U.S. CMBS Delinquencies Continue to Fall, Led by Hotel and Retail Improvement

Fitch – Fitch Ratings’ U.S. CMBS delinquency rate fell 15 bps to 3.81% in June from 3.96% in May, due to a steadily declining pace of new delinquencies, continued strong resolutions and new issuance. The rate is tracking Fitch’s expectation to end 2021 below 4.0%, albeit with some continued volatility.

This is the lowest rate since June 2020, when it spiked to 3.59% during the pandemic following a post financial crisis low of 1.31% in March 2020.

Resolution volume totaled $1.6 billion in June, consistent from May, primarily from retail ($685 million) and hotel ($532 million) loans.

New delinquencies dipped to $1.0 billion in June from $1.1 billion in May, approximately 12% of which were previously granted relief. The roll rate of 30 to 60 days delinquent was 39% from May to June, compared with 23% from April to May. Total 30-day delinquencies rose to $1.7 billion in June from $1.6 billion in May.

Current and previous delinquency rates by property type are as follows:

–Hotel: 15.30% (from 15.95% in May);

–Retail*: 9.09% (9.43%);

–Mixed Use: 3.76% (3.62%);

–Office: 1.48% (1.51%);

–Multifamily**: 0.52% (0.52%);

–Industrial: 0.21% (0.36%);

–Other: 1.28% (1.40%).

*Regional Malls: 16.42% (16.56%).

**Student Housing: 5.15% (5.10%).

The 65-bp drop in the hotel delinquency rate was due to resolutions of $532 million exceeding new delinquencies of $204 million, as borrowers continue bringing loans current while property cash flows improve. The largest hotel loans removed from Fitch’s index were the $71.3 million Intercontinental Kansas City Hotel (COMM 2016-DC2, DBJPM 2016-C3), which was modified in May 2021; and the $71 million Hilton Cincinnati Netherland Plaza (BMARK 2019-B14, BMARK 2019-B15, JPMDB 2019-COR6), which was brought current through April 2021 using lockbox funds. Both loans were reported 30 days delinquent in June after being at least 60 days delinquent since October 2020 and February 2021, respectively.

The largest resolution last month was the $127 million Deerbrook Mall loan (MSC 2011-C2), secured by a super-regional mall in Humble, TX, which was repaid nearly in full with a 0.08% loss of its original balance. The loan previously failed to repay at its April 2021 maturity. The second largest overall resolution was Charleston Town Center (Charleston, WV; BSCMS 2007-TOP28), a regional mall asset that was disposed in June with a full loss to its $91.3 million outstanding balance.

The two largest new delinquencies in June were the $130 million RiverTown Crossing Mall (Grandville, MI; CFCRE 2011-C2, COMM 2012-CCRE1) and the $121 million Ingram Park Mall (San Antonio, TX; MSC 2011-C2), both of which defaulted at maturity in June. Another regional mall loan, Valley Hills Mall (Hickory, NC; $58 million; COMM 2013-CCRE9), became 60 days delinquent in June.

Contributing to the 14-bp increase in the mixed-use delinquency rate was the $76.5 million SoHo Portfolio loan (New York, NY; COMM 2015-DC1) collateralized by two office/retail properties, which became 60 days delinquent in June.

June’s special servicing volume was $26.2 billion, (1,116 loans; 5.1% of Fitch-rated U.S. CMBS universe), down from $27.3 billion (1,154 loans) in May. Since the onset of the pandemic, $25.8 billion (830 loans; 5% of Fitch-rated universe) have received debt relief, up from $24.9 billion (816 loans) in May.

Fitch’s delinquency index currently includes 845 loans ($19.5 billion) with status of 60 days delinquent, foreclosure, REO or nonperforming matured. The current Fitch-rated U.S. CMBS universe includes 25,859 loans ($512 billion); $33 billion is defeased. The index excludes 30-day delinquencies, wireless tower, outdoor advertising and Canadian transactions and those seasoned less than one month. Fitch-rated new issuance of $6.5 billion (eight transactions) in May contributed to the higher overall index denominator.