Extended Closures Come With Significant Challenges for Retail Loans in CMBS

The negative effects of the Coronavirus Disease (COVID-19) pandemic are beginning to manifest themselves in retail properties backing U.S. commercial mortgage-backed securities (CMBS). April remittance data shows a spike in late payments and several large retail loans moving to the special servicer. The mandatory shutdown of nonessential businesses by local and state governments, coupled with tenants withholding April rent payments, has had an immediate material effect on the cash flows of retail properties. However, DBRS Morningstar believes there will be a longer-lasting impact on the sector even after governments lift their restrictions.