Distress Signals: Special Servicers Are Keeping Busy as 2020 Draws to a Close
Hotels and retail are under particular duress when it comes to paying back commercial real estate loans
December 8, 2020 | David M. Levitt | Commercial Observer
Distress in hotel loans and other asset classes, such as retail, which have been negatively impacted by the pandemic, may have crested and it won’t get much worse, according to analysts. Still, trouble in commercial real estate lending remains far more extensive than anyone expected before they heard of the coronavirus.
Almost half, or 47.5 percent, of commercial mortgage-backed securities (CMBS) loans made against New York-area hotels were in special servicing last month, according to research firm Trepp. In other words, those loans were handed over to loan servicers’ special servicing divisions, which focus on loan workouts and resolutions in times of distress. The transfer can be a precursor to default. The number of loans in special servicing has gone up every month since February, when it was just 5.48 percent.
“We don’t think the number will get meaningfully worse,” Manus Clancy, senior managing director and leader of the applied data, research and pricing departments at Trepp, wrote in an email. “We believe that now [that] there is optimism over the vaccine, those owners that have held on thus far will continue to hold on. There is light at the end of the tunnel.”
