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Appraisal Reduction Amounts Accelerate in IH 2018

As the commercial real estate credit cycle gets further along, rents and prices have shown signs of slowing and in some markets, even declines and some properties are getting caught in the undertow.

World Houston Plaza World Houston Plaza is in the top 10 of highest appraisal reduction amounts as a percentage of the principal balance (credit: Yardi Matrix).

HOUSTON—With CMBS 1.0 winding down, CMBS 2.0 is starting to take on a life of its own. The specially serviced CMBS 2.0 conduit rate has been on the rise for eight consecutive months–ending June 2018 at 1.24%.

Appraisal reduction amounts/ARAs have followed suit and recently have begun to climb. What began as a busy year for ARAs in CMBS 2.0 only accelerated as the first half of 2018 drew to a close. ARAs are considered by some market participants to be a proxy for expected loan losses, says Kroll Bond Rating Agency Inc.

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Lisa Brown

Lisa Brown

Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.

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