SPECIAL SERVICING LEVELS

In the last 12 months, Trepp?s Dallas special servicing trends indicate a leveling out of both loan totals, as well as loan balancesin special servicing, Henry S. Miller Equity Partners SVP/managing director Chance Johnson tells us. While the numbers appear flat, there are several factors that are most likely contributing to this stabilization. Many loans that have previously been transferred to special servicing due to maturity defaults are being cured with the increased activity of CMBS lenders over the last six- to nine-months, Chance says. However, continued store closures, corporate bankruptcies, and downward pressures on rents in certain areas continue to push additional loans into or near monetary default resulting in newly defaulted loans entering into the special servicing pool. The results of this in-and-out effect are most likely what are keeping the totals flat, he says.

Hopefully, increased lending activity for smaller loans will continue to gain momentum as well as stabilization of rents through an overall improvement in the economy, resulting in more assets beingreleased from special servicing than entering, Chance tells us. Finally, he cautions not to draw immediate conclusions from these charts (no matter how many bright colors we put in them) without an understanding of the individual loan details. Often, a handful of large loans can skew the reality of special servicing trends. Overall, if you keep large assets in mind, the velocity of loans entering special servicing appears to have peaked in the DFW market, Chance says.