Delinquencies on commercial real estate loan collateralized debt obligations (CREL CDOs) rose slightly in February to 13.4% from 13.2% in January, according to the latest index results from Fitch Ratings.
Last month, asset managers reported 13 new delinquent CREL CDO assets, consisting of six new matured balloon loan interests, three term defaults, two repurchased assets and two new credit-impaired securities. There are now 33 Fitch-rated CREL CDOs that encompass approximately 900 loans and 450 rated securities/assets, with a total collateral balance of $18.1 billion. The CREL CDO delinquency index includes loans and assets that are currently 60 days or longer delinquent, matured balloon loans, and the current month's repurchased assets.
According to Fitch Ratings, CREL CDO asset managers reported approximately $30 million in realized losses last month. The largest loss, which totaled $22.3 million, was related to the sale of a real estate owned (REO) failed condominium conversion project located in midtown Manhattan.Â
The disposal of the condominium conversion added to the steep decline in the delinquency rate for that property type to 5% from 24% by the end of 2011. Hotels have the highest increase since the end of last year, at 20% from 16%. Land assets made up the highest delinquency category, at 34%.
In February, 31 of the 33 Fitch-rated CREL CDOs reported delinquencies ranging from 0.7% to 54.8%. Additionally, 36% of Fitch-rated CREL CDOs were failing at least one overcollateralization (OC) test. Fitch Ratings notes that failure of OC tests leads to the cutoff of interest payments to subordinate classes, including preferred shares, which are typically held by the CDO asset managers. These proceeds, along with collected principal proceeds, are then diverted to pay down the senior classes.