Special Servicing Rate Continues Rising, Office Reaches 11-Year High
The CMBS special servicing rate rose to 8.46% in August, bringing the overall rate to a three-year high, according to Trepp.
The percentage of commercial mortgage-backed securities loans in special servicing has so far increased every month of this year and is up from 6.67% a year ago, Trepp’s report shows. Office had the highest special servicing rate of any asset type at 11.91%, a 66 basis point increase from the month prior.
This is the highest office special servicing rate since April 2013, according to the report. Some $1.4B worth of office loans were transferred to special servicing in August, including Beacon Capital Partners’ $370M loan on AMA Plaza in Chicago.
Special servicer Situs Holdings warned of imminent monetary default on the 1.2M SF skyscraper after Beacon said it may not be able to make its August 2024 loan payment or the $4.4M tax payment due Aug. 1.
The second-largest chunk transferred to special servicing came from a $335M mixed-use loan for Times Square Plaza. The loan is backed by 1500 Broadway, an office asset in the heart of Times Square anchored by ABC's Good Morning America, according to Commercial Observer. The building is set to lose both GMA and Nasdaq as tenants, CO reported.
The building owner, Tamares Group, has reportedly been exploring refinancing options since January, ahead of the loan's scheduled maturation in October.
Mixed-use loans also saw a 66 basis point increase in August, reaching 9.59%, according to Trepp. That is the highest it has climbed since May 2013, another 11-year high.
Office and mixed-use CMBS special servicing rates spiked significantly over the past year, increasing by 415 basis points and 265 basis points, respectively, the report shows.
Other asset classes inched up as the overall special servicing rate rose. The multifamily special servicing rate rose 60 basis points to 5.71%, a nine-year high, the Trepp report shows.
Retail’s special servicing rate came in at 10.92%, up just slightly from the prior month’s 10.89%, while lodging rose from 7.33% to 7.42%. Industrial's rate dropped by 1 basis point, staying well under 1%.
The new transfer balance to special servicing in August was just over $2.65B, with office accounting for 52% of that, Trepp reported. Mixed-use and multifamily accounted for 23% and 16%, respectively, meaning those three asset classes accounted for 91% of the new special servicing balance.
