Whole Loan And CMBX January Remittance Update
Following on yesterday's RealPoint January update on CMBX delinquencies, here is Lehman's most recent report on January whole loan and CMBX remittances. While CMBX 3 seems to have stopped the bleeding at least temporarily, the other vintages are happy to step in its place. Deterioration is also accelerating in non-CMBS whole loans.
The overall non-performing rate of CMBX.1 increased by 49bp, to 6.90%, slightly slower than the trailing 3-month average pace of 61bp. Of note:
- GCCFC 05-GG5: The $74.5mn Benaroya – Met Park West loan (1.78%, SS-Cur) backed by an office property in Seattle, Washington, was transferred to special servicer because the borrower may not be able to refinance the loan on the maturity date in November 2010. The most recent DSCR was reported in September 2009 and came in at 1.4x; a likely scenario is an extension of 24 months leading to a 20% loss.
An increase of 49bp in the non-performing rate of CMBX.2 brings the number to 6.82%. The pace is in line with the trailing 3-month average of 46bp. All significant loans that went delinquent were previously transferred to the respective special servicer and highlighted in prior months’ remittance reports.
The worst-performing series last month saw an “improvement” of 15bp in the nonperforming rate to 6.65%. However, three large loans for a total of $555mn were brought current either through modification or by some other means. If we exclude these loans, the non-performing rate worsened by 37bp, to 7.17%. Of note are the following loans that were
newly delinquent or transferred to special servicer:
- GCCFC 07-GG9: A full-service 390-room hotel located in Bethesda, Maryland, is the collateral for the $140.0mn Hyatt Regency - Bethesda loan (2.14% of deal, SS-Cur), which was transferred to special servicer. According to servicer comments, the property is experiencing cash flow problems and is in danger of imminent default. The loan is likely to be extended to maturity with a loss of 30% if defaulted. DSCR had been above 1.0x all through 2008 and 2009 with quarterly reported (except 1Q08) financials.
- BSCMS 06-PW14: The $65.0mn Philips at Sunrise Shopping Center loan (2.69% of deal, FCL) entered foreclosure after nine months of SS-Cur status (first mentioned in the April 2009 report). The loan is backed by a retail mall in Massapequa, New York, and has exposure to both Linen N’ Things (10.2%) and Circuit City (10.9%). Both spaces had been re-leased to Michaels and Best Buy. The loan was embroiled in a lawsuit in which the borrower, Mass One LLC, alleged that the loan originator, the trust, and its servicers, among other things, had obtained an inflated valuation of the property resulting in the borrower’s entering a loan that cannot be serviced by the property. As the payments had not been remitted since November 2009, counsel was instructed to file for foreclosure. The expected loss given default remained unchanged at 50%.
- BACM 07-1: The $220.0mn Solana loan (7.11% of deal, SS-Cur) became current this month. According to the servicer’s report, a modification agreement is ready and should be signed this month. We expect more details of the modification in next month’s remittance report. This is the A1-note of the debt stack. The $140mn A2-note is securitized in JPMCC 07-LDPX.
- CD 07-CD4: The $261.6mn Citadel Mall & Northwest Arkansas Mall loan (3.98% ofdeal, SS-Cur) became current this month even though, according to the servicer’s comment, the special servicer is moving forward with appointment of a receiver and foreclosure, as the borrower refused to contribute any cash for workout. The loan, backed by two retail properties in Colorado and Arkansas, was first transferred to special servicer two months ago.
- COMM 06-C8: The mystery continued with the $73.6mn Morgan Resort Portfolio loan(2.00% of deal, SS-Cur), backed by a portfolio of manufactured housing across various states, which became current this month as well. No new servicer’s comments were reported except for the December 2009 comment that the loan was facing imminent default due to cash flow problems. The loan is sponsored by Robert Morgan and Robert Moser.
CMBX.4’s non-performing rate rose 49bp, to 6.99%. Of note:
- COMM 07-C9/CD 07-CD5: A 890-unit multifamily property located in Silver Spring, Maryland, is the collateral for the $215mn Georgian Tower debt stack, of which the $67.0 A-note (2.33% of deal, SS-Cur) and the $58.0 A2-note (2.79% of deal, SS-Cur) are securitized in COMM 07-C9 and CD 07-CD5, respectively. The DSCR for the loan had been below 1.0x since origination in August 2007. Based on the latest cash flow, we expect a loss of 25% after a 24-month extension.
