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SF Credit Brief: Overall U.S. CMBS Delinquency Rate Mostly Stable In April 2023; Office Special Servicing Rate Saw Large Increase

(Editor's Note: This report is S&P Global Ratings' monthly summary update of U.S. CMBS delinquency trends.)

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The Overall Delinquency Rate Increased 3 Basis Points

The overall U.S. CMBS delinquency rate (DQ rate) increased 3 basis points (bps) month-over-month in April 2023, increasing to 2.8%. However, the rate remains 13.2 bps lower than 2.9% from a year earlier (see chart 1). By dollar amount, total delinquencies increased to $20.2 billion, representing a net increase of $145.4 million month-over-month and a decrease of $1.2 billion year-over-year (see chart 2).

Chart 1

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Chart 2

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Several Large Loans Moved Into Delinquency

The overall DQ rate increased, with 72 loans totaling $2.0 billion becoming delinquent in April. Table 1 shows the top five of these loans by balance.

The largest delinquent loan in April 2023 was 600 California Street, which is secured by a 20-story, 359,154 sq.-ft. downtown office building located in San Francisco. The loan, which matures on Sept. 6, 2024, first appeared on the servicer's watchlist in January 2020 due to high exposure to WeWork (51.7% of NRA; March 2035 expiration), which continues to have financial troubles. According to the servicer, the property's debt service coverage ratio was 1.72x and occupancy was 88.0% as of year-end 2022. The loan was transferred to the special servicer on March 28, 2023, due to payment default.

Table 1

Top five newly delinquent loans in April 2023
Property City State Property type Delinquency balance ($)
600 California Street San Francisco Calif. Office 240,000,000
Westfield Countryside Clearwater Fla. Retail 90,960,277
3 Park Avenue New York N.Y. Office 88,000,000
635 Madison Avenue New York N.Y. Multiple 84,814,971
750 Lexington Avenue New York N.Y. Multiple 84,814,971

Seriously Delinquent Loan Levels Are Still High

Loans that are 60-plus-days delinquent (i.e., seriously delinquent loans) represented 90.7% of the delinquent loans in April 2023 (see chart 3). Loans that are 120-plus-days delinquent (those reported in the CRE Finance Council investor reporting package with a loan code status of "6") represented 22.0% (totaling $4.4 billion) of the delinquent loans in April 2023 (see chart 4).

Chart 3

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Chart 4

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The Special Servicing Rate Rose 12 Bps

The overall special servicing rate increased 12 bps month-over-month in April 2023, increasing to 4.9% (see chart 5). The special servicing rate increased for office loans (by 65 bps to 5.2%), which is the largest month-over-month increase since we began collecting data in July 2020), and also for lodging (by 25 bps to 6.0%) and multifamily (by 2 bps to 1.8%) loans, and decreased for retail (by 59 bps to 10.6%) and industrial (by 1 bp to 0.4%) loans. Although increasing, the overall special servicing rate remains well-below the 9.5% peak in September 2020.

The largest loan to move into special servicing as of April 2023 was 300 Park Avenue. The loan is secured by a 25-story, 771,643 sq.-ft. office property located in New York. Built in 1955 and renovated in 2001, major tenants include Colgate-Palmolive Co. (5.3% of NRA; June 2033 expiration), Nordstrom (4.2%; April 2024), and TSP Coworking (4.0%; April 2024). The loan, which matures on Aug. 6, 2023, was transferred to the special servicer on March 28, 2023, due to the borrower requesting a two-year maturity extension. According to the servicer, the property's debt service coverage ratio was 1.56x and occupancy was 84.0% as of year-end 2022. The loan is current as of April.

Chart 5

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DQ Rates Increased For All Property Types Except Multifamily and Lodging

Chart 6 shows the historical DQ rate trend by property type. The overall April 2023 DQ rate increased slightly with the DQ rate for office (6 bps; 155 loans; $5.1 billion) loans increasing for the fourth consecutive month, in addition to increases for industrial (2 bps; 12 loans; $180. 0 million) and retail (2 bps; 263 loans; $7.4 billion) loans, while DQ rates decreased for lodging (7 bps; 148 loans; $3.9 billion) and multifamily (4 bps; 66 loans; $1.7 billion) loans.

There were 72 newly delinquent loans totaling $2.0 billion in April. These included 22 office loans ($814.9 million), 21 retail loans ($555.9 million), 14 multifamily loans ($325.0 million), three lodging loans ($33.0 million), and two industrial loans ($7.0 million).

Charts 7 and 8 show the year-over-year change in the property type composition for delinquent loans. DQ property type composition rates increased year-over-year for office (to 25.3 from 13.9%), multifamily (to 8.5% from 4.8%), and industrial (to 0.9% from 0.8%) loans but decreased for retail (to 36.6% from 41.7%) and lodging (to 19.2% from 28.4%) loans.

Chart 6

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Chart 7

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Chart 8

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Several Large Loans Moved Out Of Delinquency

Although the overall DQ rate increased in April, 62 loans totaling $1.6 billion moved 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 April 2023
Property name City State Property type Outstanding balance ($)
Republic Plaza Denver C.O. Office 241,579,181
1551 Broadway New York N.Y. Retail 162,041,389
Glenbrook Square Fort Wayne I.N. Retail 92,133,257
Eastview Mall and Commons Victor N.Y. Retail 90,000,000
Tysons Metro Center Mclean Va. Office 90,000,000

This report does not constitute a rating action.

Primary Credit Analyst:Senay Dawit, New York + 1 (212) 438 0132;
senay.dawit@spglobal.com
Secondary Contacts:Benjamin Ach, New York + 1 (212) 438 1986;
benjamin.ach@spglobal.com
Tamara A Hoffman, New York + 1 (212) 438 3365;
tamara.hoffman@spglobal.com
Ambika Garg, Chicago + 1 (312) 233 7034;
ambika.garg@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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