BEYOND GRACE PERIOD: USA HOTELIERS OWE $15B

COVID-19 is already causing a spike in commercial mortgage delinquencies in the American hotel sector according to a new analysis. In Trepp’s latest data release, almost 20 percent of all lodging CMBS (commercial mortgage-backed securities) loans are now categorised as “In Grace Period” or “Beyond Grace Period”. Trepp is a New York-based research firm that tracks this market. The data presented by Trepp sparks fears that COVID-19 could result in an even bigger mortgage crisis than 2008.

CMBS loans account for about 15 percent to 20 percent of all American commercial real estate mortgages today. Hoteliers are top of the list with tourism tanking globally. Trepp added that many of the cases categorised as “In Grace Period” or “Beyond Grace Period” had payments due by April 10 – which now add up to almost USD $15 billion in unpaid loans in the hotel sector alone.

Trepp pointed out that this spike in late payments is an early indicator for how bad things can get for lodging real estate. “For a lot of these what we see accompanying these is a lot of notes saying, ‘We want a forbearance. We cannot pay this’,” explained Trepp senior managing director Manus Clancy. “Unfortunately, the numbers above could be on the low side of what’s to come. There are many examples of loans for which the April 1 payment was made, but for which the watch list comments now indicate a forbearance has been requested.”