Hotel Loans Lead in Delinquencies for February
“The hotel sector continues to exhibit the highest volatility with delinquency rates by property type across several markets in February,” wrote Marc McDevitt, a senior managing director at CRED iQ.
“By market and sector, hotels accounted for four of the top 10 increases in distress and five of the top 10 decreases in distress, according to CRED iQ’s analysis of market performance for nearly 400 metropolitan statistical areas across the U.S. covering over $900 billion in outstanding commercial real estate debt.
“Financial pressures for many lodging properties have been alleviated over the trailing 12 months, albeit maybe temporarily, through the use of forbearance agreements, or modifications in more severe cases of cash flow disruptions. As forbearance agreements expire, get extended, or new forbearance agreements are signed, rates of distress can fluctuate rather dramatically on a market-by-market basis.
“As an example, the distressed rate for the Nashville hotel market spiked this month following the delinquency of a $104.8 million loan secured by the 456-key Westin Nashville. A forbearance agreement was signed in October 2020 that deferred debt service payments through April 2021; the loan subsequently remained current through January 2022 until it became 30-days delinquent.
“Similar to last month, the office sector showed additional signs of distress in select markets. Three of the top 10 market/sectors with increased distress were represented by the office property type.
“The Allentown, Penn., office market had the highest overall percentage increase, among the top 50 MSAs, in its distressed rate compared to the prior month. This was primarily caused by the special servicing transfer of a $59.4 million loan secured by TEK Park — a 514,033-square-foot, eight-building office campus located in suburban Lehigh Valley, Penn. The Allentown market was ranked as one of the best overall within the top 50 MSAs as recently as last month due to strong performance in the industrial sector.”
A previous version of this article incorrectly stated that a loan for the Westin Nashville was delinquent due to a servicer reporting error. The servicer for the Westin Nashville loan posted debt service payments for December 2021 through February 2022.
