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Thursday, 09 August 2018

Large CMBS 2.0 Transfer Causes Increase in Special Servicing Volume for July

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Commercial Real Estate Direct Staff Report

The volume of CMBS loans in special servicing increased last month by $245.3 million to $20.7 billion, according to Morningstar Credit Ratings.

That marked the first increase in nine months and was driven by a 19 percent jump in the volume of CMBS 2.0 loans in the hands of the sector's 15 active special servicers, to $4.9 billion. That increase was due solely to the transfer, to Strategic Asset Services, of the $568 million mortgage, securitized through COMM, 2016-SAVA, against a portfolio of 155 skilled-nursing properties with 18,870 beds. The loan transferred because it's expected to default, even though cash flow last year was on track to be at least double that necessary to fully service the loan.

The mortgage represents the senior portion of a $1.05 billion financing package with an initial maturity in October. It can, however, be extended for up to three additional one-year terms.

The 2.0 universe, which now totals $421.9 billion, down slightly from the $422.8 billion in June, is comprised of loans securitized since the Great Financial Crisis.

CMBS Loans in Special Servicing - June 2018

Year Issued

#Loans

Bal $mln

2007

518

9,164.23

CMBS 2.0

238

4,928.66

2006

223

4,122.12

2005

61

1,338.64

2008

46

884.70

2004

14

132.49

2001

2

55.55

2003

9

41.67

2000

2

21.73

1998

6

18.02

2002

1

1.70

1996

1

1.00

Source: Morningstar Credit Ratings

Despite the sharp increase in volume last month, the percentage of 2.0 loans in special servicing is only 1.17 percent. That compares with 52 percent for legacy CMBS, a universe whose total balance has shrunk to $30.4 billion in July from $31.5 billion in June.

Meanwhile, nearly every legacy vintage saw a decline in special servicing volume. For instance, 518 loans with a balance of $9.2 billion that were securitized in 2007, the most active year in terms of CMBS issuance on record, are in special servicing. That's down from $9.4 billion in June.

Most Active Special Servicers

July 2018

June 2018

Servicer

#Loans

Bal $mln

MktShr%

Bal $mln

%Chng

LNR Partners Inc.

447

7,308.31

35.22

7,215.31

1.29

C-III Asset Management

292

5,755.50

27.80

6,357.97

(9.48)

CWCapital Asset Management

151

2,842.20

13.72

2,703.49

5.13

Rialto Capital Advisors

99

1,489.62

7.19

1,437.19

3.65

Torchlight Loan Services

32

724.70

3.50

760.25

(4.68)

Midland Loan Services

50

706.33

3.41

692.75

1.96

Strategic Asset Services

4

663.17

3.20

51.69

1,183.00

Wells Fargo Bank

4

516.48

2.49

551.68

(6.38)

Keycorp Real Estate Capital

19

273.77

1.32

273.89

(0.04)

Situs

17

205.75

0.99

214.90

(4.26)

Source: Morningstar Credit Ratings

LNR Partners continues to dominate the ranks of special servicers, with a 35.3 percent share of the market. While its actively managed portfolio has shrunk by more than 17 percent over the past year, it actually grew slightly last month, to $7.3 billion. That was due in part to the addition of a couple of sizable 2.0 loans.

Recent Large Transfers to Special Servicing - July 2018

Property Name

Location

Prop
Type

Deal Name

Bal $mln

Notes

MStar Value
$mln

Special Servicer

Sava Portfolio

Various

HLTH

COMM 2016-SAV

568.00

Imminent default

1,200.00

Strategic Asset Services

Wyoming Valley Mall

Wilkes-Barre, Pa.

RET

GSMS 2014-GC18

74.26

Imminent default

45.60

LNR Partners

Queens Crossing

Flushing, N.Y.

MIX

GSMS 2013-GC12

68.68

Other; decline in cash flow

74.20

Rialto Capital Advisors

Jamison Valley Holdings Pool

Various

OFF

WBCMT 2007-C32

38.00

Imminent maturity default

NA

C-III Asset Management

Monarch 815 at ETS

Johnson City, Tenn.

APT

COMM 2015-CR25

31.90

Payment default

10.20

LNR Partners

Source: Morningstar Credit Ratings

Strategic Asset Servicers, meanwhile, saw a nearly 1,200 percent increase in its portfolio, thanks to the Sava loan, which was the largest transfer in recent weeks.

Comments? E-mail Orest Mandzy, or call him at (267) 327-4281.


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