Landmark Links June 19th – Mind the Gap

One Big Thing

As the pandemic puts stress on commercial real estate, CMBS loans have been moving to special servicing at an unprecedented rate.  A new report from Moody’s Analytics and loan special servicer CWCapital found that a whopping 96% of the loans transferred to special servicing from March 1 through the third week in May were for hotel and retail properties.

Perhaps the most stunning part of the report is this little gem about multi-family forbearance:

For multifamily loans where “Covid-19” or “forbearance” appeared in servicer comments, the majority (97.1%) of those issued by agencies were current, but that was the case for only about half (53.8%) of non-agency (CMBS) issuances, the report said, even though those loans, totaling about $2.2 billion, were roughly equally divided between agency and non-agency issuers, the report said.

This difference is massive and probably points to the higher quality of agency-backed properties.  It has been very difficult for non-GSE lenders to compete with agency lenders on good multi-family properties during this cycle.  As a result, non-agency lenders generally ended up with lower quality collateral.  It also indicates that, if distress in the multi-family market materializes, it will likely not come from GSE sources.

What I’m Reading

Uncertainty: Commercial real estate CLOs have performed relatively well during the pandemic with loans in-or-beyond their grace period at only 3.1%, compared to CMBS with 7.15%.  However, concerns about the direction of the economy and its impact on the transitional properties that tend to be financed by loans in CLOs have ground originations to a halt.

Trickle Down: As rich people cut their spending, it has hurt the people that depend on it for a living:

As income inequality has grown in America, so has inequality in consumption. That means that when the rich spend money, they drive more of the economy than they did 50 years ago. And more workers depend on them.

Put another way, this particular economic shock — one that has halted much in-person spending, even by rich people who never lost their jobs — has been devastating for an economy in which many low-wage workers count on high-income people spending money.

Relative Pain: As the Bay Area reopens, San Francisco – which is the home to many young, VC-dependent tech firms – has the highest sublease availability in the US at about 30%.  Silicon Valley – which is home to more established tech companies with large balance sheets – has sublease availability of only 2.5%.  This trend is likely to continue as many of San Francisco’s tech companies encourage employees to work remotely and suburbs continue to gain relative to cities.

Exposed: Clothing stores-  not restaurants and bars – took the biggest retail hit from the pandemic shutdown, with sales falling by two-thirds.

Chart of the Day

Source: Bloomberg


Your Move, Florida: An Oregon man stripped down, fought a police dog and spent 12 hours perched atop a railroad crossing sign that he had climbed, throwing rocks at people below.  (h/t Laura Nelson)

Gonna Leave a Mark: A man was bitten in the face by an alligator while playing disk golf because Florida.

Its Always the Ones You Least Expect: A man with a machete tattoo on his face was arrested for an alleged machete attack because Florida.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

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