October CMBS Performance Worsens, Loan Backing Union Square W Hotel To Default Imminently

Tyler Durden's picture

It really is time for the our central planning banking system, aka the Fed, to start thinking about enforcing CRE bailout strategies. Aaron Bryson over at Lehman, pardon, Barclays, has released his monthly CMBS remittance report, and things are getting worse ever faster. In disclosure that is sure to keep the market rally going for month, BarCap looks hard for CMBS green shoots and finds only their (near) homophone equivalents:

Credit performance for CMBS worsened at an accelerated pace this month versus the recent trend. Thirty-plus day delinquencies across the fixed rate universe increased by 41bp, to 5.50%, partly owing to the deterioration of loans that were current but transferred to the special servicer last month. This compares with the trailing three month average of 34bp. We expect this trend of accelerating delinquencies to continue throughout 2009 and early 2010, given the long lag times associated with commercial real estate.

By vintage, we notice a growing divergence between more recent and seasoned vintages. The 30+ day delinquency rate on 2005+ vintages jumped 47bp to 5.63%. More seasoned pre-2005 vintages saw a 27bp pickup to 5.17%. In particular, 2007+ vintage was a notable laggard, with delinquencies surging by 69bp to 5.32%.

The worst performing category was hotel, which hit a record overall 30+ delinquency rate, and a stunning 10.71% for the 2007 vintage. Close behind were Multifamily and Retail, at 7.55% and 7.11%, respectively.

The table below summarizes all the various data points:

Visualizing the various credit metric trends demonstrates just how bad the deterioration is especially in the near vintages (2006-2007).

And below are selected properties by CMBS class that have become delinquent or moved to special-servicing:

CMBX 1:

  • The $217mn World Market Center (8.57% of deal, SS-Cur), backed by the first newly constructed building in the World Market Development, was transferred to the special servicer.

CMBX 3:

  • The 270-room W Hotel in Manhattan is the collateral for the $115mn W New York-Union Square loan (3.38% of deal, SS-Cur), which was transferred to special servicer for imminent default.

CMBX 4:

  • The $150mn Hyatt Regency – Jacksonville loan (2.79% of deal, 30 day) backed by a 966-room full service hotel located in the Jacksonville, Florida, went 30 days delinquent this month.
  • the $50mn Palm Beach Gardens Marriott loan (1.59% of deal, 30 days), went delinquent this month. The 279-unit property is located in Palm Beach Gardens, Florida, and financials reported monthly from June to August showed a steady decline to 0.52x from 0.70x versus 1.41x since underwritten.