By David Pendered
All those empty storefronts, offices and apartments around metro Atlanta have propelled the region to ninth in the nation in the balance of securitized commercial real-estate loans that are delinquent, according to a new report from real estate provider Trepp Inc. The hardest hit area is the newly formed city of Stonecrest.
Metro Atlanta at the top of a national story of rising delinquencies for commercial real estate loans – loans for retail centers, offices and multifamily residences that are secured by the property. Trepp released a national overview and parsed out data for metro Atlanta and metro Houston at the request of SaportaReport.com.
Metro Atlanta’s commercial properties carry a total of $7.5 billion in debt incurred on a total of 571 loans. The total balance of delinquent loans is $450 million. That represents a delinquency rate of 5.94 percent, which is higher than the national average of 5.75 percent.
Trepp’s definition of delinquency means any loans that are 30 or more days delinquent, not making monthly payments beyond maturity, in foreclosure or taken back by the lender.
By comparison, the rival market of metro Houston has a delinquency rate of 1.54 percent. Of a total balance of $11.4 billion on 810 loans, $175.8 million is delinquent.
Nationwide, the delinquency rate jumped in June by the largest amount in over five years, according to Trepp. The rate has moved up in 13 of the past 16 months, as borrowers haven’t refinanced loans that reached their maturity dates.
For example, The Mall at Stonecrest had a 10-year loan that matured Oct. 1, 2014. The owner had been making monthly payments. Trepp’s June report showed the latest payment was not made. July’s data shows that July’s payment was made and the loan is now performing beyond maturity. The current loan balance is $93.3 million and is the largest delinquent debt of its kind in the region, according to Trepp’s report.
Stonecrest Marketplace is another secured loan in the new city that’s delinquent. A 10-year loan matured March 1 and the owner isn’t making a monthly payment. The loan balance is $34.5 million.
Finally, Stonecrest Promenade was taken back by the lender July 31, 2013. The outstanding balance is $2.3 million and the 10-year loan was to mature Aug. 11, 2016, according to Trepp’s report.
Trepp’s report shows the majority of the 30 seriously delinquent loans in metro Atlanta are located in the suburbs. Five of the 30 such loans have Atlanta addresses, but only two appear to be within the city limits.
One is the Cascade Citi Center, a shopping center anchored by a Kroger grocery store at 590 Cascade Avenue. A 10-year loan matured Feb. 1 and the owner has stopped making monthly payments. The balance is $8.8 million, according to Trepp.
The other is QLS Garden Apartments, at 1870 Campbellton Road. A 10-year loan matured Jan. 1, 2016. The loan balance is $3.2 million.
Metro Houston’s market presents a much healthier perspective.
Of local note, Atlanta-based Cousins Properties Inc. has disposed of its portfolio of Houston properties.
Cousins merged with Orlando-based Parkway in October 2016 and the two companies spun off all their Houston properties into a new REIT, or real estate investment trust. The new REIT, Parkway Inc., announced in June it was being acquired for $1.2 billion by the Canada Pension Plan Investment Board. The deal is expected to close before year-end.
Metro Houston’s total commercial loan balance is half-again larger than that of metro Atlanta. Yet its delinquency rate is less than a third that reported in metro Atlanta.
Nearly half the seriously delinquent loans in Houston are for office space. That’s not surprising, given the collapse of the energy sector and the associated decline in office tenants.
The one hotel that’s delinquent is at Houston’s airport. The Holiday Inn Houston Intercontinental is 90-plus days delinquent on a loan balance of $19.8 million. The 10-year loan matures July 1, 2024.
Two mixed use projects failed to make their June payments, according to Trepp’s report. Lenders took back seven of the 19 delinquent properties and foreclosed on two others. The two parcels have loans that total $6.7 million on 10-year loans that matured in May and June, according to Trepp’s report.