Monday, May 13, 2013

Another >100% Loss Severity

East Ridge Mall ($44.5mm - WBCMT 2005-C22) was liquidated last month after GGP tossed the keys back to the servicer. The sales price came in at $7mm (was appraised at $13.7mm in August!), which Barclays expects to result in 100% loss in principal, partial payback of outstanding ASERs, TI&LCs and transaction costs.

This follows several other recent 100% (or close to it) loss severities in recent months:
  • Oviedo Marketplace ($55mm MSC 2005-HQ6) - 108% severity
  • Lakeview Square Mall ($43mm - COMM 2006-C7) - 100% severity
  • Prestige Place I & II ($15.2mm  - GSMS 2006-GG8) - 92% severity
  • Parmatown Shopping Center ($61.6mm - GMACC 2004-C2) - 91% severity
  • AnchorBay ($41.2mm - MLMT 2003-KEY1) - 100%
  • Carefree Eastern ($11.3mm - WBCMT 2006-C28) - 96% 
  • Metro I Building ($40mm - COMM 2004-LB4A) - 100%
  • Pentagon Park ($18.5mm - MLCFC 2006-4) - 94%
  • Hilton Tapatio ($55.25mm - BSCMS 2006-T24) - 90%
  • Livonia Industrial Properties ($16.3mm - LBUBS 2005-C1) - 96%
  • Empire Towers ($14.6mm - MSC 2007-T27) - 108%
  • Lightstone Portfolio ($62.5mm JPMCC 2006-CB15) - 90.7% severity
  • City View Portfolio ($69mm JPMCC 2006-CB16) -  101% severity
I'm sure I'm missing some too, but there has definitely been an uptick in 100% loss severities. Before the Great Recession 100+ loss severities in CMBS were rare birds, with stories such as Doctor's Hospital (pre 9/11) resulting in the arrest of the sponsor (but the head of origination that made the loan runs his own company today - its all in your perspective). I wonder if anyone has done a piece on 100%+ Loss Severities throughout history...


Anonymous said...


Long time reader here and thanks for putting that together.

Question: Can you please explain how losses are distributed to the trust and bondholders in 100% loss severity situations like this. With RMBS it's a little more clear-cut but with CMBS I get confused as to how ASERs, TI&LCs, and transaction costs are prioritized in the cash waterfall.

Thank you and keep up the good work.

-Sacramento Stud

crabsofsteel said...


Allow me. Upon liquidation, there are usually some proceeds from disposition of the property/ies. These are your gross proceeds. The payout waterfall is:

- workout fees to the special servicer
- master servicer advances (which may include P&I, T&I, PPAs, etc.)
- unpaid interest (usually due to ASERs from appraisal reductions) which goes to reimburse bond interest shortfalls.

If anything is left over, those net proceeds are paid out as principal to whichever front pay is supposed to get them (A1A if it's a group 2 MF or MH loan). The difference between net proceeds and loan balance is principal loss, applied to the lowest-rated principal-bearing class and up.

Should gross proceeds be insufficient to reimburse servicer advances (i.e. overadvancing), they are recovered either from other loans' interest, leading to further interest shortfalls or via a WODRA, where they are recovered from principal payments.

Anonymous said...

Makes better sense now. Many thanks crabsofsteel.

Concrete Jungle said...

Good answer. Thanks.

Obviously it can get fairly complex, especially when mods change the rules. I can't for the life of me remember which loan I was looking at the other day that had an A/B note mod, an extension, and a clause that said the loan would not be responsible for curing interest shortfalls above $3.5mm if the borrower refinanced before a certain date.

Anonymous said...

One Congress, $190mln in WBCT2007-C30.

Concrete Jungle said...

Yup, that's it.