🚨A 1.08-million-sf office portfolio in Seattle has been foreclosed after defaulting on a $233.1M CMBS loan. The portfolio's value, now appraised at $149.8M, signals over 60% impairment. Seattle's high vacancy rate (~35%) has led to an occupancy drop to 65%, exacerbating refinance challenges and contributing to rising office CMBS delinquency, now at 11.7%
Loan Amount: $233.1M
Current Appraisal: $149.8M
Office CMBS Delinquency Rate: 11.7%, August 202
Loan Performance. Despite a DSCR of ~1.5×, high Seattle vacancies compromise NOI stability. Maturing loans face elevated refinance risk.
Demand Dynamics. 65% occupancy reflects severe tenant turnover. With 40% of leases expiring by 2026, demand softening is clear.
Asset Strategies. Stabilization requires urgent tenant retention and managing downtime. Concessions may enhance lease-up efforts.
Capital Markets. The CMBS foreclosure highlights the intense distress, prompting cautious lender behavior with focus on quality assets.
Rising delinquency suggests stress in office CMBS.
Trophy assets may outlast thanks to stable rent-betas.
Expect lender conservatism in new financings.
Spreads and risk premiums widen as a cautionary measure.
🛠 Operator’s Lens
Refi. Flexibility will be key; early dialogue for modifications is crucial.
Value-Add. Strategic capex could rejuvenate tenant interest.
Development. Pro forma should incorporate high vacancy scenarios.
Lender POV. Banks focus on collateral strength and sponsor quality.
Rate trajectory may affect further defaults.
Watch for CMBS spread trends as market stabilizes.
Bid-ask gap could narrow in late 2025, aiding distressed sales.
CRERenews — Seattle Office Portfolio Seized (October 2025). KBRA — Occupancy Trends Report (September 2025). WolfStreet — CMBS Delinquency Analysis (August 2025). TheRealDeal — Seattle Office Vacancy Details (October 2025).
