Troubled commercial properties see values fall 27%: report

Recession triggered by Covid-19 has devastated hotels, malls and other commercial properties

National /
Sep.September 28, 2020 10:45 AM
The pandemic is leading to huge losses in value for hotels, malls and other commercial properties (iStock)

The pandemic is leading to huge losses in value for hotels, malls and other commercial properties (iStock)

Commercial properties such as hotels and malls may have lost as much as a quarter of their value as the pandemic devastated the retail and hospitality businesses, along with other sectors.

The value of the collateral for commercial mortgage-backed securities has been written down by 27 percent on average when properties get into trouble, the Financial Times reported, citing data from Wells Fargo.

New appraisals are done when commercial real estate property owners fall behind on their mortgage payments, and the loans are handed to a special servicer.

Wells Fargo’s data also shows that the number of appraisals is going up, with 68 triggered in September alone.

Hotels, which have been struggling thanks to the collapse of the tourism industry, have experienced big losses in value. A Crowne Plaza hotel in Houston, for example, was valued at $25.9 million, down by 46 percent from its valuation in 2014 when its loan was bundled into a CMBS deal. The Holiday Inn La Mirada outside of Los Angeles was recently valued at $22.1 million, a dip of about 27 percent since its loan was securitized in 2015.

“The longer this crisis goes on, we will move into a valuation problem,” said James Shevlin, president of special servicer CW Capital.

[FT] — Akiko Matsuda


Related Articles

arrow_forward_ios
With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)
Real estate stocks push up this week as U.S.-China trade tensions ease
Real estate stocks push up this week as U.S.-China trade tensions ease
416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)
Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
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
arrow_forward_ios

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

Loading...