DBRS CMBS Highlights No Images? Click here As the Houston office market continues to struggle amid sustained declines in energy prices since 2015, the CMBS sector has seen a higher concentration of loans secured by office buildings on the servicers’ watchlists and in some cases, loans have been transferred to special servicing. According to Reis, the Houston metro reported an overall vacancy rate of 22.9% at YE2018, up from 14.5% five years ago, at YE2013. DBRS is monitoring many loans impacted by these trends, including these four loans secured by office properties within the Houston MSA. The Heron Lakes loan transferred to special servicing in January 2019 and the other three loans are currently performing and not on the respective servicers’ watchlists.SPOTLIGHT LOANS MSC 2011-C3One Briarlake PlazaThe largest tenant, Apache Corporation (41.8% of the NRA) has a lease expiration a few years after loan maturity in October 2024, and approximately half of its space is currently dark, adding to refinance risk. DBRS has requested updates on the cash management provisions and asked if the servicer intendeds to place the loan on the watchlist given the dark major tenant and the related cash sweep trigger. JPMBB 2015-C30One City CentreIn addition to the recent downsizing of Energy at the subject, driven by financial difficulties for the company, the loan is being highlighted due to significant tenant rollover risk as the current largest tenant, Waste Management, has announced it will vacate the property. WM currently represents 40.5% of the NRA at the subject property and has reportedly signed a lease at the new Capitol Tower in downtown Houston, scheduled to be delivered in mid-2019. Its current lease at the subject property runs through YE2020. WFRBS 2014-C20Sugar Creek I&IIThe largest tenant, Noble Drilling Services (41.0% of NRA), is scheduled to roll in January 2020, while the next two largest tenants, United Healthcare Services (12.9% of NRA) and ICON Clinical Research (6.2% of NRA), expire in April and March 2019, respectively. JPMBB 2014-C26Heron LakesShortly after the loan transferred to special servicing, the servicer discovered an unapproved second mortgage against the property in the amount of $11.0 million with the purpose of securing Mr. Moe Nasr’s personal debts. |