CMBS Bonds Downgraded on Special Servicing Action
Standard & Poor’s had downgraded 15 classes of bonds backed by a $425 million loan secured against the Four Seasons Hotel in New York and 3 other luxury resort hotels. The action was triggered by a drop in cash flow which was 46% below S&P expectations. Surely, the expected cash flow figure had already been discounted in arriving at these expectations, painting this drop as a serious cause for concern in CRE. Occupancy has dropped from 69% in the last fiscal year to just 58%.
The full blown impact of CRE deterioration on the hotel industry could escalate rapidly: according to RealPoint there are over 1,500 loans with a total balance of nearly $25 billion which may be in danger of default.
And he closes with this:
The silver lining: REITs now see cap rates at or below 6% in perpetuity… Which unless they are seeing something in the ultraviolet end of the electromagnetic spectrum that is invisible to everyone else, is almost believable.
As I have been preaching for quite some time here, it should be abundantly clear to everyone in the CRE industry that CAP rates are headed down. Yup.
that ZH piece caught on to a LOT of blogs and mainstream sites. and by down you mean up, i am assuming.
no, not up, down. sarcasm, of course.
no, not up, down. sarcasm, of course.