Season 5 of the No Cap podcast continues with a look inside special servicing, one of commercial real estate’s most opaque corners.
This time around, co-hosts Alex Gornik and Jack Stone sit down with Alex Killick, Senior Managing Director at CWCapital Asset Management, one of the largest CMBS special servicers in the US. Throughout the conversation, Killick breaks down what actually happens when a loan goes bad, who ultimately controls key decisions, and how certain assets end up in receivership while others are quietly worked out behind the scenes.
The conversation covers CMBS mechanics, B-piece control, multifamily distress, office workouts, tenant fraud, and the rise of “quiet” private credit stress, offering a ground-level view of today’s credit cycle and why it looks nothing like 2009.
Conversation Highlights
Alex: Before we get into the market, walk us through your background and how you ended up at CWCapital.
Alex Killick: I joined CWCapital in 2008. Before that, I was on the origination side at a large bank. I moved into workouts in late ’07, early ’08, just before distress really accelerated.
At the start of 2008, special servicing was quiet. After Lehman, liquidity disappeared, values became unclear, and a lot of the CMBS workout playbook was developed during that period.
Jack: What’s the biggest difference between that downturn and today?
Killick: Liquidity. In 2009 and 2010, there was no pricing. Selling meant guessing. Today, even with stress, there’s still a market. That’s why values haven’t reset as fast this cycle.
The conversation then shifted from Killick’s early days in the GFC to the mechanics of how CMBS loans are actually handled when they break.
Alex: For people outside CMBS, explain special servicing simply.
Killick: In securitized loans, mortgages sit in a trust, not on a bank’s balance sheet. You have a master servicer collecting payments, a trustee administering the trust, and when a loan defaults, it moves to special servicing.
We enforce remedies, negotiate workouts, oversee receivers, or manage foreclosures, all under very detailed servicing agreements.
Everything we do comes back to the servicing contracts. That’s the rulebook.
Jack: And the special servicer is usually chosen by the B-piece holder?
Killick: Typically, yes. The first-loss bondholder selects the special servicer. Many also run in-house teams because if you’re taking first loss, you need to understand exactly what can go wrong.
With the structure laid out, the discussion moved to where stress is showing up most clearly in today’s market.
Alex: How active are you right now?
Killick: We’re working around 350 loans, roughly $8.5 to $9 billion. About 70% are multifamily by loan count, but only 20–25% by dollars since the loans average around $15 million.
A lot of that activity is in Texas. That’s not because Texas is broken. It’s because a lot of loans were made there and the demographic growth is real.
Jack: What’s driving multifamily distress?
Killick: Taxes, insurance, and tenant delinquency. But operational competence is the biggest factor. One red flag is frequent property manager turnover. If managers are walking, something is usually wrong.
Operational competence is the key thing.
Alex: You’ve mentioned tenant delinquency as a major issue.
Killick: It’s more than delinquency. We’re seeing tenant fraud. Fake pay stubs, fake utility bills, fake documentation. As a result, AI has made that behavior easier and more widespread.
In turn, in some markets, high physical occupancy quickly turns into much lower economic occupancy. Rather than more tech, the fix is manual verification, which inevitably increases management costs.
Because of that, this isn’t going away quickly. Buyers have to underwrite higher collection loss and real management expenses.
Jack: Let’s talk office. What’s the core problem?
Killick: Cost of capital. Leasing office space requires large upfront checks for tenant improvements and commissions. Inflation and labor costs have made that harder.
Commodity Class A office is struggling the most. Trophy assets still trade. Suburban office has held up better than expected.
Alex: Are institutional buyers coming back?
Killick: Not meaningfully. We’re mostly seeing smaller buyers and family offices, which makes selling difficult when bids come in well below expectations.
Jack: How do you decide whether to sell or stabilize?
Killick: It comes down to present value. Value-add buyers want some inefficiency. Right now, buyers want six months of clean operating history. You can’t sell off short-term improvements.
Alex: CMBS distress is public. Private credit isn’t. How concerned should people be?
Killick: Private lenders have more flexibility. They can extend quietly and don’t face securitization constraints. A lot of stress exists, but it’s being worked out behind the scenes.
When those sales become public, they’ll affect comps. That’s what people are waiting for.
Alex: How does CWCapital use AI?
Killick: We use it to read loan documents, track triggers, standardize operating statements, and flag tenant risk. It saves time, but this is still a relationship business. AI supports decisions. It doesn’t replace them.
In the end, it’s lending relationships and it’s commercial real estate.
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