CMBS Delinquencies Approach 8%

6;1 billion net increase in office loan delinquencies fueled a 49 basis point (bp) rise in U.S. commercial mortgage-backed security (CMBS) loan delinquencies to 7.97% in May, according to the latest index results from Fitch Ratings. ‘As expected, office loan delinquencies have begun to increase and will continue to rise well into next year,’ says Mary MacNeill, a managing director at the firm. Though office loans have outperformed the index due to long-term leases insulating against cashflow fluctuations, performance has come under pressure. ‘Landlords are facing tenant downsizing and, in many cases, must offer significant concessions and reduced rent to maintain their existing tenant bases,’ MacNeill adds. The largest newly delinquent contributor to Fitch's index in May was the $380 million Columbia Center loan, the collateral for which is located in Seattle. The loan – sponsored by Beacon Capital Partners LLC – transferred to special servicing in February due to imminent default and is now 60 days past due. In total, 44 office loans became newly delinquent in May, including 14 loans with a balance greater than $20 million. After Columbia Center, the largest delinquent office loans are DRA-CRT Portfolio I, a $180.9 million loan covering 12 properties in Florida and two properties in both Maryland and North Carolina; and a $165 million loan on 550 South Hope St. in Los Angeles. Future office-sector index readings could be impacted if two large office loans that recently transferred to special servicing – the $4.9 billion EOP Portfolio loan and the $2.7 billion Beacon Seattle & D.C. Portfolio loan (of which Fitch rates $1 billion) – fail to remain current. If those two loans were to become 60 days delinquent, the overall index would increase by 135 bps, and the sector-specific reading would increase by over 400 bps, Fitch explains. Despite a net increase in delinquencies of 18.6% in May, the office sector remains the strongest of all the traditional property types, with a delinquency rate of 4.59%. The industrial and retail sectors posted delinquency net increases of 9.5% and 5.8%, respectively, while hotel delinquencies rose less than 1% and net delinquencies for multifamily loans dropped slightly for the first time in 20 months. Current delinquency rates by property type are as follows: [list] Hotel – 18.63%,*Multifamily – 13.65%,*Retail – 6.03%,*Industrial – 5.07% and* Office – 4.59%.[/list] SOURCE: [link= ]Fitch Ratings


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