Member News

CMBX Activity: CMBX Spreads Plunge While CMBS Spreads Narrow; S&P 500 Hits All-Time High

In one of those weird 21st century fads (think “virtual pets”) people around the US are taking to the streets, looking for Pokémon characters through their smartphone apps. (Didn’t they know they’ve been lurking in Times Square for years?) The game was launched by Nintendo whose stock price was up more than 30% yesterday based on the popularity of the game.

For the last several years, investors have seen yields on government bond go from real to virtual. Yesterday, investors might have felt they needed special glasses to see the ever-shrinking CMBX spreads. CMBX 6/7/8/9 AAA spreads were tighter by another two to three basis points yesterday while CMBX 6/7/8/9 A spreads were in 10 to 12 basis points. CMBX 6/7/8/9 BBB- spreads also narrowed another 14 to 19 basis points.

CMBS cash didn’t keep pace to that degree, but spreads were certainly tighter across the board. At the top of the new issue stack, long AAA spreads were tighter by a basis point or two while CMBS 3.0 A- and BBB- spreads came in about 10 basis points. About $100 million was out for bid on the day

Elsewhere, US stocks picked up where they left off last week with more solid gains ahead of the start of earnings season. The Dow added 80 points (0.44%) while the S&P 500 rose 0.34%, hitting an all-time high in the process. The Nasdaq again led the pack, moving up 0.64%. The 10-year Treasury yield reversed course yesterday, climbing six basis points to close at 1.43%.


Credit Stories

Retail Portfolio Loan Heads to Special Servicing

According to an email from Fitch yesterday, the $46.7 million Ross Retail Portfolio loan has been sent to special servicing. The loan is backed by 817,497 square feet of retail space spread across six separate properties. Three of the assets are in North Carolina; two are in Florida; and one is in Tennessee.

The loan makes up 1.69% of the remaining collateral behind JPMCC 2007-LDPX. The note is current and matures in January 2017.

DSCR for the loan has declined over the last several years. In 2011, DSCR (NCF) and occupancy were 1.17x and 93%, respectively. In 2015, DSCR (NCF) and occupancy were down to 0.95x and 85%, respectively. The collateral was appraised for $62.45 million in 2006.

The properties are predominantly anchored by grocery stores and according to servicer watchlist comments, two of the properties were rated in poor condition.


Former AT&T/SBC Loan Finally Heads to Special Servicing

Almost three years after we first tipped TreppWire readers off to concerns over the (one-time) $165 million SBC – Hoffman Estates loan, that note has finally been sent to special servicing. In 2013, we noted that AT&T had vacated its 22-year-old campus in Hoffman Estates, Illinois. About 3,000 AT&T workers were to be scattered to various sites around Illinois as a result.

The property was once 100% occupied by SBC, which later became AT&T when the SBC bought the company and maintained the AT&T name. The firm’s lease is to end next month and July remittance data received yesterday indicated that the loan has been sent to special servicing.

The loan was supposed to pay off in December 2010, but the loan is an anticipated repayment date (or ARD) loan, so the borrowers were not obligated to payoff the loan in full on the underwritten maturity date date. The legal maturity for the loan is not until 2035. Under the ARD structure, all excess cash is captured and used to amortize the loan once the anticipated repayment date is passed. That amortization has reduced the current balance to just over $115 million.

The note makes up a big part of the collateral behind two CMBS deals. There is a $59.1 million slice that makes up 35% of MSC 2006-T21 and a $56.7 million slice that makes up 18% of BSCMS 2006-PW11.


Two More Portfolio Loans Transferred to Special Following JQH Bankruptcy

According to a Fitch email alert, two additional CMBS portfolio loans associated with the John Q. Hammons Hotels & Resorts bankruptcy have been transferred to special servicing. The two loans are the $110.3 million JQH Hotel Portfolio and the $150 million JQH Hotel Portfolio (Rollup). We previously reported that the hotel owner and management firm announced that The Revocable Trust of John Q. Hammons and its affiliates had filed for Chapter 11 bankruptcy late last month. The bankruptcy filing may cause other loans associated with the sponsor to fall into special servicing.

The $110.3 million JQH Hotel Portfolio is backed by five lodging properties built between the years 2003 and 2005. The portfolio includes Embassy Suites, Holiday Inn, and Marriott hotels located in Texas, Kansas, Virginia, Arkansas, and Missouri. The loan matures in November 2016 and makes up 5.61% of COMM 2006-C8. For the 2015 fiscal year, DSCR was listed at 1.53x.

The $150 million JQH Hotel Portfolio (Rollup) is split into a $100 million piece that takes up 4.86% of BACM 2007-3 and a $50 million piece that comprises 1.69% of JPMCC 2007-LD11. The loan is secured by five lodging properties under the Embassy Suites, Renaissance, and Residence flags. Built between 2000 and 2005, the hotels are situated in various cities in Tennessee, Texas, and Missouri. DSCR reached 1.93x and occupancy clocked in at 69% for the first quarter of 2016. The hotels received an appraisal value of $205.6 million in 2007.

Earlier this month, the $44.9 million Chateau on the Lake note backed by a JQH, full service hotel in Branson, Missouri was also sent to special servicing. The loan makes up 4.73% of WFCM 2015-C26 and is scheduled to mature in January 2025.


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