via commercialobserver:
Properties and mortgage notes securing nearly $600 million in outstanding CMBS debt were auctioned from January through mid-June 2023, based on CRED iQ’s observations of impending losses for investors.
Sales through an auction can take a couple of months to close, and sale transactions can be delayed or even fail to close after a due diligence process. Additional complications include relatively tighter lending for the commercial real estate market compared to the prior year; although, many of the distressed auction sales can attract all-cash acquisition bids. Of the approximate 70 auctions observed thus far in the first half of 2023, only nine of auctioned assets with CMBS debt of $40 million were closed as of the June reporting period.
CRED iQ monitored over 70 individual CMBS property and note sales through their respective auction processes during the first half of 2023 and were able to identify definitive final bids for approximately 57 of those properties. Of the 57 auctions with definitive bids, 25 involved distressed sales facilitated by a special servicer.
Out of 25 specially serviced assets, there were 16 real estate-owned (REO) properties with titles that transferred to respective CMBS trusts prior to auction events. Special servicers are tasked with liquidating these properties, sometimes after a period of stabilization, for maximum proceeds on behalf of CMBS certificate holders.