By THOR KAMBAN BIBERMAN, The Daily Transcript
Friday, December 3, 2010
The Mortgage Bankers Association (MBA) reported there are indications of a strengthening economy, but that doesn't mean there aren't plenty of commercial property owners in San Diego County more than 90 days delinquent with their payments.
The MBA analysis looked at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae (OTC: FNMA) and Freddie Mac (NYSE: FMCC) in the third quarter.
Together these groups hold more than 80 percent of outstanding commercial/multifamily mortgage debt.
The report said that the 90-plus day delinquency rate on loans held by FDIC-insured banks and thrifts increased 0.15 percentage points to 4.41 percent.
In San Diego County, a number of assets have loans more than 90 days delinquent.
Topping the list is the 329-room Park Hyatt --formerly the Four Seasons -- Aviara in Carlsbad, which is more than three months behind on a $186.5 million loan, as noted by Bloomberg News.
A venture including Broadreach Capital Partners and Maritz Wolff & Co. owns a majority stake in the Aviara.
While high profile hotels receive much of the attention, other types of assets here are in a similar situation.
One of these is the 433,320-square-foot Pacific Center I & II office complex in Mission Valley, on which GE Asset Management has defaulted. A total of $121.2 million is owed on that property.
Other properties that are delinquent more than 90 days include the 90,000-square-foot Village Faire shopping center in Carlsbad ($16.9 million); the 75,000-square-foot Carlsbad Corporate Plaza office complex ($21.3 million); the 240,000-square-foot Gateway Chula Vista office complex (two loans totaling $50.5 million); and the 26,000-square-foot Prospect Plaza office building in La Jolla ($7.2 million).
There are about 20 other commercial properties with delinquent loan balances of $1 million or more in San Diego County.
The MBA report said delinquency rates for different commercial/multifamily mortgage investor groups were mixed in the third quarter.
The delinquency rate for loans held in CMBS is the highest since the series began in 1997.
Delinquency rates for other groups remain below levels seen in the early 1990s, some by large margins.
"Greater strength in the economy is bringing some stability to commercial mortgage delinquency rates," said Jamie Woodwell, MBA's vice president of commercial real estate research.
"Commercial mortgage performance among most investor groups, including life insurance companies, Fannie Mae and Freddie Mac, and commercial banks and thrifts, continues to be better than during the last major downturn of the early-1990s."
"Although weak, the economic recovery is just beginning to be seen in commercial real estate fundamentals and the mortgages they support," the report added.
The MBA reported the 30-plus day delinquency rate on CMBS loans rose 0.36 percentage points in the third quarter to 8.58 percent.
Maturing CMBS loans may be a $1 trillion problem nationally but William Hoffman, president of the Trigild Inc. receivership firm, said he hasn't really seen the maturities yet.
However, Hoffman suggested hotel owners have plenty reason to worry -- particularly if they bought their properties within the past three years.
"It's going to be nasty for them," Hoffman said.
There have been encouraging signs, but mixed signals as well.
The 60-plus day delinquency rate on multifamily loans held or insured by Fannie Mae decreased 0.15 percentage points to 0.65 percent during the third quarter.
The 60-plus day delinquency rate on multifamily loans held or insured by Freddie Mac increased 0.07 percentage points to 0.35 percent during the same period.
Hoffman said that while his firm has no shortage of multifamily properties, it remains the strongest asset class -- even in tough markets such as Arizona.
"There are buyers for multifamily. That's the easiest property to move," Hoffman said.
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