According to new Trepp analysis.
Typically, deferrals allow borrowers whose loans are not in default to withhold their principal and interest payments until they can repay them, or until the end of a deferral period. specified (the duration of which varies depending on the loan). Since the start of the pandemic, most abstentions observed by Trepp experts do not eliminate the borrower’s obligation to pay–although generally, reserves can be tapped to keep a loan up to date.
But in some cases, when borrowers don’t pay principal or interest, providers don’t advance P&I either. Trepp mentions the case of Crocker Park, a large mixed-use complex in West Lake, Ohio that has 80 retail tenants (including a Dick’s Sporting Goods) and 18 office tenants as collateral for a $ 140 million loan. Borrowers benefited from a 12-month deferral and the manager did not advance–in contravention of typical CMBS practice, where providers advance P&I for the term of the loan. With Crocker Park, there were no interest payments, no server advances, and “in September, the agreement that this loan was part of paid back hundreds of thousands of dollars in previous advances to the server.” , Trepp analysts wrote in a recent article highlighting the dilemma. “This means that for three CMBS transactions, all 2016 vintages, there were large interest deficits in September… Due to this postponement, these interest deficits can continue for a considerable period, 12 months, because the loan is so important. “
Crocker Park marked the first time Trepp analysts saw a loan deferral approved without a service advance.
The phenomenon has been highlighted recently the Wall Street newspaper coverage of shopping center owner Pyramid Management Cos., which defaulted on two shopping centers in securitized debt and ultimately negotiated extensions and deferrals. Pyramid resumed payments in November.