Great write up Cole.
You started to see this escalating in the watchlist tape data mid 2023. DSCR and LTV watchlist codes dominated the reasons. Small handful of lender forced insurance and environmental codes.
Some assets had originated prior to COVID and just got wrecked by moratoriums and missed capital improvement windows to compete. Not all properties in these deals are SASB, in fact most are MASB and the weak high risk properties are what put the deal on the watchlist.
MF distress funds started growing and preparing mid 2025. May saw $13.5bn in sales, up 38% YoY. Deals are getting done. Some will wait out special serving so the very weak or undesirable properties can get stripped out.
Looking at the bulk of these in SS they are currently performing, but for some it’s too late, and that is where the opportunities lie.
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