Trepp Research: Lodging Takes Hardest Hit from COVID-19; Increase in Distressed Hotels Across the U.S.

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Given the alarming disruption in the lodging commercial real estate sector, Trepp has analyzed the impact of the coronavirus using metrics such as delinquency rate, special servicing rate and late payments, and evaluated how these metrics have fared in recent months.

While the impact from COVID-19 across all property types has been substantial, the figures for the lodging sector look particularly grim. The CMBS delinquency rate for lodging loans jumped by 118 basis points to 2.71% in April.

Trepp, a leading provider of information, analytics, and technology to the structured finance, commercial real estate, and banking markets, has released a research report on the lodging sector amid the COVID-19 pandemic. The full report can be accessed here: https://info.trepp.com/covid-19-lodging-hotel-report-april-2020-pr.

While the impact across all property types has been substantial, the figures for the lodging sector look particularly grim. The CMBS delinquency rate for lodging loans jumped by 118 basis points to 2.71% in April. Although the retail sector logged the highest delinquency rate based in April, it was the lodging sector that clocked in the largest increase among all property types.

In April, 27 loans totaling over $1.0 billion were reported as newly delinquent. This was a significant uptick in comparison to the month prior which recorded 12 loans totaling only $121.0 million as newly delinquent.

“This steep increase in the delinquent balance is incredibly important considering that most CMBS borrowers impacted by COVID-19 will not be identified as delinquent,” said Trepp research analyst, Jyoti Yadav. “Most borrowers made their March 1 payments as that payment was due before the headlines and shelter-at-home orders became widespread.”

With hotels across the board struggling to maintain enough liquidity, a large number of borrowers have missed their April 1 rent payment. These loans currently have a loan status – ‘A’ or ‘B’, which indicates that the borrower is (A) “in grace period” or (B) “beyond grace period” on its payment. Historically, this category has not been paid much attention. But with the nature of the current crisis, it warrants more attention given it could serve as an early indicator for future distress.

Based on April remittance data, 657 lodging loans, which together account for a little less than $15.0 billion were reported to be in the A/B category. By balance, those in the A/B category increased from 2.7% last month to 20.4% in April.

For additional details, such as lodging delinquency and special servicing rates from the last few months, the largest MSAs by lodging delinquent balance, the number of lodging loans in grace period or beyond, newly watchlisted lodging loans by state, and more, download Trepp's report here: https://info.trepp.com/covid-19-lodging-hotel-report-april-2020-pr.

For daily CMBS and CRE commentary, follow @TreppWire on Twitter.

About Trepp
Trepp, founded in 1979, is the leading provider of information, analytics, and technology to the structured finance, 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. From its offices in New York, San Francisco, and London, Trepp serves its clients with products and services to support trading, research, risk management, surveillance, and portfolio management. Trepp is wholly-owned by Daily Mail and General Trust (DMGT). For more information, visit https://www.Trepp.com.

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Jyoti Yadav
Trepp
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