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Special Servicing Overview – July 2016

Nearly $1.3 billion in CMBS loans were transferred to special servicing in July. Whether a CMBS loans go unpaid after their maturity date, falls into financial distress, or is subject to a bankruptcy filing from the borrower, chances are they’ll end up in the hands of a special servicer. Trepp has published an infographic that highlights the top 10 loans to be transferred to special servicing. The infographic also features statistical breakdowns for a number of criteria, including property type and reason for transfer. 

Property Type

By loan balance, the office sector was the most represented in July’s special servicing totals. 22 office loans amounting to $489.3 million were sent to special servicing last month, the largest note being the one that backs Hercules Plaza in Wilmington, Delaware. Four of the top 10 loans transferred to special servicing in July back office properties, while an additional four of the top 10 loans sent to servicing are collateralized by retail properties. The retail sector featured the highest number of loans transferred to special servicing last month with 32, which translates to the second largest balance of any sector at $472.6 million. Coming in third by both loan count and balance was the lodging sector, with $232.5 million across seven loans sent to servicing.

SpSv_0716_Prop_Type_2

MSA

The 76 loans transferred to special servicing last month are collateralized by properties across 47 different MSAs, with four loans being multiproperty notes that feature collateral across multiple MSAs. Of the major market areas affected, Chicago featured the most exposure by loan balance ($176 million) and count (five loans). The two largest of those loans behind Chicago properties are the $59.1 million and $56.7 million pieces that back AT&T’s corporate location in Hoffman Estates. Other MSAs landing in the top five for July special servicing exposure are Burlington, Vermont ($92 million across one loan), Washington DC ($76 million across four loans), Philadelphia ($70.7 million across two loans), and Detroit ($61.1 million across two loans).

SpSv_0716_MSA
Reason for Transfer

39 loans were tagged with a balloon payment/maturity default or an imminent balloon/maturity default in July. The aggregate total of these loans exceeds $342.5 million. With the wall of maturities in full effect, a myriad of 10-year loans issued between 2006 and 2007 will need, and have had trouble landing refinancing. There has been a larger proliferation of maturity defaults in the past three months as evidenced by the climbing CMBS delinquency rate over that time frame.

SpSv_0716_Transfer_Reason_2

Also of note are the 3 loans totaling $193.7 million transferred to special servicing for borrower bankruptcy: Hammons Hotel Portfolio (CGCMT 2015-GC3), JQH Hotel Portfolio (JPMCC 2007-LD11), and Chateau on the Lake (WFCM 2015-C26). Those three loans are backed by hotels owned by John Q. Hammons Hotels & Resorts. The Revocable Trust of John Q. Hammons and its affiliates filed for Chapter 11 bankruptcy last month, thus prompting the transfer. The fact that two of those loans back CMBS 3.0 debt is also something to footnote.

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Compliments of Trepp – a member of the EACCNY