This week's column examines RXR's new loan servicing business, Fitch Ratings' outlook for next year and a New Jersey bank testing the CMBS market for the first time. Read the entire piece by clicking "read more" below.
RXR targets delinquent loans: New York real estate firm RXR is expanding its real estate credit capabilities by preparing to launch REX Loan Services, a commercial mortgage special servicer. While still a nascent company with no loan portfolio to service, bond rating firm Morningstar DBRS awarded REX an industry-standard ranking.
The move positions RXR to capitalize on mounting commercial real estate distress, should office vacancies rise and interest rates squeeze property values. Special servicers manage troubled CMBS loans through workouts, foreclosures and asset sales.
RXR brings direct lending and development expertise to the special servicing business, potentially offering more creative restructuring solutions than traditional servicers, according to Morningstar.
REX is leaning on RXR's experience in restructuring troubled real estate debt.
The company hired an industry veteran last year to build its credit business. Steven Schwartz joined as executive vice president and head of real estate credit after serving as co-head of H.I.G. Realty Credit Partners. Schwartz previously ran JPMorgan Chase's commercial real estate and mortgage-backed securities group for nearly two decades.
"As a fully integrated owner and operator of office and multifamily properties, we are uniquely positioned to maximize resolutions on behalf of CMBS trusts," Schwartz said in an email to CoStar News. "Our focus to start will be on office [single-asset, single-borrower] transactions, the vast majority of which are in New York City, where we are one of the largest owners and managers of office properties. This, combined with our deep understanding of credit, enables us to deliver outsized returns to CMBS bond investors."
He added that REX expects to announce one or more partnerships in the first half of next year.
CMBS stress to intensify in 2026: Fitch Ratings projects worsening performance for properties backing CMBS loans in 2026, with office, retail and hotels facing mounting pressure from economic headwinds and policy uncertainty.
The deteriorating outlook stems from persistent labor market pressures and cost-of-living constraints that are said to weigh on consumers and businesses, despite Federal Reserve rate cuts. Trade policy uncertainty and potential tariffs add pressure on property owners already grappling with reduced demand and rising expenses.
The ratings firm assigned the "deteriorating" outlook to CMBS overall, warning that office delinquencies could peak next year as valuation declines and elevated capital expenditure costs hinder refinancing. Fitch forecasts office delinquencies will climb from 8.4% in 2025 to 10% in 2026, marking the highest level among commercial property types.
Retail properties face similar strains as waning consumer confidence, labor market softness and tariff-driven supply chain disruptions push tenants to rationalize footprints and curtail spending, according to Fitch. Delinquencies in retail CMBS debt are projected to rise from 3.6% to 4.1%, Fitch said. Necessity-based retail is expected to outperform lower-tier malls, which remain vulnerable to reduced foot traffic.
Hotel performance is set to deteriorate as a slowing economy and tariff-induced uncertainty dampen travel demand, Fitch said. The firm forecasts hotel delinquencies increasing to 3.9% from 3.4%.
Bank taps CMBS market for first time: Cross River Bank has securitized $288.5 million in commercial real estate loans through a CMBS transaction, marking the New Jersey lender's push to diversify funding sources and expand its lending operations.
The deal converted an existing portfolio of commercial real estate loans into bonds purchased by institutional investors.
The securitization, a first for the bank, reduces Cross River's reliance on deposit funding for lending, according to the bank. The transaction establishes a repeatable funding model that supports continued loan origination without constraining the balance sheet.
The collateral pool comprises 59 commercial real estate loans secured by 54 multifamily properties, four commercial real estate assets and one mixed-use property. Cross River originated the loans between May 2017 and September, according to Morningstar DBRS, which rated the offering.
Rent-regulated multifamily properties secure 48.6% of the pool. Eleven loans, representing 34.8% of the transaction, back properties with 100% rent-regulated units, according to Morningstar.
"This transaction is a major step forward in our capital and funding strategy," Shimon Eisikowicz, executive vice president, chief lending officer and head of commercial banking at Cross River, said in a statement. "It showcases our ability to originate, structure and bring institutional-quality assets to market."