The real estate industry is yet another place to see how the effects of this pandemic fall so unevenly.

It seems not quite proper to even talk about real estate, given how some families are touched by tragedy due to COVID-19. Yet time after time these days, you see that what people do for work is what matters, not how well they do it.

It has been a big year for big companies like Target Corp. that sell essential stuff even as small business gets crushed. Newly public software firm Jamf Holding just reported 29% quarterly revenue growth while the hair-salon company Regis saw revenue all but completely evaporate.

Very few could have chosen their line of business or occupation thinking ahead to when an infectious disease swept across the country. That includes what kind of building to invest in.

So if you think the big real estate story this year is housing prices going up in a recession, take a look in the market for commercial mortgage-backed securities, or CMBS.

This segment of finance is not banking, exactly, but really a part of the vast bond market. It’s a big business, too, with more $500 billion in non-agency commercial mortgage-related securities out in the market. And the pain is felt right away once a downturn starts.

It’s easy to guess where it’s really painful, with social distancing keeping lots of people from shopping in stores or staying in hotels, including business travelers who ordinarily would be zipping around to conferences and business meetings.

Nearly a quarter of CMBS loans for hotels were at least 30 days behind on payments as of July, according to the market-data firm Trepp. In a couple of big metro areas most of the hotel-related CMBS loans were delinquent. Last summer, a delinquent CMBS hotel mortgage was almost unheard of.

The picture for retail property mortgages looks a little better and has even improved in July, with the delinquency rate slipping to about 16%. That’s partly because so many mortgages had already been renegotiated. That meant some borrowers behind in June were now current even without making any more scheduled payments.

One of them appears to be the Mall of America in Bloomington, having reached an agreement on its $1.4 billion mortgage with an agent for the bondholders.

As for whether anything like the calamity witnessed in these markets has ever happened before, of course the answer is no. The retail property mortgage delinquencies of around 16% is twice the worst rate experienced in the 2008-09 recession.

The delinquency rate for CMBS mortgages on apartments, offices and industrial buildings, on the other hand, remain a fraction of what they are for hotels and retail properties.

In looking ahead at what’s going to happen to properties financed by CMBS, it’s important to understand that these deals are usually created by a bank, but only to funnel the money that comes from bond investors.

The basic idea here is that there are pension-fund managers and other bond investors that always have money to invest, so the way to find capital to keep buying or constructing more buildings is to make commercial mortgages that look a lot like bonds.

But with no bank involved looking after its own business, there’s no team of bankers who could be talked into helping a borrower they actually know stay afloat, hoping future loans turn out to be more profitable.

The CMBS investor will never meet any borrower and wouldn’t care if all a building’s owners get wiped out in a foreclosure.

CMBS deals have servicers, often a unit of a banking company, to handle the mortgage payments and administer the loan. If the borrower gets into trouble and the investors need help getting their money back, the deal gets sent to a firm called a special servicer.

One message for real estate owners on the website of CMBS. Loans — a unit of the real estate lender Janover Ventures — is don’t ever default on a mortgage, as no special servicer can ever be trusted.

One of the weird aspects of a CMBS deal, though, is that the pain won’t be shared equally on a bad deal. A good example might be what’s developing with the 2018 refinancing of our region’s largest hotel, the 821-room Hilton Minneapolis.

The current owners, an affiliate of Walton Street Capital of Chicago, bought the property for $143 million, renovated part of the building and then refinanced everything with a $180 million, interest-only loan through a commercial mortgage-backed security created by JPMorgan Chase.

The striking detail was that a $180 million mortgage was put on a property judged by bond ratings firm Moody’s to be worth $118.8 million.

Good luck trying to borrow $300,000 from a bank on a house appraised at $200,000.

The hotel’s owner hasn’t paid back a nickel in principal and the hotel is now worth even less. But the reason some bondholders are in far bigger danger of losing money than others is because of one feature of a common CMBS financing, a kind of dial-a-risk option. These deals get carved into pieces, and investors got to pick a different slice depending on how much risk they wanted to take. The lowest risk, meaning the bondholders who are first in line for repayment, kept Moody’s top rating even after the big credit-rating firm recently downgraded the rest of the deal.

At the other end of the line, it’s not looking too rosy. Moody’s in August re-rated the bottom three slices of bonds as progressively riskier versions of “speculative,” another word for junk. In business, people have to live with their decisions, and that includes choices that suddenly looked risky this year. Yet the bond fund manager who bought the F-class slice of these hotel mortgage bonds couldn’t have seen a pandemic coming.

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