Cash-strapped borrowers are increasingly giving keys back to lenders

Majority of nearly $3.9B in debt is backed by malls and hotels

National /
Oct.October 23, 2020 07:30 AM
(Getty, iStock)

(Getty, iStock)

UPDATED, Oct. 23, 2020, 5:15 p.m.: Many commercial mortgage-backed securities borrowers that are strapped for cash are trying to turn the keys over to their mezzanine lenders.

That’s according to a recent report from data provider Trepp, which found that the borrowers behind about $3.9 billion in outstanding CMBS debt across nearly 100 loans have “indicated a willingness” to give the collateral to their mezzanine lenders.

The loans include both small-dollar and large portfolio loans with principles exceeding $200 million, according to the report.

Nearly 65 percent of the loans Trepp found were secured by regional malls and limited- and full-service hotels.

One example is the owner behind the 212-key Eastgate Holiday Inn in Cincinnati, according to the report. The borrower “delivered written notice of unwillingness to further carry the loan payments and is cooperating in friendly foreclosure filing” on the $13.1 million CMBS loan secured by the hotel, according to special servicer notes.

The coronavirus pandemic has exacerbated a retail apocalypse that was already battering several major mall owners. Barry Sterlicht’s Starwood Capital Group recently lost control of a seven-mall portfolio after a ratings downgrade on its bonds triggered a clause allowing bondholders to take control of the properties.

The pandemic has similarly pummeled the hotel industry and driven many lenders to try to put up their hotel loans for sale.

This mall and hotel carnage prompted the proposal of a bipartisan bill in Congress that would offer relief to struggling CMBS borrowers in the form of preferred equity. But borrowers would have to be able to show they were in good standing on mortgage payments prior to the pandemic to be eligible for funds. The legislation has yet to move forward.

Correction: An earlier version of this story misidentified the entity that lost control of a mall portfolio earlier this year. It is Starwood Capital Group, not Starwood Property Trust.


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
Hudson Meridian Construction Group founder Bill Cote and a rendering of the Science Park Apartments planned at 201 Munson in New Haven (Hudson Meridian Construction Group)
Breakthrough for beleaguered New Haven project
Breakthrough for beleaguered New Haven project
From left: Scott Rechler and 5 Times Square; Marc Holliday, Steven Roth and 280 Park Avenue (Getty Images, Eden, Janine and Jim from New York City - via Wikimedia Commons)
Swell of maturing debt pressures office owners
Swell of maturing debt pressures office owners
RFR's Aby Rosen and 285 Madison Avenue (RFR, iStock)
RFR seeks extension on 285 Madison loan
RFR seeks extension on 285 Madison loan
Barbara Russo, Danielle Englebardt, and Oren and Tal Alexander (Getty, iStock BFA)
Ranking the top residential brokers on the Upper East Side
Ranking the top residential brokers on the Upper East Side
Jamestown chairman Christoph Kahl and One Times Square (Jamestown LP, iStock)
Jamestown lands $425M to bring the metaverse to One Times Square
Jamestown lands $425M to bring the metaverse to One Times Square
Ron Perelman with 35 East 62nd Street and 41 East 62nd Street (Getty, Google Maps)
Ron Perelman’s former Lenox Hill offices hit market for $160M
Ron Perelman’s former Lenox Hill offices hit market for $160M
arrow_forward_ios

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

Loading...