KBRA Releases Research – Appraisals for Distressed CRE Continue to Trend Lower in COVID’s Wake

Kroll Bond Rating Agency (KBRA) releases a report on Appraisals for Distressed CRE. Based on 1,078 commercial real estate appraisal valuations from April 1, 2020 through March 2021 on average, they were 30.2% lower than valuations available at the time of securitization. In addition, there have been larger valuation declines in more recent months compared to earlier in the pandemic.

In KBRA’s review of the data, we segregated the valuations into two six-month time segments, including April-September 2020 (Period 1) and October 2020-March 2021 (Period 2). The goal of the exercise was to determine any observable differences in value changes between these two time periods. What we found was that valuations actually declined more in Period 2 (33%) compared with Period 1 (28.9%).

In the report, we also highlight the top five retail assets that had the largest valuation declines since securitization, as well as for the top five lodging assets. While lodging’s top five did not experience valuation declines as large as those for the top five retail assets which fell 86.9% or more, they still declined 75.5% and higher We also looked at the top ten assets with the largest valuation increases since securitization. Although, the valuation increases were not as dramatic as the declines, they were still positive.

Many of the properties that had an updated appraisal were already in distress prior to the pandemic, meaning they were more susceptible to higher valuation declines during the economic disruption. However, while property valuations may continue to be under pressure in the near to medium term, improving property fundamentals and valuations could be in sight.

Click here to view the report.

Related Publications

• CMBS Trend Watch: April 2021
• KBRA CMBS Loan Performance Trends: April 2021
• CREFC Lending Forward Conference 2021 Recap

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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