Retail Hurts CMBS Performance: Fitch

The struggling retail and hotel sectors have hit commercial mortgage-backed securities (CMBS) performance, and loans collateralized by office space may be the next to take a hit. Of the largest mortgages transferred to special servicers — firms that handle loans that are delinquent or on the verge of non-performance — four are collateralized by retail developments, according to a Fitch Ratings report issued Wednesday. The largest of those loans is a $206.8m loan secured by the 556,835-square-foot Woodbridge Center in Woodbridge, New Jersey. Distressed shopping mall owner General Growth Properties is the debtor of the loan, and the real estate investment trust is trying to reorganize under Chapter 11 bankruptcy protection. Other loans in Fitch’s list of top 10 largest delinquent loans are backed by malls in Iowa and California, as well as one loan for two malls, one in Georgia; the other in North Carolina. Hotels and resorts in Phoenix, Atlantic City, N.J. and Las Vegas are also on the list, as well as multifamily housing portfolios in Texas and the southeast US and a collection of senior citizen health care facilities. The loans in the lists come from Fitch’s portfolio of 470 US CMBS with an unpaid principal balance of $471bn. Fitch said 18% of the portfolio — 5,561 loans totaling $75.5 billion — contain mortgages it lists as loans of concern. Most of those, 11%, were originated in 2006 and 2007. Loans on four office complexes worth a combined nearly $2bn, two each in Los Angeles and New York City, are on Fitch’s watch list of 10 “loans of concern.” These loans haven’t been assigned to special servicers yet, but the ratings agency believes they are in danger of doing so. A third list in the report details the best performing specialty-serviced loans. Four loans for multifamily developments, including one loan for a group of 14 apartments across six states, are on the list, as well as a mixed-use development outside Dallas and two groups of economy hotel locations spread across the US. Write to Austin Kilgore.