NEW YORK CITY—The once-ballyhooed, and dreaded, wall of CMBS maturities is continuing to crumble with less incident than originally expected. S&P Global Ratings said Friday that payoff rates were up in July, and August may continue in the same vein.

July payoffs reached 71% of maturities, starting the third quarter higher than the year-to-date average of 70.7% for the first six months, according to S&P. The month's payoff rate was second in 2017 only to the 74.8% reached in January.

Thus far this year, about 6,041 loans with an original balance of $87.5 billion have either been prepaid or paid off at maturity, S&P says. Of this, $73.8 billion came from loans that were scheduled to mature through July.

The remaining $13.8 billion were payoffs, including prepays, for loans that come due after July, according to S&P data. In addition, 1,213 loans with original balance of $18.2 billion, or 12.6% of the total, were liquidated with a loss.

At this point, says S&P, the '17 maturity wave has dwindled down to its lowest point in the second half of the year, with just about 27% of the total original balance still outstanding. As of July, 1,945 loans with an original balance of $38.4 billion remain outstanding to mature this year. Of these, 27.0% are current, 35.5% are on the master servicer's watchlist, 30.0% are being specially serviced and 7.8% are defeased.

Of the 10 largest loans with a July maturity date, five have paid off, two remain specially serviced, one remains on the master servicer's watchlist, one was extended and one transferred to special servicing. The $131.8-million JW Marriott Chicago Hotel Loan, which remains on the watchlist, did not pay off at maturity, and based on most recent servicer comments the borrower has entered into a forbearance agreement with the servicer, says S&P, which notes that the loan is seeking refinancing. The $82-million Killeen Mall loan transferred to the special servicer in July despite healthy occupancy and limited lease rollover concerns, which S&P says indicates “a conservative sentiment towards high-balance loans backed by mall collateral.”

In fact, retail represents a trouble spot in this year's CMBS maturities, as loss severities for loans in the sector retuned to historical highs during Q3. YTD, loss severities are at 60%, up from 55.2% in 2016 and 45.5% in 2015 and S&P cites “the well-known struggles for many brick-and-mortar retailers of late” as a key factor.

That being said, the ratings agency points out that YTD, 63.8% of the total retail loans scheduled to mature have successfully prepaid or paid off, suggesting that the trouble with retail might be limited to a subset of loans. While the overall retail liquidated balance for the year could still increase over the coming months as the outstanding balance matures, YTD is only at $102 million compared to an average of $500 million historically.

During August, 309 CMBS loans across all property types with an original balance of $4.9 billion outstanding are scheduled to mature. Of those, 43 loans totaling $500 million are currently with the special servicer. Specially serviced loans make up only 4.7% of the total loan maturities in August, which bodes well for July's elevated payoff rate carrying through to the current month.

Instant Insights /

CMBS Payoffs Rise in July; Retail Losses Up

Related Stories

Recommended For You