U.S. commercial real estate loan collateralized debt obligations delinquencies (CREL CDO) dropped to 11.6% in August, according to new data from Fitch Ratings. August was the fourth straight month of declining CREL CDO delinquencies and the first time since August 2011 that the level fell below 12%.
Fitch Ratings reports that asset managers reported only one realized loss in August, totaling $3.5 million – a loss severity of 68% of the original principal balance. The loss was the result of the distressed sale of a whole loan secured by a multifamily property located in Indiana.
There were 28 CREL CDOs rated by Fitch Ratings in August that reported delinquencies ranging from 0.2% to 63.7%. Additionally, 38% of Fitch-rated CREL CDOs were failing at least one over-collateralization test.
In August, land and construction loans continued to lead all property types with the highest delinquency rates with a 38% level. However, non-cash flowing property types (including land, construction and condominium conversions) only comprise 7% of total CREL CDO collateral. Of the more traditional property types, hotel loans also continued to have the highest delinquency rate at 16%.