Trepp Sees “Mixed Data” on CMBS Distress Levels

Trepp Inc. has reported mixed data on CMBS distress levels lately. The volume of private-label securitized loans that are at least 30 days late declined by $3.49 billion, or 3.7%, in June. Conversely, while the volume of CMBS delinquencies shrunk to $43.98 billion, or 7.35% of the overall CMBS universe, the volume of loans in special servicing increased by 1.72% to $66.76 billion.

“CMBS loans get transferred to special servicing for a variety of reasons, but they typically provide a distress signal,” according to Trepp.

To gain better clarity, Trepp dug into the data and found that among the largest loans in special servicing was the $536 million of financing against Chicago’s 2.78 million-square-foot Aon Center office building. Parts of the loan had previously been transferred, so the distress was well known. This month, the loan appeared among those that transferred as a $93-million loan piece finally moved.

“It’s not to say that the 54-year-old Aon Center isn’t facing credit issues – it is,” reported Trepp. “The building was only 66% occupied as of last September, and cash flow is roughly half what it was expected to be in 2018, when the loan was originated. The building’s appraised value is now a quarter what it was in 2018.”