Trepp Research: Can Lodging Real Estate Fundamentals Support Continued Growth?

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Trepp releases a new research report highlighting how solid market fundamentals have contributed greatly to the progress of lodging in the world of CMBS.

Maturing Lodging Loans in CMBS

Thanks to increases in hotel revenue, occupancy and room rates, the lodging sector is seeing its highest number of CMBS loans issued for properties in over five years.

Trepp, LLC, the leading provider of information, analytics, and technology to the CMBS, commercial real estate, and banking markets, has published new research on the commercial real estate lodging property sector that highlights how solid market fundamentals have contributed greatly to the progress of lodging in the world of CMBS.

“Thanks to increases in hotel revenue, occupancy and room rates, the lodging sector is seeing its highest number of CMBS loans issued for properties in over five years”, said Joe McBride, Research Associate at Trepp. “Through the first five months of 2015, there have been nearly $10.1 billion issued in loans for lodging, which is more than any other property type so far. In 2014, there was $21.7 billion issued for lodging properties, a monstrous increase from the $150.6 million issued in 2010.”

The Trepp report features historical performance breakdowns for lodging loans in CMBS, as well as occupancy, issuance, and amortization totals for the property type. Delinquency rates for the sector have fallen dramatically since their peak of almost 20% in 2010 to 4.2% in April 2015.

One of the factors most important to the continued growth of the lodging sector is the ability for loan borrowers to refinance their mortgages when they mature. With the “wall of maturities” unleashing over $300 billion in maturing CMBS loans from now until 2017, the market will see $41.5 billion of that total come from maturing lodging loans. While this number may seem daunting, there are many predictive statistics that should alleviate some concerns for loan borrowers.

“The ability to refinance these maturing lodging loans should be easier for borrowers, given that many of these loans are current on their payments”, adds McBride. “There is also a small number of lodging loans carrying appraisal reductions, which will help the ability to refinance since property and loan values will remain high if there is no reduction issued.”

A complimentary copy of the report can be downloaded at http://www.trepp.com/knowledge/research. For daily CMBS and commercial real estate commentary, follow @TreppWire on Twitter.

About Trepp
Trepp, LLC, founded in 1979, is the leading provider of information, analytics and technology to the CMBS, commercial real estate and banking markets. Trepp provides primary and secondary market participants with the web-based tools and insight they need to increase their operational efficiencies, information transparency and investment performance. Trepp serves its clients with products and services to support trading, research, risk management, surveillance and portfolio management. Trepp is wholly-owned by dmg b2b, a division of the Daily Mail and General Trust (DMGT).

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Joe McBride
Trepp
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