Hotels, Retail Drive Spike in CMBS Defaults, Fitch

Email icon - Send a Message on ABL Advisor

August 26, 2020, 08:54 AM

Filed Under: Industry News

Related: CMBS, Fitch Ratings

New CMBS delinquencies for July 2020 totaled 283 loans ($8.05 billion) for a total of 871 ($20.1 billion) compared to 673 loans ($13.7 billion) as of June 30, 2020; some loans that were delinquent in June became current again in July. Hotel loans accounted for 146 of the new defaults (52% by number and 36% by balance) and Retail loans were 99 (35% and 48%). Nineteen loans ($2.95 billion) had loan balances exceeding $100 million.

As of July 30, 2020, 71% of the loans (64% by balance) in Fitch-rated conduit deals from 2011 to 2020 that defaulted (moved to 60+ days delinquent) in June and July had been expected to default in Fitch's bulk review completed in May 2020. The remaining 29% (36%), representing 274 loans, were unexpected term defaults, according to a review conducted by Fitch Ratings.

In the bulk review, Fitch anticipated over 4,000 loans to default between May and the YE 2020 due to the coronavirus pandemic. The number of expected defaults in June and July comprise 18% of this total. In other words, while Fitch had not anticipated all loans that have defaulted to date, there are still a large number of loans that the agency expects will default which drove the ratings actions in the bulk review.

The largest newly delinquent loans include:

Gurnee Mills ($260 million in CSAIL 2016-C7, WFCM 2016-C36 (full review completed August. 13), WFCM 2016-LC25 (Jul 23), CSMS 2016-NXSR, CD 2017-CD5 (June 25), and CD 2017-CD6) in Gurnee, IL. The default was expected based on the YE 2018 DSCR of 1.58x, compared to the Bulk Review DSCR hurdle of 1.75x for retail loans. DSCR has fallen further to 1.42x as of YE 2019. Fitch had already assumed prior to the Bulk Review that this loan would default at maturity and had assigned an outsized loss of 25%. This maturity loss was increased to 50% at the most recent review for the WFCM 2016-C36 transaction on August 13.
Starwood Capital Extended Stay Portfolio ($192.7 million in CSAIL 2015-C3, CSAIL 2016-C5, CSAIL 2016-C6 (April 28) comprised of 50 extended stay hotel properties across 12 states. This loan defaulted at maturity and had relatively stable performance prior to the pandemic with YE 2019 of 3.12x, compared to the Bulk Review DSCR hurdle of 2.75x for hotel loans. Fitch assigned no loss in its Bulk Review.
Holyoke Mall ($185.8 million in JPMCC 2011-C3 (August 13)) in Holyoke, MA. The default was anticipated based on the YE 2018 DSCR of 1.35x, compared to the Bulk Review DSCR hurdle of 1.75x for retail loans; reported DSCR has fallen further to 1.21x as of YE 2019 and 0.54x as of YTD June 2020. Fitch had already assumed prior to the Bulk Review that this loan would default at maturity and had assigned an outsized loss of 50%.

Among the loans that defaulted in June 2020, 85 ($1.64 billion) were not reported as delinquent as of July 30, 2020. The largest of these loans include:

Eastview Mall and Commons ($210 million in COMM 2012-CCRE4 and COMM 2012- CCRE5) in Victor, NY. The loan had originally transferred to the special servicer in May 2020 for imminent monetary default and was delinquent through the July payment date. Per the most recent servicer commentary, the loan was returned from the special servicer as a corrected mortgage. Funds were submitted in July to cover outstanding payments and the loan is current. Fitch had assigned a base case loss of 21% at its most recent review of the loan in July 2020.
Decoration & Design Building ($165 million in CGCMT 2015-P1 and CGCMT 2015-GC33) in New York. The loan had been past due for the April, May and June payments but was made current in July. However, per the most recent servicer commentary, the loan has transferred back to the special servicer and is 30 days past due as of the August payment date. Fitch assigned no loss in its Bulk Review.
Legends at Village West ($119 million in BMARK 2019-B14, BMARK 2019-B15, and COMM 2019-GC44) in Kansas City, KS. The loan had transferred to the special servicer in May 2020 due to payment default. Per servicer comments, coronavirus relief was granted in the form of a three-month deferral of non-tax and non-insurance reserves and the ability to use non-tax, non-insurance reserve funds for P&I payments. Fitch assigned no loss in its Bulk Review.