Weekly Wrap: CMBS Special Services Prices Fall Again


The specialized service rate on loans held in commercial mortgage-backed securities fell for a fourth consecutive month in January.

The drop was attributed to lower month-over-month special service assignment rates across all types of CMBS properties except hotels, according to a new report from Trepp.

The share of CMBS loans allocated to recovery arrangements fell to 9.72%, from 9.81% in December. The main factor was a significant drop in office mortgage rates: around 2.52% of office loans are granted to special management agents, compared to 2.71% in December.

Since office buildings represent the largest loan balances in the ongoing CMBS portfolios, “the reduction in the office rate has a significant impact on the overall rate”.

January special service prices also fell month-over-month for the industrial (1.06% vs. 1.22% in December), multi-family (2.75% vs. 2.9%) sectors. retail (17.04% versus 17.2%).

Hotels were the only property types with a deterioration trend, increasing at a service rate of 24.49% from 24.07% in December. The January rate is lower than the November rate (25.56%) and close to the six-month average for accommodation with special services (24.3%).

The pre-COVID 19 special service rate for hotels a year ago was just 1.94%, among the lowest of different types of CMBS loans.

Hotel operators continue to struggle for loan repayments, having used up most reserve funds while battling a nearly year-long crisis in convention business and tourism due to COVID-related travel restrictions -19.

Last week, the American Hotel & Lodging Association business trips declared in 2020 was down 85% due to pandemic restrictions on large convention gatherings. Overall hotel revenue fell by half to $ 85 billion, from $ 167 billion in 2019.

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