I recently read a Realpoint report about CMBS liquidations. This reviewed sales of CMBS deals went bad and how they performed. This was a pretty eye-opening report. According to this report over $10.9 billion in CMBS were liquidated with an average loss severity of 40%. However this amount has been increasing over time.
For CMBS properties liquidated during 2010 the average loss on sale was 48.9%, for multifamily properties it was 52%. These losses include loss of income during the foreclosure process and costs of owning and holding the REO, but even with that it shows a substantial discount from the previous loan amount to the current sale price. Considering these deals were made at 80% or better LTV these properties sold for 50% or more from the previously appraised value. Pretty substantial discount.
looking at specific transactions from 2010 the losses ranged from over 100% to just making money on a few deals. However, most deals did have losses of over 50%. Examples include properties in Atlanta at 88%, Miami at 135% and Memphis at 82%. These were real losses for someone and real opportunities for others.
For me the interesting thing about this is how low the prices of these deals were and that there are opportunities in today’s market. So far we have not seen many deals hit the market, but given the large number of CMBS deals in he default/foreclosure pipeline they will be coming. When bidding on these deals don’t be shy I don’t know how active the bidding has been, but if you are thoughtful you might be able to pick up a real bargain.
MFLoan.com-Blog 