Key Takeaways
- The U.S. CMBS overall delinquency rate decreased by three basis points month over month to 2.5% in August 2022.
- The rate of seriously delinquent loans (60-plus-days delinquent) was 94.3% as of August 2022. Loans that are 120-plus-days delinquent continued to represent the largest portion of delinquent loans at 33.3%.
- By balance, delinquency rates decreased for lodging (27 basis points), retail (12 basis points), and office (one basis point), and increased for industrial (11 basis points) and multifamily (two basis points).
U.S. CMBS Delinquency Rate Decreased Slightly To 2.5%
The U.S. commercial mortgage-backed securities (CMBS) delinquency (DQ) rate decreased three basis points (bps) month over month to 2.5% in August and fell 216 bps from 4.7% a year earlier (see chart 1). By dollar amount, total DQs decreased to $18.6 billion, representing a net decrease of $130.1 million month over month and $11.7 billion year over year (see chart 2).
Chart 1
Chart 2
Large Loans Moved To Delinquency
Although the overall DQ rate has shown a slight decline, several loans became delinquent in August 2022. Table 1 shows the top five delinquent loans by balance. The largest loan is World Trade Center I & II, a 785,549-sq.-ft. office property built in 1979 and located in Denver. The loan was on the servicer's watchlist since November 2019 due to decreasing occupancy and a debt service coverage ratio (DSCR) below 1.10x, was transferred to special servicing due to COVID-19 in July 2020, and was subsequently modified in January 2021 to use excess cash flow reserves to fund operating expenses and debt service. The borrower defaulted in June 2021 after the modification expired and the property was foreclosed in June 2022. The title of the property was acquired in July 2022 and, following the acquisition the property, continues to be managed by Jones Lang Lasalle, who was able to execute several lease renewals at the property.
Table 1
| Top Five Delinquent Loans In August 2022 | ||||
|---|---|---|---|---|
| Property | City | State | Property type | Delinquency balance ($) |
| World Trade Center I & II | Denver | Colorado | Office | 100,327,469 |
| Eastview Mall and Commons | Victor | New York | Retail | 90,000,000 |
| Arbor Walk and Palms Crossing | Various | Texas | Retail | 66,490,365 |
| Supor Industrial Portfolio | Harrison | New Jersey | Industrial | 50,955,946 |
| Cumberland Mall | Vineland | New Jersey | Retail | 38,027,252 |
Seriously Delinquent Loan Levels Are Still High
The share of delinquent loans that are 60-plus-days delinquent (i.e., seriously delinquent loans) was 94.3% as of August (see chart 3). Further, loans that are 120-plus-days delinquent (those reported in the CRE Finance Council investor reporting package with a loan code status of "6") continued to represent the largest portion of delinquent loans, at 33.3%. The $6.2 billion outstanding balance as of August is much higher than the pre-pandemic level. As of July 2020, 120-plus-days delinquent loans comprised less than 5.0% of all delinquent loans (see chart 4).
Chart 3
Chart 4
Special Servicing Rate Increased 26 Bps
The overall special servicing rate increased 26 bps month over month to 4.1% in August (see chart 5), with retail increasing 68 bps to 10.3% and lodging increasing 15 bps to 6.6%. The overall special servicing rate has been declining since it peaked at 9.5% in September 2020.
Chart 5
The largest office loan in special servicing in August is Greenway Plaza, which is located approximately five miles west of downtown Houston and has an outstanding balance of $465 million. The loan is collateralized by a 4.5 million-sq.-ft. mixed-use property comprising 20 buildings with office and retail uses. As of March 31, 2022, the property was approximately 88% occupied. The loan transferred to special servicing on July 1, 2022, due to imminent maturity default. The loan matured on May 6, 2022, and was under a forbearance agreement that expired on July 6, 2022. The borrower has requested a 90-day extension of the forbearance agreement and is currently negotiating a longer-term maturity extension.
DQ Rates Increased For All Property Types Except For Industrial And Multifamily
Chart 6 shows the historical delinquency rate trend by property type. By balance, DQ rates decreased for lodging (27 bps; 218 loans totaling $4.88 billion), retail (12 bps; 285 loans totaling $7.71 billion), and office (one basis point; 122 loans totaling $2.73 billion), and increased for industrial (11 bps; 16 loans totaling $0.23 billion) and multifamily (two bps; 59 loans totaling $0.78 billion).
There were 55 newly delinquent loans totaling $909.8 million in August. These include 15 retail loans ($314.6 million), 12 office loans ($265.7 million), seven multifamily loans ($68.7 million), five lodging loans ($95.3 million), and three industrial loan ($59.4 million).
Charts 7 and 8 show the year-over-year change in the property type composition for delinquent loans. Office shows an increase to 14.7% from 10.5%, while retail fell to 41.5% from 42.1% and lodging fell to 26.3% from 34.6%.
Chart 6
Chart 7
Chart 8
Largest Loans Moved Out Of Delinquency
The overall delinquency rate declined slightly in August, with 56 loans moving out of delinquency. Table 2 shows the top five of these loans by balance.
Table 2
| Top Five Loans That Moved Out Of Delinquency In August 2022 | ||||
|---|---|---|---|---|
| Property name | City | State | Property type | Outstanding balance ($) |
| 1551 Broadway | New York | New York | Retail | 170,125,000 |
| Empire Hotel & Retail | New York | New York | Multiple | 104,573,858 |
| Crossroads Center | Saint Cloud | Minnesota | Retail | 84,693,148 |
| Bellis Fair Mall | Bellingham | Washington | Retail | 75,771,254 |
| Holiday Inn--6th Avenue | New York | New York | Lodging | 71,277,454 |
This report does not constitute a rating action.
| Primary Credit Analyst: | Benjamin Ach, New York 212 438 1986; benjamin.ach@spglobal.com |
| Secondary Contacts: | Tamara A Hoffman, New York + 1 (212) 438 3365; tamara.hoffman@spglobal.com |
| Senay Dawit, New York + 1 (212) 438 0132; senay.dawit@spglobal.com | |
| Deegant R Pandya, New York + 1 (212) 438 1289; deegant.pandya@spglobal.com | |
| Research Contact: | James M Manzi, CFA, Washington D.C. + 1 (202) 383 2028; james.manzi@spglobal.com |
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