- CSMC 07-C3: The $51mn 520 Broadway loan (1.91% of deal, 30 days) turned 30 days delinquent this month. The pro forma loan is backed by a 112k sf office property in Santa Monica, California, that was barely covering its debt service with the most recent DSCR, reported in September 2009, at 1.02x. According to REIS, the effective rent for the property had dropped from $51psf at loan origination to $42psf as at 3Q09. A loss of 40% is expected given default.
- JPMCC 07-LD11/BACM 07-3: The $147.1mn ChampionGate Hotel loan, backed by a full-service hotel in ChampionGate, Florida, is securitized via two A-notes – $98.1 A1-note in JPMCC07-LD11 (1.82% of deal, 30 days) and $49.0mn A2-note in BACM 07-3 (1.40% of deal, 30 days). According to the servicer, the borrower had been shorting the payment due to a dispute regarding the funding of the FF&E reserve since August. DSCR at September 2009 was 0.78x. A loss of 65% is expected given default.
- LBCMT 07-C3: The $164.5mn Bethany Phoenix Portfolio I loan (5.09% of deal, SS-Cur) was brought current by the servicer through sweep of the reserve funds and is in the process of being foreclosed. The loan was first transferred to the special servicer a year ago after the master servicer became aware of mechanics liens recorded against six of the seven properties that formed the collateral pool for this loan. Note that this loan hasan additional $71.8mn mezzanine loan, for a total debt stack of $236.3mn.
The non-performing rate of CMBX.5 rose 83bp, to 7.81%, making it the worst performing series this motnh. Noteworthy loans include:
- CSMC 07-C5: The $63.7mn Fairfield Inn by Marriott Hotel Portfolio loan (2.35% of deal, SS-Cur), backed by nine limited-service hotels, was transferred to special servicer this month. Borrower indicated that they will no longer be able to fund the shortfall, as eight of the nine properties are underperforming. The combined DSCR as of October 2009 was 0.88x. The loan is expected to default in the near term, with an expected loss of 60%.
- CSMC 08-C1: The 1100 Executive Tower loan has a total debt stack of $106.8mn, of which the $89.5mn A-note is securitized in this deal (10.17% of deal, SS-Cur). The loan is backed by a 372k sf office building in Orange, California, and is plagued by departure of tenants and the general downturn in southern California. The property lost a number of tenants since October 2009, either through early termination of leases or not renewing once leases expired. DSCR as at September 2009 was 0.80x. According to PPR, the asking rent in the area, as of 3Q09, averaged $24psf and is expected tocontinue to drop through 4Q12, and office using vacancy is at 21% and forecast to peak in 3Q10. The loan, however, has a total reserve of $5.9mn, which will coverapproximately 14 months of debt service. Given default, a loss of 60% is expected.
- LBUBS 07-C7: Backed by four multifamily apartments in Tennessee, the $116.8mn Nashville Multifamily Portfolio (3.69% of deal, SS-Cur) was transferred to special servicer due to imminent default. According to servicer, the borrower had submitted amodification request that is currently under review and is paying only the necessary operating expenses to keep the properties operational. In addition to the securitized Anote, there is also a $32.1mn mezzanine note in the debt stack. The debt service had not been covered since loan origination, with the most recent DSCR as of June 2009 at
0.94x. According to the borrower, it is about $6.5mn in arrears on the mezzanine loan. A default is expected in the near term, with a loss of 50% given default.
- MSC 07-HQ13: According to the servicer’s comment, a modification to the cash management agreement for the $114.5mn The Pier at Caesars loan ($80.5mn A-note securitized in and making up 7.81% of this deal, $34.0mn B-note) had been approved in November 2009, which prioritizes operating expenses above payment of debt service in order to protect the property, resulting in monetary default. The property is owned by retail REIT Taubman Centers and is currently in foreclosure. Our loss estimates remained unchanged at 55%.
In the whole loan sector there were some notable deteriorations as well:
A number of large loans went delinquent or were transferred to special servicing-current status. Of note:
- CGCMT 05-C3: The $105.3mn Carolina Place loan (8.26% of deal, SS-Cur), backed by a regional retail property in Pineville, North Carolina, matured this month and was transferred to the special servicer as the borrower indicated that it was unable to refinance or pay off the loan. The borrower affiliate is GGP/Homart II LLC and is not one of the SPEs that were placed into bankruptcy protection. The loan is the A-piece of a $119mn debt stack that includes a $15.8mn B-note. Financials last reported in September 2009 came in at 1.81x for DSCR, and the property is 100% occupied. An extension is expected for 24 months with minimum loss, consisting of workout fees, to the trust.
