Nearly $16.6 billion in commercial mortgage-backed security loans were granted some form of relief as of July, with the lodging and retail sectors accounting for the bulk of forbearances, according to a new Trepp analysis of remittance comments.
The review found about 400 loans were granted relief, though that number will likely increase. Nearly two-thirds of forbearances granted thus far were on hotel loans, and 25% were for retail loans, according to Trepp. Outside of those industries, which have been especially hard-hit by the COVID-19 outbreak, only a few industrial, multifamily or office loans were approved for forbearance.
A majority of the forbearances—nearly 250 loans—had $250 million or less in outstanding debt. Only 26 had an outstanding balance of $100 million or more.
Among the largest loans granted relief was the $652 million HIT Portfolio loan in Chicago, the $597 million Grande Lakes Resort loan in Orlando, Florida, and the $508 million JQH Hotel Portfolio loan in Arkansas, according to Trepp.
For the HIT loan, it’s recommended that the loan be removed from a watchlist, according to Trepp. The forbearance agreement dated June 10 was executed and the loan was transferred back to master servicing two days later.
For the Grande Lakes Resort loan, granted as relief due to COVID-19, the arrangement includes a side-letter with Marriott to modify the deposit and use of brand-held furniture, fittings and equipment reserves, according to Trepp.
With the JQH loan, the modification includes an agreement allowing the use of reserve funds for debt service payments starting on May 1, and waives deposits into the reserve fund beginning April 1, with both accommodations allowed through July 1, according to Trepp.
The borrower was already granted one of two 30-day extensions under the modification. During that time, the borrower will have access to reserve funds to make debt payments and cover operating expenses.
Trepp’s survey notes there will likely be more loan modifications in the near future.
“There were hundreds, if not thousands, of loans for which ‘forbearance request is under review,’” according Trepp. “We excluded those loans from our forbearance tally, which is evidence that the list of 400+ loans will likely grow.”
Trepp also notes other loans may not have been counted yet since comments are generally released once a month, usually when a loan remits. Given the fluidity of negotiations, that means some loans granted forbearance were not counted in Trepp’s tally.
The study also didn’t include companion loans. “[I]t is likely that those companions also received relief so the amounts above would be higher if those were included,” according to the study.