Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.
Issue link: https://westernrealestatebusiness.epubxp.com/i/818922
www.REBusinessOnline.com Western Real Estate Business • May 2017 • 47 ing average loss rate for retail loans has been trending downwards since mid-2016 to the 46 to 48 percent range in recent months. The loss severity is a percentage calculated by measuring the amount of realized losses associ- ated with a loan against the unpaid principal balance at disposition. (As an example, the loss severity for a $100 million loan that was closed out with a $10 million loss is 10 percent). Dur- ing this time frame, 9.59 percent of all retail loans were written off with some kind of loss at an average loss severity of 48.06 percent. By comparison, 13.13 percent of office loans have taken a loss, generating an average loss rate of 43.20 percent. The current status of maturing loans can serve as an indicator for losses and refinancing outlook. Based on a Febru- ary snapshot, around $102.2 billion in fixed-income mortgages are still up for refinancing this year, with retail loans making up around 29.81 percent of this number. The maturing volume falls to $86.4 billion combined between 2018 and 2021, but retail loans will com- prise large portions of each yearly ma- turing total after next year. Looking at retail loans that will come due for the remainder of the year, 26.57 percent is in special servicing while 25.08 percent is 30 days or more delinquent on pay- ment. 10.37 percent of the maturing balance through December has been assigned $3.2 billion in total ARAs, a good chunk of which will show up as losses taken by the borrower. The av- erage occupancy level for this batch of properties is currently pegged at 93.4 percent. Rising NOIs, persistent low interest rates, and solid commercial real estate fundamentals will enable many of these loans to pay off in the next few months while others obtain additional financing. Since risk retention rules that place higher capital charges on issuers were implemented in late December, CMBS issuance has dropped off consider- ably from previous years. Issuance reached $11 billion in the first quarter of 2017, which is a 34 percent decrease from the same period in 2016. In par- ticular, growing angst surrounding widespread retail downsizing has caused some pullback as the share of retail loans in the issuance pipeline dwindled to 15.27 percent in the first three months of this year, down from 26.12 percent and 24.93 percent of to- tal volume for 2015 and 2016, respec- tively. Looking at the favorable pricing garnered by risk retention deals issued thus far, issuance may pick up as regu- latory uneasiness recedes in the com- ing months. Raising Cane's Laguna Hills, CA For sale $6,133,333 2,882 s.f. Walgreens Santee, CA For sale $11,500,000 13,666 s.f. Bank of America Portfolio Long Beach & Lynwood, CA Just sold $5,125,000 22,818 s.f. Sportman's Warehouse Colorado Springs, CO Just sold $8,663,666 49,991 s.f. Red Robin Citrus Heights, CA In escrow $2,500,000 7,189 s.f. McDonald's Lehi, UT Just sold $3,000,000 5,180 s.f. In this niche marketplace, our national team provides a personalized level of institutional service to help execute the sale, purchase and recapitalization of single-tenant net lease properties anywhere in the United States. Adam Friedlander Vice President +1 424 901 8201 CA 01806555 adam.friedlander@am.jll.com us.jll.com/netlease Matthew Berres Senior Vice President +1 424 901 8202 CA 01977909 matthew.berres@am.jll.com © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. Scott Bailey Associate +1 424 901 8204 MA 9534897 scott.bailey@am.jll.com Contact our Southern California team: