As of the end of May, about $22 billion in loans received modifications
Loan modifications have been jumping according to data from CRED iQ and are on track to expand beyond the record in 2023.
As of the end of May 2024, about $22 billion in loans received modifications by lenders. Just in 2024, there were $9 billion in modifications, “placing 2024 squarely on a path to a record-setting year of loan modifications.” In 2023, the total modifications were $16.8 billion. The average monthly volume of modifications was $1.8 billion, with April seeing the highest volume of $3 billion.
“Nearly half of the modification types (46.2%) compiled from CRED iQ loan data fell into the Maturity Date Extension category,” they wrote. “CRE CLO loans continued to dominate the loan modifications by deal type with YTD cumulative balances of $4 billion, representing 44% of all modifications in 2024. The SBLL deal type notched a second-place finish at $3.3 billion (36.4%) YTD through May, followed by conduit loans with YTD totals of $1.6 billion (17.4%).”
Three categories of loans — agency, CMBS conduit trusts, and single-borrower large loan (SBLL) securitizations look to be on pace to equal their activity in 2023. CRE CLO, though, looks as though it will easily pass its 2023 modifications.
This is the continuation of “extend and pretend” the markets have been seeing, despite the recent trend of large banks seeking to quietly offload portions of commercial real estate portfolios to avoid losses when office property owners can’t pay off mortgages.
CRED iQ pointed to two specific modifications as some of the largest. One was Phoenix Corporate Tower. The 457,878 square foot office backs a $33.7 million loan that was originally $38.0 million. The loan was modified in April 2024, pushing it out to July 2025. “The office tower is in the Central Corridor submarket of Phoenix and was appraised for $42.5 million ($93/sf) at underwriting in February 2019. A 0.83 DSCR and 78.0% occupancy was reported as of March 2024.”
The other example was the Retreat at Riverside, a 412-unit multifamily property in Atlanta that backs a $63.9 million loan, also modified in May 2024. That only extended the loan to July 2024. “Life safety issues and upcoming maturity lead to the loan being on the servicer’s watchlist since June 2023. At underwriting in February 2021, the asset was appraised at $81.3 million ($197,330/unit). The property was 93.4% occupied with a 0.78 DSCR as of March 2024.”
