Fitch: Road Diverges for U.S. CMBS Loans in Special Servicing
OREANDA-NEWS. The well continues to diminish for older U.S. CMBS loans in need of a workout while the rate of newer CMBS loans in special servicing is increasing, according to Fitch Ratings.
Fewer loans were in the hands of special servicers at the end of first quarter-2016 (1Q'16) compared to the end of 1Q'15. The amount of U.S. CMBS 1.0 loans in special servicing has also decreased as these more seasoned loans are disposed. Conversely, U.S. CMBS 2.0 loans entering special servicing have increased year-over-year and now comprise a larger proportion of overall loans in special servicing.
Approximately $15.1 billion (977 loans; or 4% of the U.S. CMBS Fitch-rated universe) was specially serviced at end of 1Q'16 compared to $22.5 billion (1,219 loans; or 6%) at the end of 1Q'15. While the amount of specially serviced 1.0 loans has fallen to $14.4 billion from $22.3 billion between 1Q'15 and 1Q'16, the number of 2.0 loans transferring to the special servicer has increased to 60 loans ($693 million) from 28 loans ($242 million) over this same period. The CMBS 2.0 transfers have generally been due to various factors, including the idiosyncratic risks centered on sponsor or tenant issues with the most recent being the impact of lower oil prices in North Dakota.
Two common denominators in these diverging trends are office and retail properties, which are both tops for specially serviced loans for both CMBS 1.0 and 2.0 as well as performing specially serviced loans. For CMBS 2.0, office and retail comprise 46% and 33%, respectively, of the total performing specially serviced 2.0 balance.
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