Germany at centre of CMBS problems

Standard & Poor’s finds German deals make up large slice of those not repaid at 2011 maturity

The centre of trouble for CMBS loans is shifting from the UK  to continental Europe, with German loans’ performance in particular showing signs of pressure, according to Standard & Poor’s August European CMBS monthly bulletin. Only one in three European CMBS loans had repaid at maturity in the year to July – just 37 of the 108 loans scheduled to mature in the period.

The UK and France led the way in overall loan repayments, at 33% and 42% respectively by balance. German loans accounted for only 18% of repaid loans, but they represented 47% of the balance of loans maturing from January to July. Of 24 extended loans, 15 are German, while German assets backed 10 of 12 loans that are in standstill.

German loans also dominated the 28 non-UK loans, totalling €1.3bn, transferred to special servicing during that time. By contrast, nine of the 14 loans that came out of special servicing, in most cases following full repayment, were UK loans. The number of defaulted UK loans has also fallen since last year, with only five of the 20 loans declared to be in default backed by UK properties.

Only two of the loans in S&P’s delinquency index and six in its non-monetary breaches index are backed by UK assets, principally healthcare properties linked to Southern Cross. October will mark the second highest concentration of maturing European loans this year, after July, with 28 loans scheduled to mature.

Four of these have balances close to or over €200m: the Terry loan, backed by German retail assets; the Keops loan, backed by Swedish mixed-use assets; and the Adelphi and Devonshire Square Estate loans, backed by UK offices. The Keops loan could prove tough to refinance, as it is in special servicing after breaching its loan-to-value covenant.