2024 Special Servicing Rates
CMBS special servicing rates continued to increase in November, with office leading the uptick.
The Trepp CMBS Special Servicing Rate climbed 39 basis points to reach 9.53 percent in November. The rate has increased about 275 basis points so far in 2024, with November seeing the second-largest monthly jump in the overall rate in 2024, following the 80-basis-point increase in April.
About $3.7 billion in outstanding loans transferred to special servicing in November, which is the largest amount that has transferred in a given month in the last six months. The office sector claimed the largest proportion at 35 percent of the newly special serviced loan amount, and the rest of the newly special serviced loan balance was evenly distributed across the multifamily, mixed-use and retail sectors.
The largest loan that transferred to special servicing in November was also the loan that drove the substantial uptick in the mixed-use rate. The $742.8 million 1515 Broadway loan transferred to special servicing due to imminent balloon payment default ahead of its March 2025 maturity date.
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However, a three-year term extension has been negotiated, so the loan will now mature in March 2028. The subject collateral is a 1.7 million-square-foot office tower located in Times Square in Manhattan, N.Y., that was built in 1972 and renovated in 2011. The 57-story Class A building is classified as mixed-use but is predominantly office space. The top tenant at the space is media giant Paramount, which occupies more than 96 percent of the total square footage on a lease that expires in summer 2031.
The freshly acquired media giant announced plans to lay off 15 percent of its workforce in September; headcount reductions have already been underway in phases and could impact its footprint at 1515 Broadway. Separately, SL Green, owner of 1515 Broadway, has proposed converting the property into a casino and has bid for a New York State gaming license alongside Caesars Entertainment and Jay-Z’s Roc Nation.
Other large deals
The $505 million Natick Mall loan was the second-largest loan to transfer to special servicing in November. According to servicing commentary, the loan transferred due to imminent balloon payment default at its November maturity date. The loan is backed by a 1 million-square-foot superregional mall in Natick, Mass., a Boston suburb, that was built in 1966 and renovated in 2017.
Per servicer commentary, the top tenant at the space, Wegman’s Food Markets, has closed but is still paying rent. Wegman’s has occupied just shy of 19 percent of the square footage on a lease that was set to expire in 2037. Other tenants include Shoppers Find, Forever 21, Crate & Barrel and Puttshack. The lease on Forever 21 is set to expire at the end of 2024, and a leasing update has been requested from the borrower. Crate & Barrel has renewed its lease, which was to end in June 2024, through June 2029. The loan posted a Debt Service Coverage Ratio based on Net Cash Flow of 1.72x with occupancy at 92 percent in the first six months of 2024.
—Posted on December 27, 2024
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