Kroll Bond Rating Agency (KBRA) releases a report on the state of the commercial real estate (CRE) landscape amid the ongoing coronavirus (COVID-19) contagion. The report discusses the short- and long-term impacts on the various property types in commercial mortgage-backed securities (CMBS) and implications related to servicing and special servicing as well as potential rating actions.
As the COVID-19 pandemic continues to spread, the CRE market is being meaningfully affected. Nearly two-thirds of Americans are now under orders to stay home with half of the U.S. states having issued stay-at home orders and nonessential business closures. The majority of the remaining states encouraging social distancing and businesses have subsequently been operating under reduced hours or closed due to lack of customer traffic. The orders have shut down many sectors of the economy which in turn is continuing to cause mass furloughs and layoffs. The broadness of the impact has already taken a toll on the commercial real estate industry and is expected to get worse.
The effects on commercial real estate will vary by sector and market, and the extent of the effects will depend upon the duration of the economic shutdown and the speed of return to normalcy in social activity and behavior thereafter as discussed in the report. Servicers and special servicers will need to handle what is expected to be a large number of borrower requests for relief and an increase in loan defaults. These events in turn will have implications on the CMBS trust cashflows and credit ratings.
Click here to view the report.
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA. Kroll Bond Rating Agency Europe Limited is located at 6-8 College Green, Dublin 2, Ireland.
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