CMBS Special Servicing Rates Continue Their Series of Jumps in 2024

The climb of the CMBS special servicing rates continues by Trepp’s count. In August, the overall rate lifted another 16 basis points to 8.46%. So far in 20204, CMBS special servicing has climbed every month from January through August, when it hit a three-year high. One year ago, it was 6.67% and six months ago it was 7.14%.

Looking only at CMBS 2.0+, the special servicing rate was 8.34%. In August 2023, it was 6.44% and six months ago it was 7.03%. For CMBS 1.0, the special servicing rate was 26.19%, compared to 33.12% a year ago and 23.40% six months ago.

By property type, the only category to break the pattern was industrial, seeing a three basis point drop from 0.43% in June to 0.40% in July, and then an additional one basis point down to 0.39% in August.

All the other categories have seen drops in at least one month during 2024. Overall, however, the individuals have blended for the constant upward movement and each of them saw an increase between July and August.

Lodging went from 7.33% to 7.42%; multifamily rose 60 basis points from 5.11% to 5.71%; office had the highest rate of 11.91%; mixed-use went from 8.93% to 9.59%; and retail was at 10.92%, up from July’s 10.89%.

The last time multifamily CMBS was higher was in December 2015, so nearly a nine-year high. Mixed-use is at its highest level since May 2013. Office is at its highest since April 2013.

The new transfer balance to special servicing was $2.65 billion. Office accounted for $1.4 billion, or 52% of the total. Mixed-use was 23% and multifamily was 16%.

For loans, two together were $700 million of the total. The AMA Plaza office debt, worth $370 million, was transferred because of imminent monetary default. The property backing the loan is a nearly 1.2 million square foot downtown office building built in 1971 and then renovated in 2016. The AMA and Latham & Watkins respectively use 22% and 9% of the total space. Their leases end in 2028 and 2029. In 2023, the debt service coverage ratio was 0.86 and occupancy was 84%.

The second largest new loan, for the Time Square Plaza, was $335 million, also transferred due to imminent monetary default. It’s a mixed-use property with 506,412 of rentable area in Times Square. Built in 1972, it was renovated in 2014. At the 2014 securitization, its value was $810 million. The borrower has sought refinancing since January. The loan is supposed to mature in October 2024.