- GECMC 05-C3: The $67.6mn One Main Place (3.28% of deal, SS-Cur) is the A-note of a total debt stack totaling $71.6mn, secured by an office building in Dallas, Texas. The loan was transferred to the special servicer this month. As per documentation at origination, Ernst & Young occupied 10.2% of the net rentable space, with its lease expiring in October 2009. It is unclear if the lease was renewed, although this location is no longer listed on Ernst & Young’s website. The property suffered from a drop in occupancy, as September 2009 reported occupancy was 72%, compared with 81% as
of June 2009. A loss of 40% is expected given default.
- JPMCC 05-LDP1: Backed by a 294-unit multifamily property in Manhattan, New York, the $80.5mn 777 Sixth Avenue loan (3.42% of deal, SS-Cur) was transferred to special servicer this month. The IO loan matured this month, and the transfer was triggered by the borrower's request for an extension of the loan. Financials reported had been strong; DSCR was consistently above 2.0x. We believe an extension of 12-24 months is likely, with a 1.5% loss to the trust taking into account fees associated with the workout.
- LBUBS 05-C2: The borrower of the $100.0mn Park 80 West (5.85% of deal, SS-Cur) is requesting a restructuring of loan terms after a large tenant, Ajilon Job Search service, (occupying 5.5% of the space) and several smaller tenants vacated the 490k sf office building in Saddle Brook, New Jersey. According to the remittance report, there are tenants
interested in the vacated space, but they are unwilling to commit to a long-term lease and high rents. Our current expectation is a loss of 30% after a 36 month extension. However,there is a possibility of a loan modification depending on the borrower’s proposal. A loss to the trust is still expected in this scenario.
- WBCMT 06-C28: Besides the $190mn A-note securitized in this deal (5.36%, SS-Cur), the debt stack for Montclair Plaza loan also include a $75.0mn B-Note. The collateral is a retail property located in San Bernardino County, CA, and the sponsor is GGP. This is not one of the SPEs included in GGP’s bankruptcy filing. The mall lost two of its top three tenants,
Circuit City and Linens ‘N Things, through bankruptcy and subsequent liquidation. Financials for the loan had been steady, with DSCR consistently above 1.40x (with the exception of September 2007 at 1.28x). Based on that, the expected loss is 20% given default.
- GMACC 04-C3: The $53.9mn Sawyer Portfolio loan (5.36% of deal, 30 day) backed by six multifamily properties in Maryland is in maturity default. The loan matured in December 2009 and, according to the borrower, it had not been able to sell the properties or refinance the loan for the past two years. DSCR, reported every quarter, had consistently
been above 1.20x since underwritten in 4Q04. An extension of 36 months is expected, with a 1.5% loss to the trust taking into account related work-out fees.
- GSMS 07-GG10: A portfolio of six extended-stay hotels, across different hotel submarkets, secured the $52.3mn GP2 loan (0.69% of deal, 30 days), which turned 30-days delinquent this month. According to the borrower, it had been struggling with cash flow for six months; only two of the properties achieved DSCR above break-even as at September 2009, with the weighted average DSCR coming in at 0.62x. A loss of 60% is expected given default. The average debt/key is $71k/key
- MSC 05-IQ9: The $65.5mn 400 Madison Avenue loan (4.66% of deal, 30 days) is maturing in February 2010. The loan is backed by a 185k sf office property in Manhattan, New York. DSCRs reported have been above 1.50x since underwritten, and an extension of 12 months is expected without a loss.
- WBCMT 07-C30: The $53.2mn Wildcat Self Storage Pool loan (0.67% of deal, 30 days), backed by a portfolio of nine self-storage properties in Ohio and New Jersey, went 30-days delinquent again. The loan was first delinquent in August 2009 and was subsequently placed on servicer’s watchlist (and in a grace period) for the next four months. According to the servicer’s comments, borrowers had been unresponsive since August. Given default, the loan is expected to take a 45% loss.
- CSMC 07-C2: As mentioned in last month’s report , the delinquency of the $63.2mn Three Westlake Park loan (1.93% of deal, Current) could be a payment delay. The loan is brought current this month.
Lastly, as was pointed out yesterday in the RealPoint analysis, Lehman also notes the spike in the loss severity as liquidating loan balances accelerate and are very likely to surpass the previous 2005 peak of $3 billion. Unlike RealPoint, Lehman is already seeing loss severity in the 60%+ area.