The Five Largest CMBS Loan Losses

August has been an interesting month for CMBS losses, according to Trepp. There was a decrease in loan losses from $119.0 million in July to $47.2 million in August. The latter was across $85.6 million and nine loans for an average loss severity of 55.20%. Over the last 12 months, August 2024 had the second-lowest losses incurred, with only November 2023 being lower at $36.4 million.

The 12-month average disposed balance went from $305.5 million in July to $277.7 million in August. The 12-month disposed loan count was 129 and the loan amount was $3.33 billion. Incurred losses were $2.108 billion with a loss severity of 63.28%.

The five largest loan losses in August were the Mall de las Aguilas, Washington Square, Loyalty and Hamilton, Glenwood Farms, and Bella of Baton Rouge.

The largest loss severity was 92.96%, which came from Bella of Baton Rouge, a multifamily property in Baton Rouge, LA. The disposed balance was $9.5 million, and the realized loss was $8.9 million. The underlying property is a 220-unit garden/low-rise apartment structure built in 1973 and renovated in 2014. In 2015, during securitization, the appraised value was $16.6 million. The most recent valuation was $5.9 million in 2024. Past widespread flooding landed the building on the servicer watchlist in 2016 and was transferred to special servicing in mid-2020. Occupancy is 21%, with 68 units unoccupied from flood and fire.

Next was Loyalty and Hamilton, a 76,370-square-foot office in Portland, OR. Constructed in 1893, it was renovated in 2011. In 2017, the property was valuated at $20.2 million and reduced in early 2024 to $3.0 million. The disposed balance was $11.2 million with a realized loss of $10.1 million and a loss severity of 90.94%. The DSCR was 2.11 with an occupancy of 88% in 2018. They have fallen since. Financials from 2023 had negative cash flow and only 38% occupancy.

The Mall de las Aguilas, a 447,188-square-foot retail property in Eagle Pass, TX had a disposed balance of $21.7 million and realized a loss of $12.2 million for a loss severity of 56.23%. In 2015, the property valuation was $40 million. By 2021, that was cut to $7.3 million. But the most recent appraisal in March 2024 was $10.4 million. Built in 1983, it was renovated in 2014. The two largest tenants were Walmart (occupied 25.3%) and JC Penney (occupied 22.5%). A foreclosure sale was conducted in July 2021. The market went on the market and was expected to sell by the third quarter of 2024.

Washington Square is a 264-bed student housing property in Schenectady, NY, built-in 2012. At 2014 securitization, the property was valued at $19.5 million, cut to $9.4 million in 2020. Last, in 2023, that was reduced to $8.6 million. Financials from 2022 showed a DSCR of 0.61X with 65% occupancy, possibly a victim of the pandemic. At securitization, the DSCR was 1.24X, and occupancy was 99%. Disposed balance was $13.0 million with a realized loss of $5.6 million and a loss severity of 43.19%.

At the low end of loss severity, at 9.41%, was Glenwood Farms, a 232,623-square-foot mixed-use property in Richmond, Virginia. It was built in 1945 and renovated in 2004. The disposed balance was $9.8 million with a realized loss of $922,533.