Daily market intelligence on mortgages, equity raising, investment sales, and CMBS.

Friday, 10 July 2020

Coronavirus Quickly Pushed Massive Volumes of CMBS Loans into Default

The volume of delinquent CMBS loans against hotel and retail properties has risen at an alarming rate. Meanwhile, those against other property types have held up relatively well.

By Catherine Liu, Trepp LLC

Ever since the term "social distancing" was introduced as a part of the daily vernacular following the onset of the coronavirus outbreak, it became apparent that the commercial real estate sector would have to brace itself for disruptions that would introduce a new type of "normal"—one that would shape the way we work, live and play.

Since March, CMBS participants have been holding their breath in anticipation of the market malaise spilling into the sector.

The delinquency rate for non-agency CMBS, as measured by loans that are at least 30-days late with their payments, had been less than 2 percent in February and March. It then rose to 2.29 percent in April, 7.15 percent in May and 10.32 percent of the $550 billion universe in June. That comes close to the all-time high of 10.34 percent reached in 2012 after the Great Financial Crisis.

The hotel and retail sectors - the two property segments that were the most immediately impacted by sudden travel restrictions and widespread closures - reported June delinquency rates of 24.3 percent and 18.1 percent, respectively, up significantly from 1.53 percent and 3.89 percent in March.

These numbers also represent all-time highs for the two loan types, surpassing the 19.5 percent and 10.1 percent respective delinquency rates recorded following the GFC.

The coronavirus pandemic, meanwhile, has highlighted the importance of a previously overlooked data point that gauges the volume of loans whose monthly payments weren't made on time, but remain within or beyond their grace periods. The metric serves as an early indicator of the direction of delinquency rates.

Historically, only about 2 percent of all private-label CMBS loans had been in the category, mostly because of administrative delays in payment processing. The surge in grace period loans since April was a telltale sign that many borrowers were experiencing cash-flow challenges that could prompt a change in delinquency, special servicing or forbearance status. For the most part, the rates have been increasing at a pace faster than anticipated, and certainly...


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Data Digest







Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44




cppichart FP



CMBS 2.0 Spreads


Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41





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