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This year, without a doubt, will be a big one for refinancing commercial mortgages. While few experts anticipate large-scale problems affecting CMBS loans set to mature in 2016, the market has experienced some headwinds in new issuance of late. So to make things more interesting Trepp LLC, a data and consulting firm that tracks the CMBS market, put together its second annual Commercial Real Estate Derby, which looks at refinancing odds for 2016. Manus Clancy, Trepp’s senior managing director for applied data, research and pricing, provided the analysis for individual loans. The total purse for the derby totals $12 billion.
According to Trepp, “Many of the largest loans slated to mature over the next 12 months look likely to refinance.”
*Disclaimer: Odds are purely fictional and do not represent true odds of each loan paying off.
Status: Scratched
Loan Balance: $3 billion
Maturity Date: December 2016
According to Trepp’s analysis, “the only thing that can keep this horse of a loan from paying off is the legal jockeying of its owners. It had trouble staying healthy between ’09 and ’13, but it seems revved up to put up impressive numbers. Sometimes referred to as the ‘Big Horse That Could.’”
Loan Balance: $472 million
Maturity Date: December 2016
Trepp notes that “Owners are already signaling that the horse is not 100 percent healthy. The loan is with the special servicer and early 2017 occupancy at the Chicago property is projected to be only 55 percent. Special servicer comments indicate refinancing risk over vacancies. Modification possible. 2014 value is below current note value.
Loan Balance: $458 million
Maturity Date: August 2016
“Recent results look weak, with 2014 debt service coverage ratio (DSCR) under 1.0x, but sometimes numbers can be deceiving,” Trepp research indicates. “New leases and extensions at the Los Angeles property should provide ‘gas.’ Look for improved results in 2016 and a high likelihood of a payoff. Ready to go the distance.”
Loan Balance: $429.9 million
Maturity Date: June 2016
According to Trepp, “Low leverage (35 percent loan to value) to CMBS debt makes this seem lik a no-brainer, but the property carries tons of mezz debt. DSCR has been weak, but new Franklin Templeton lease should push number closer to 1.0x. Horse lives in a pricey Manhattan neighborhood, which should help cause.”
Status: Scratched
Loan Balance: $353 million
Maturity Date: March 2016
“After Stuy Town, this is the closest to a sure thing in the race,” Trepps’ note indicates. “Outstanding numbers (1.87x DSCR in 2014) in a hot market. If this New York City property can’t refinance, plan to stock up on freeze-dried food and survival gear.”
Loan Balance: $350 million
Maturity Date: December 2016
Trepp proclaims this loan “another no-brainer.” “Latest DSCR was over 3.0x (2.73x for 2014),” the firm’s research shows. “The Chicago property was built in 1930 during the Great Depression, but only a Great Depression will keep this thoroughbred from crossing the finish line.”
Loan Balance: $342.4 million
Maturity Date: December 2016
This is “another trophy property in a strong market. Office suffered Hurricane Sandy damage in 2012, but rebounded. Low leverage loan (50 percent LTV) with 100 percent occupancy and growing. DSCR should get this property across the finish line.”
Loan Balance: $340 million
Maturity Date: August 2016
One of two Boston entries in the race, the property’s owners had “cause for concern when top tenants PwC (26 percent of GLA) announced it was leaving, but two major leases for over 300,000 square feet were signed, putting the property back on firm footing,” according to Trepp. “Securitization LTV was 45 percent, but the horse is carrying extra $189 million in mezz debt. Should refinance even if Tom Brady is writing the terms.”
Loan Balance: $292.7 million
Maturity Date: August 2016
Trepp researchers indicated that this “entrant looks cuspy.” “Low occupancy (70s percent) and DSCR well below 1.0x since 2012 make this horst ‘interesting’,” they write. “Unlike other low DSCR entries, this came to market in 2006 with a relatively high LTV of 15 percent. Lease extension with GE would help, but this horse could use a shot of Lasix and a few sugar cubes.”
Loan Balance: $280 million
Maturity Date: June 2016
“A rare traditional retail property in the field, this horse sports blistering DSCR and occupancy levels,” Trepp notes. “Should finish without breaking a sweat. Benefits from training in Denver’s high altitude. First time wearing blinders.”
Loan Balance: $300 million
Maturity Date: December 2016
Trepp researchers believe the 3.7-million-sq.-ft. self-storage portfolio, with 48 properties scattered primarily through Michigan and Ohio, should have no difficulty refinancing. “2014 financials saw DSCR blow past the 3.0x level,” they write.
Status: Scratched
Loan Balance: $280 million
Maturity Date: August 2016
This property has been designated a “tough read.” “Top tenant Goodwin Proctor, in 37 percent of the space, will vacate in April. Latest occupancy is 88 percent, but that could drop sharply, as could the 1.65x DSCR. Include in exotics, but don’t overpay.”
Status: Scratched
Loan Balance: $266.9 million
Maturity Date: March 2016
“Don’t be fooled by the fact that this is a three-legged retail portfolio,” according to Trepp. “DSCR has been strong and growing. Loan should leap, not limp, over the finish line.”
Loan Balance: $264 million
Maturity Date: October 2016
The 1,052-unit apartment complex is the “only apartment entry in the field, and sports a DSCR of 1.29x, which has been growing in recent years. Spent formative years in great weather. Can it handle the rain and mud?”
