According to Fitch Ratings, an additional $1.2 billion of loansin Fitch-rated CMBS entered special servicing--including thehigh-profile hotel property in Washington, DC--in November. Alsoincluded in the 95 new loans was New York City's $3-billion PeterCooper Village/Stuyvesant Town loan, which became the secondlargest loan to officially transfer to special servicing. With theNovember increase, specially serviced loans now total 7.8% ofFitch-rated CMBS.


The Mayflower's inauspicious status is indicative of largertrends in the retail and hotel asset classes, which Fitch says willcontinue to see the most adverse and immediate effects. Additionalhigh-profile hotel properties transferring to special servicing arelikely, according to senior director Adam Fox. Fitch Ratings wasunable to return a call in time for publication.


Defaults in the DC area are indeed likely to increase, accordingto Greg Leisch, CEO of Delta Associates--but not at the same rateas they did in 2009. Leisch points to changes in the tax laws andnew REMIC rules that should ease some of the defaults. Also, thereare signs that capital is moving back into the DC market, albeit ata glacier pace.


"At the same time, however, property performance indicators showthat occupancy levels across all assets are still deteriorating,"Leisch said. Indeed, the Mayflower illustrates the impact sucheroding fundamentals are having: Rockwood Capital reportedly wantsto restructure the$200-million securitized mortgage on the asset as it isn'tbringing in enough capital to pay the annual $11.5-millionpayments.


Still, though, Leisch cautions not to read too much into any onemonth's worth of data. "Some periods will be lumpy, where we willhave large assets hit like the Tishman portfolio or General GrowthProperties, both of which have a big footprint in DC, or theMayflower."

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Erika Morphy

Erika Morphy has been writing about commercial real estate at 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.