$12.2bn US properties added to distress pile in November

Roughly $170bn of properties were classed as troubled, had been taken back by lenders or resolved at the end of November, according to Real Capital Analytics. Las Vegas leads the way with $17.7bn of distress.

More than $12.2 billion of troubled properties were added to the US commercial real estate distress pile in November alone, pushing the total volume of problem assets to more than $170 billion.

The latest troubled asset radar report by data provider Real Capital Analytics showed an extra $7.3 billion of property loans had become “troubled” as of the end of November, having fallen into default, foreclosure or bankruptcy.

The distress is formidable.

Real Capital Analytics

That was added to another $4.9 billion of property taken back by lenders as REO (real estate-owned) – the highest level seen since the start of 2007, according to the RCA data.

However, despite the rise in lenders taking back keys, the figures also revealed lenders “resolved” fewer property loans in November than at anytime over the past six months with just $1 billion of assets dealt with.

Overall, the total volume of troubled assets at the end of November was $140.6 billion, with an extra $19.3 billion of property REO. A further $17.9 billion of property assets had been resolved, as of the end of November, the report said.

Earlier last month, a $3 billion CMBS note from Tishman Speyer and BlackRock Realty Advisors' Stuyvesant Town, Peter Cooper Village deal was transferred to special servicing, after the owners request relief. Morgan Stanley also handed back to the keys for its Crescent Real Estate Equities deal to Barclays Capital in November.

“The distress is formidable,” the report said. “Even excluding the Stuyvesant Town and Crescent
situations, new distress for November was heavy compared to prior months.”

The greatest level of distress was in the retail sector with $37.5 billion of assets deemed troubled. Las Vegas was the leading location for distress with $17.7 billion of troubled properties, followed by Manhattan with $12.3 billion.

RCA said a two-tier market was starting to emerge in the US – one where solid, income-producing properties with stable cash-flows were selling for prices close to the peak of the market and another where value-add and opportunistic properties, including those with “vacancy, roll-over issues or deferred maintenance”, were much less desired.

Average prices for core, stabilised suburban office buildings over the past six months had remained relatively unchanged at $240 per square foot compared to those at the height of the market, RCA said. However value-add, opportunistic properties had plummeted to $125 per square foot, on average, from more than $200 per square foot.