Refinancing stress in the office sector is continuing to pressure the CMBS market, as a new wave of troubled loans in the asset class pushed the Trepp CMBS Special Servicing Rate higher despite ongoing loan modification and extension activity.
According to Trepp, the overall CMBS special servicing rate rose 38 basis points in April to 11.38% versus a month earlier, driven primarily by a heavy concentration of newly transferred office loans. These rates climbed by 93 basis points during April, the largest increase among major property types, while multifamily rose 33 basis points and industrial increased 20 basis points.
In total, approximately $1.93 billion across 43 loans transferred to special servicing during the month, with office accounting for more than half of that volume. The report suggests that while leasing fundamentals have stabilized in parts of the office market, refinancing conditions remain difficult for many borrowers facing looming maturities in a higher-rate environment.
The largest transfer involved the $470 million One & Three Allen Center loan in Houston, which was transferred to special servicing due to an imminent balloon maturity default after failing to pay off on its fully extended maturity date. The loan was secured by a 2.3 million-square-foot CBD office complex that backs the entirety of the ALEN 2021-ACEN SASB transaction.
Trepp noted that the borrower had not confirmed a refinance or payoff strategy before maturity, leaving resolution options uncertain as the loan approached default. Special servicer commentary indicated that diligence is underway as the servicer evaluates strategies to maximize value for bondholders.
The second-largest transfer was the $175.2 million SOP2 Portfolio loan, secured by a suburban office portfolio spanning six states. The loan transferred ahead of its June 2026 maturity after multiple prior extensions. Trepp reported the portfolio posted a debt service coverage ratio of 0.76x and occupancy of 66.8% for the full-year 2025.
At the same time, the report also highlighted ongoing workout activity across the CMBS market. Loans returning from special servicing totaled roughly $847.1 million across 11 loans during April—many involved loan modifications and maturity extensions rather than outright resolutions.
The largest cure involved the $439.2 million Starwood Regional Mall Portfolio loan, which returned to the master servicer after a maturity extension through September 2026 allowed additional time for asset sales and repayment efforts.
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