The dollar number of U.S. fixed-rate commercial mortgages that were liquidated in March rose by 49% from February, according to Trepp. However, the majority of loans with losses have losses of less than 2%.
In total, 105 loans totaling $1.2 billion were liquidated in March, according to Trepp. The losses on those loans were approximately $216 million, which had an average 17.8% loss severity. That is the lowest loss severity tally that Trepp has seen since it began releasing the Trepp Loss Analysis report in January 2010.
The March number is much less than the average 41.1% loss severity in the last 15 months. The special servicers have been liquidating at a rate of about $901 million per month during that time. This is why the $1.2 billion in liquidation this month represents an above average reading.
The low loss reading for March was mostly due to a large number of loans closing out very close to par. In most instances, these loans were effectively paid off at par, although the payment of the 1% special servicing fee created a small loss on the loan, Trepp said. Of the 16 largest loans that had losses in March, 14 had losses of 1.1% or even less, Trepp said.
The One Park Avenue loan, which recently paid off, is a good example. That $375 million loan was effectively paid off at par, although the special servicing fees of 1.01% created a loss on the loan of about $3.8 million. The loan was split into two $187.5 million pieces. The losses were not exactly the same. One pieces’ loss had $2,340 more in losses compared with the other, leaving us scratching our heads.
Of the $1.2 billion liquidated in March, $801 million fell into the category of having one of these miniscule losses.
