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$32B In CMBS Loans In Special Servicing, Almost All Hotel And Retail

Another $9.4B of CMBS loans went into special servicing as of May 19, adding to the $10.1B transferred in April, according to Moody's Investors Service. That increases the total amount in special servicing to over $32B.

Hotel and retail loans make up almost all of the new loans slipping into special servicing, at more than 96% of the transfers since March 1, Moody's reports.

Burning house burning money

Hotel loans represented 65% of the total number of loans transferred to special servicing since March 1, for 229 loans totaling $12.6B, according to the report. Retail loans represented 31% of the total (124 loans totaling $6.1B). Many mixed-use loans transferred to special servicing recently have a hotel or retail component.

Conduit late payments (less than 60 days late) increased to 11.8% in May from 8.6% in April and 2.6% in March, Moody's reports. The largest uptick was among loans late 30 days to 59 days, meaning that they have missed both their April and May payments. Some 3.2% of conduit loans are now in that category, compared to 0.3% in April and 0.1% in December 2019.

Some large-loan/single-asset single-borrower loans of more than $100M, and associated with well-known hospitality or retail properties, are now in special servicing.

These include Queens Center in Elmhurst, New York, whose $600M total is less than 30 days delinquent; the Hyatt Regency Waikiki Beach Resort in Honolulu, whose $400M total is less than 30 days delinquent; and the Palmer House Hilton in Chicago, whose $328.9M total is 30 days to 59 days delinquent. 

A transfer to special servicing usually means that cash flow isn't enough to keep a borrower current. In the conduit CMBS space, 74.3% of loans that go into special servicing eventually default, according to Moody's.

But the company said the current wave of CMBS loans going into special servicing might see a different outcome.

"Given the current economic shock stemming from COVID-19, the transition rate from special servicing to default could be less than the historical average, given the inclusion of the temporary nature of relief sought by the borrowers," the report said.