Don't judge a book by its cover. While some loans have shown immediate signs of distress during the pandemic, others that appear to be current could actually be on the brink of falling into default.  This has always been the case, of course, but pressures brought about by the pandemic is accelerating the trend.

The New York by Gehry, a 76-story, 900-unit apartment tower designed by Frank Gehry in Manhattan, is a prime example of a seemingly stable loan. According to research from Trepp, the property has stayed current on the $550 million loan backing the property, and it has not received additional relief funds; however, first-time servicer watch lists indicate that occupancy at the residential tower has fallen by more than 20% since last year.

As a result, the property has been placed on servicer watch lists this month, reducing the property's debt service coverage ratio. Last year, the property had a DSCR of 1.93 with occupancy at 98%. The latest data, however, reduced DSCR to 1.84 as occupancy fell to 74% this year. In 2014, the property collateral was valued at $1.1 billion.