THE LODGING SECTOR has seen a steep increase in the number of commercial mortgage-backed securities loan borrowers being placed “in grace period” or “beyond grace period”, according to the Trepp research firm. It’s a category usually occupied by less than 3 percent of all lodging CMBS loans, but in April the number rose 2.7 percent over the previous month to 20.4 percent.
Trepp’s most recent “COVID-19 Lodging Report” showed 657 lodging loans, which together account for a little less than $15 billion, had fallen into the category after missing the April 1 payment.
“Historically, this category has not been paid much attention,” Trepp CLO/CMBS Analyst Jyoti Yadav said in an article. “But with the nature of the current crisis, it warrants more attention given it could serve as an early indicator for future distress.”
There are about 3,000 lodging CMBS loans totaling over $86.0 billion across the U.S. with outstanding balances.
“The lodging sector is the third-largest property type by outstanding balance, accounting for over 16 percent of the outstanding mortgage debt in the CMBS universe,” Yadev said.
California and Florida each contain more than 10 percent of loan borrowers with outstanding balances. Las Vegas topped the list of metropolitan statistical areas with outstanding balances with more than $4.6 billion in balance followed by New York with $4.5 billion and Miami with $4 billion.
In early April, Trepp forecast that the lodging sector could see a 35 percent default rate on commercial mortgages as a result of the pandemic.