According to Fitch Ratings, an additional $1.2 billion of loans in Fitch-rated CMBS entered special servicing--including the high-profile hotel property in Washington, DC--in November. Also included in the 95 new loans was New York City's $3-billion Peter Cooper Village/Stuyvesant Town loan, which became the second largest loan to officially transfer to special servicing. With the November increase, specially serviced loans now total 7.8% of Fitch-rated CMBS.
The Mayflower's inauspicious status is indicative of larger trends in the retail and hotel asset classes, which Fitch says will continue to see the most adverse and immediate effects. Additional high-profile hotel properties transferring to special servicing are likely, according to senior director Adam Fox. Fitch Ratings was unable to return a call in time for publication.
Defaults in the DC area are indeed likely to increase, according to Greg Leisch, CEO of Delta Associates--but not at the same rate as they did in 2009. Leisch points to changes in the tax laws and new REMIC rules that should ease some of the defaults. Also, there are signs that capital is moving back into the DC market, albeit at a glacier pace.
"At the same time, however, property performance indicators show that occupancy levels across all assets are still deteriorating," Leisch said. Indeed, the Mayflower illustrates the impact such eroding fundamentals are having: Rockwood Capital reportedly wants to restructure the $200-million securitized mortgage on the asset as it isn't bringing in enough capital to pay the annual $11.5-million payments.
Still, though, Leisch cautions not to read too much into any one month's worth of data. "Some periods will be lumpy, where we will have large assets hit like the Tishman portfolio or General Growth Properties, both of which have a big footprint in DC, or the Mayflower."
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
