Solve News Flash: An excerpt from Methodical’s March Commentary
March 3, 2021
While senior CMBS bonds have rallied to pre-pandemic tights, BBB- bonds from hotel and retail heavy deals are still offered at heavily discounted levels similar to those observed in December.
Doing some back of the envelope math of the over $400 billion of conduit CMBS outstanding (per SIFMA), 27% is retail collateral and 13% is hotel for a total of $160 billion, and given about 13% of retail and about 20% of hotel collateral is delinquent, there should be about $24 billion of distressed loans in conduit deals and perhaps another $10 billion in SASB deals for a total of $34 billion in CMBS. Real Capital Analytics estimates $146 billion across all CRE is in distress, at serious risk of bankruptcy or default. While some of these loans will benefit from an economic recovery, others – especially high-delinquency retail – may share the fate of Fashion Outlets of Las Vegas.
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