the Oshkosh one.

The second largest loan was the $10.4 million one on the Crossings of Sandusky, a 102,358 square foot community shopping center across four parcels. It became REO in 2018. It was worth $26.9 million at securitization, and this year was valued at $19.1 million. Home Depot accounted for 55% of the space and exercised a five-year extension option in early 2024. DSCR had been 1.28x in 2023 but dropped to 0.91x in 2024. Liquidation proceedings were $8.1 million and expenses were just under $1.0 million.

The largest office loan to resolve with a loss was an $8.6 million loan against the Duncan Center, an office in Dover, Delaware built in 2004 with 57,468 square feet. The property became REO in 2021. At securitization, the property was worth $12.8 million. The most recent valuation was $4.1 million. The loan was transferred to special servicing in 2019. Originally, DSCR was 1.36x with 93% occupancy. In the first quarter of 2024, DSCR was -0.05x and occupancy was 34%. Proceeds and expenses of liquidation were each $4.9 million.

A Holiday Inn in Ames, Iowa had a $5.1 million loan for a 53,000-square-foot full-service space. Valued at $10.8 million in 2013, it was most recently appraised at $3.1 million. Sent to special servicing in 2020, the property was underwritten at a DSCR of 1.63x with 66% occupancy. Most recently, DSCR was down to -0.55x and occupancy plummeted to 18%. The property became REO in 2022.

Then there was a Holiday Inn in Rochester, New York, with a $4.7 million loan. Worth $8 million at securitization in 2016, it was most recently valued at $7.6 million, and the loan was transferred to special servicing in 2020. In 2023, the DSCR was 1.59x at 74% occupancy. The liquidation got $6 million in proceeds and $1.3 million in expenses.

Instant Insights /

CMBS Loan Losses Were Down in October

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