REPORT FROM THE U.S.—A big loan that reached maturity in May helped push the hotel CMBS delinquency rate higher during the month.
Manus Clancy, a senior managing director at Trepp, pointed to Lehman Brothers’ $61-million Ritz-Carlton Bachelor Gulch loan, done in 2007, as being one CMBS deal that stuck out among the 30-day May delinquencies. The Ritz-Carlton Bachelor Gulch is a 180-room property in Avon, Colorado.
“That was one of the biggest loans that hit in the month of May,” he said.
The May delinquency rate for hotel CMBS 30 or more days delinquent surged by 172 basis points and is now higher than 12%, according to data provided by research company Trepp LLC. The overall CMBS delinquency rate reached an all-time high of 10.04% in May, an increase of 24 basis points when compared to April of this year.
Clancy said going forward, CMBS lenders and borrowers likely will be working on refinancing deals, and that should help stabilize delinquency rates.
In an email, CEO at Gatehouse Capital Marty Collins said he still sees an active hotel CMBS market and that “one month does not make a trend.”
“CMBS is increasingly active and I believe an indication of a ‘normal’ transaction environment,” he said.
That said, Collins added his company is not financing any projects with CMBS these days.
“The inflexibility of (the) lender once (the) loan is made is just too daunting for me,” he said. “Plus, I am a developer and CMBS is a stabilized-asset game.” But even then, it’s just too inflexible, he added. ”It is a bad fit with operating businesses and better for true bond deals like industrial or office.”
Whether delinquency rates stabilize or decrease will largely be a factor of how PIPs are handled, he said.
“Almost all of these have deferred maintenance that brands are increasingly aggressive on getting resolved,” Collins said.