Delinquencies for U.S. commercial real estate loan collateralized debt obligations (CREL CDOs) declined for the third straight month, according to the latest index results from Fitch Ratings.
July delinquencies fell to 11.8% from 12.6% in June. Asset managers reported 12 new delinquent assets last month, including nine newly impaired commercial mortgage-backed security bonds.
Although new delinquencies included one term default, two matured balloons and nine impaired securities, 14 formerly delinquent assets were removed from the index, Fitch explains.
However, "some loans that were brought current or extended may resurface and cause CRE CDO delinquencies to rise if these workouts prove to only postpone an inevitable default," says Fitch director Stacey McGovern.
In July, CREL CDO asset managers reported approximately $31 million in realized losses. The highest lost was related to the discounted sale of a participation in a loan secured by a recently constructed hotel in Atlantic City, N.J., Fitch reports.
Office – the largest property type, at 24% by balance – remains at the lowest delinquency rate among all property types. Conversely, loans from non-cashflowing property types – such as land, condominium conversions and construction – have the highest delinquency rates.
