Special Servicing Rate Sees Biggest Jump Since August 2020
The percentage of CMBS loans in special servicing experienced its largest month-over-month increase since August 2020, bringing the total loan volume in special servicing to $2.39B, according to newly released Trepp data.
The number of troubled loans rose 37 basis points to more than 5.5% in March, per the Trepp data, largely attributable to the transfer of nine loans with an outstanding balance of at least $100M.
Retail was the asset class with the biggest bump in special servicing, rising 84 basis points from the previous month to 11.57%. Office followed with a 34-basis-point increase to 4.77%. The two sectors accounted for 35% of new transfers to special servicing in March.
The proportion of CMBS loans in special servicing is up from six months ago, when the rate was 4.94%, but down from a year ago, when the rate was 5.66%, according to the report.
The increase from $1.84B worth of loans in special servicing in February to $2.39B worth of loans in special servicing in March was spearheaded by two notable loans: a $350M loan for the Gas Company Tower and World Trade Center Parking Garage in Los Angeles and $300M for Bergen Town Center in New Jersey.
Brookfield defaulted on $784M worth of loans linked to two of its Downtown Los Angeles office towers, including Gas Company Tower at 555 West Fifth St., Bisnow previously reported. Subsidiaries of Brookfield DTLA Fund Office Trust Investor defaulted on $465M worth of loans linked to the building, Securities and Exchange Commission filings showed.
Trepp reported the $350M loan used the 1.3M SF office and parking garage as collateral, adding Brookfield chose not to exercise its option to extend the maturity date on its loans.
Los Angeles’ downtown office market has struggled to recover from the effects of the pandemic and a shift toward hybrid and remote work. Other office buildings have been decreasing in value, and a foreclosure is seemingly in the works at 444 South Flower St.
The Bergen Town Center is a 1M SF mall in Paramus, New Jersey. The $300M loan was transferred ahead of its April maturity date.
Trepp said that transfer “depicts the challenges of refinancing in the current market even with strong-performing assets” amid continuously rising interest rates and a lack of liquidity. The mall’s occupancy rebounded from 77% in 2021 to 91% in 2022, according to Trepp.
Multifamily’s special servicing rate rose to just over 3% in March, up 34 basis points, while lodging rose by 1 basis point to 6.39%, Trepp’s report shows.
Industrial was the only asset class to see a decrease. Its special servicing rate sits at 0.39%.
