2024 Special Servicing Rates
CMBS special servicing rates continued to increase in September, with office spearheading the uptick.
The Trepp CMBS Special Servicing Rate rose substantially in September, jumping 33 basis points to reach 8.79 percent. This was the ninth consecutive monthly increase, and the second-largest uptick of 2024.
Property type specifics revealed some interesting statistics. Distress was consistent throughout, with the respective special servicing rates of the five major property types all increasing. These increases varied in degree, but four of the five property types increased by at least 30 basis points.
Driving the overall increase in September was the office sector, which surged 67 basis points to 12.58 percent. The office rate is now up more than 200 basis points in the past four months alone, with distress continuing to mount.
The multifamily rate rose 36 basis points to 6.07 percent, surpassing the 6 percent mark for the first time in nearly nine years. Furthermore, the retail rate reached a near two-year high of 11.22 percent and the lodging rate hit a two-year high of 7.84 percent.
New Transfers
The new transfer balance to special servicing was on the heavier side in September, totaling about $3.27 billion. Around $1.9 billion of this, or 58 percent, came from the office sector. Retail, lodging and multifamily covered most of the remainder, representing 16 percent, 14 percent and 7 percent, respectively. On a per-loan basis, lodging transfers carried the most weight, with the average loan worth $76.8 million.
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September’s top two loans to transfer to special servicing together amounted to nearly $1 billion. The largest loan to newly transfer last month was the $525 million 150 E. 42nd St. loan, which transferred due to maturity default. September’s second-largest new transfer was the $409.8 million Ashford Hospitality Trust Portfolio, which transferred ahead of its scheduled maturity date this November.
The loan collateral for 150 E. 42nd St. is a massive 1.7 million square-foot office building near Grand Central Terminal in Midtown Manhattan. The building was originally constructed in 1954 and later renovated in 1998. The property’s second-largest tenant is Wells Fargo, which occupies 462,000 square feet and plans to vacate the property by 2026 for space it bought at 20 Hudson Yards. Financials from the first half of 2024 show a debt service coverage ratio based on net operating income of 1.50 x with 89 percent occupancy.
—Posted on October 28, 2024
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