CMBS Special Servicing Rate Continued to Climb in August

The special servicing rate on commercial mortgage-backed securities hit 10.04% in August, an increase of 55 basis points from July, according to a report by Trepp.

The rise was tied primarily to the retail and lodging industries and continued a consistent increase in the rate that started in March. The retail special servicing rate was 17.3%, up from 16.0% the previous month..The lodging special servicing rate was 25%, up from 24.3% in July. The rate for lodging was the second-highest increase among all property types.

Earlier this month, Trepp reported that the CMBS delinquency rate continued to drop, dipping to 9.02% in August.

“The difference in the delinquency and special servicing rate trend is based on the fact that while forbearances switch the loan status from delinquent to current, the loans, if stressed, still continue to be specially serviced,” the report said. “Considering that forbearance agreement typically provides short-term respite, [the] special servicing rate seem[s] to be a better representative of the current state of distress in the CMBS universe.”

Special servicing rates in the industrial (1.21%), multifamily (2.56%) and office (2.93%) sectors remained generally flat, according to the report.

The special servicing rate for CMBS 2.0+ notes grew to 9.12% in August, up 58 basis points, the Trepp report found. The outstanding balance on these loans increased by roughly $3.2 billion to $48.1 billion.

Among legacy, or CMBS 1.0, properties, the special servicing rate grew by six basis points to 46.81%. The outstanding balance on these loans fell to $6.1 billion in August from $6.2 billion in July.

“The number of loans newly transferred to special servicing slowed down in August, with a total of 170 loans sent to special servicing in comparison to 363 the month before,” the report said.