CMBS delinquencies fell, but hold the applause

Apparent improvement actually reflects more borrowers getting forbearance

National /
Sep.September 11, 2020 08:00 AM
The special servicing rate has increased each month since the coronavirus pandemic hit the United States, and clocked a 55 basis point increase to 10.04 percent in August (iStock)

The special servicing rate has increased each month since the coronavirus pandemic hit the United States, and clocked a 55 basis point increase to 10.04 percent in August (iStock)

The delinquency rate for CMBS loans has fallen for two consecutive months. Save the party supplies for later, though, because there is still no reason to celebrate.

Many CMBS lenders have offered forbearance to struggling borrowers during the downturn. When loans enter forbearance, their status is changed to “current” from “delinquent,” even if the borrower cannot pay on time. Given the surge in such arrangements, the delinquency rate does not reflect commercial real estate distress as well as it once did.

The better metric now, according to a report from CMBS data firm Trepp, is the share of loans being handled by special servicers – the companies that borrowers turn to when they need loan relief. And the special servicing rate has increased each month since the coronavirus pandemic hit the United States. It jumped to 10.04 percent in August from 9.49 percent in July.

Hotel and retail loans have driven the rise. Half of all loans transferred to special servicers in August were backed by hotel properties and one-third by retail properties. Twenty-five percent of all hotel CMBS loans and about 17 percent of all retail CMBS loans were being handled by special servicers by the end of August.

Transfers of loans backed by retail properties to special servicing have not slowed in September. Brookfield Property Partners’ high-end Tyson Galleria mall in McClean, Virginia, was transferred to a special servicing last week after Brookfield fell behind on payments for $282M in outstanding debt.


Related Articles

arrow_forward_ios
L-R: Savanna's Chris Schlank, Eastdil Secured's Will Silverman, JLL's Bob Knakal (Photos by Paul Dilakian)
Office royalty talk conversions, distress and the “downsize upgrade” trend
Office royalty talk conversions, distress and the “downsize upgrade” trend
Columbia Property Trust's Nelson Mills and 799 Broadway (Columbia Property Trust, 799 Broadway, iStock)
Columbia Property Trust signs investment firm to 71K sf at 799 Broadway
Columbia Property Trust signs investment firm to 71K sf at 799 Broadway
East End Capital's Jonathon Yormak and 141 East Houston Street (141 East Houston Street, East End Capital)
Boutique LES office scores blockchain firm as anchor tenant
Boutique LES office scores blockchain firm as anchor tenant
Vice Media CEO Nancy Dubuc and 225 Broadway (Getty Images, Google Maps, iStock)
Refinery29 subleasing at 225 Broadway for move in with Vice
Refinery29 subleasing at 225 Broadway for move in with Vice
Naftali Group's Miki Naftali, BRP Companies' Meredith Marshall (Photos by Paul Dilakian)
Miki Naftali, Meredith Marshall talk development, death of 421a
Miki Naftali, Meredith Marshall talk development, death of 421a
R-L: Willow's Kevin Danehy, Era Ventures' Clelia Warburg Peters, Fifth Wall's Brad Greiwe and The Real Deal's Hiten Samtani (Photo by Paul Dilakian)
Real estate tech is coming for your business
Real estate tech is coming for your business
Industrious CEO Jamie Hodari and CBRE chief financial and investment officer Emma Giamartino (LinkedIn, CBRE)
CBRE doubles down on flex-office provider Industrious
CBRE doubles down on flex-office provider Industrious
New York skyline
Rising interest rates will dampen city’s investment sales market this year
Rising interest rates will dampen city’s investment sales market this year
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...