(Editor's Note: This report is S&P Global Ratings' monthly summary update of U.S. CMBS delinquency trends.)
Key Takeaways
- The U.S. CMBS overall delinquency rate decreased by seven basis points month over month to 4.6% in May.
- By sector, lodging experienced the highest level of loan modifications with 22.5% of loans by balance being modified. While the office sector continues to have the highest DQ rate of 7.0% of loans by balance, most office loans have not been modified.
- Seriously (60-plus-days) and 120-plus-days delinquent loans represented 84.5% and 17.7% of all delinquent loans, respectively.
- Special servicing rates increased for retail, lodging, and multifamily loans, and decreased for office and industrial loans.
- By balance, delinquency rates increased for retail, lodging, and industrial loans, and decreased for office and multifamily loans.
The Overall Delinquency Rate Decreased By Seven Basis Points
In this report, S&P Global Ratings provides its observations and analyses of the U.S. private-label CMBS universe, which totaled $714.5 billion as of May 2024. The overall U.S. CMBS delinquency (DQ) rate decreased by seven basis points (bps) month over month to 4.6% in May 2024. The rate increased 145 bps from a year earlier, representing a 43.6% year-over-year increase by DQ balance (see chart 1). By dollar amount, total delinquencies were $32.9 billion representing a net month-over-month decrease of $354.7 million and a net year-over-year increase of $10.0 billion (see chart 2).
Chart 1
Chart 2
Several Large Loans Moved Into Delinquency
The overall DQ rate decreased in May despite an additional 138 loans ($4.0 billion) becoming delinquent. Table 1 shows the top five of these loans by balance. The top five newly delinquent loans are all secured by either retail, office, or multifamily asset types.
The largest delinquent loan was Santa Monica Place. The loan is secured by a 523,139-sq.-ft. retail property located in Santa Monica, California. As of the end of 2023, the loan's debt service coverage ratio (DSCR) was 0.69x and occupancy was 72.0%.
The loan was transferred to the special servicer on April 8, 2024, due to an imminent monetary default stemming from the borrower failing to remit April's monthly payment. The loan is currently 30 days delinquent on loan payments. The borrower and special servicer are in discussions.
Table 1
| Top five newly delinquent loans in May 2024 | ||||
|---|---|---|---|---|
| Property | City | State | Property type | Delinquency balance ($) |
| Santa Monica Place | Santa Monica | California | Retail | 300,000,000 |
| Providence Place Mall | Providence | Rhode Island | Retail | 254,930,762 |
| 590 Madison Avenue | New York | New York | Office | 200,000,000 |
| Parkmerced | San Francisco | California | Multifamily | 177,500,000 |
| Selig Portfolio | Seattle | Washington | Office | 141,936,855 |
Loans Delinquent And Modified Or Extended
In May, $72.7 billion loans were modified, out of the total $714.5 billion in the CMBS universe. By dollar amount, total modified loans have increased by $380.0 million, representing a one-bp month-over-month increase. Overall, the total number of loans that have been delinquent and modified decreased by six bps month-over-month to 0.92%. Table 2 shows the top five of these loans by balance. The top five modified loans are backed by office, multifamily, and retail properties.
Overall, 10.2% of loans in the universe have been modified as of May 2024. By sector, lodging has experienced the highest level of loan modifications with 22.5% of loans by balance being modified as of May 2024. Of total lodging loans, 2.3% by balance are delinquent and modified, and 3.0% by balance are delinquent and not modified. While the office sector continues to have the highest DQ rate of 7.0% of loans by balance, a relatively lower percentage of office loans have been modified. By balance, 7.3% of office loans have been modified and only 0.3% of loans by balance are delinquent and modified. Chart 3 shows the breakout of the delinquency rate, modified loan rate, and both delinquency and modified loan rates by property type.
The largest loan that was modified was 280 Park Avenue. The loan is secured by a 1,260,101-sq.-ft. office property located in Midtown Manhattan. As of the end of 2023, the loan's DSCR was 1.10x and occupancy was 93.0%.
The loan was transferred to the special servicer on Dec. 20, 2023, and is current. On April 4, 2024, per the modification and extension agreement, the maturity date was extended to Sept. 9, 2026, with two options for further extension. In exchange for this extension, the borrower contributed $100.0 million to cover current and anticipated shortfalls. For each subsequent extension, the borrower will need to contribute an additional $25.0 million in equity. The loan will revert to the master servicer after three consecutive timely payments. Furthermore, the special servicer ordered a new appraisal upon transfer, which was received on April 15.
Table 2
| Top five modified loans as of May 2024 | ||||
|---|---|---|---|---|
| Property | City | State | Property type | Outstanding balance ($) |
| 280 Park Avenue | New York | New York | Office | 1,075,000,000 |
| CXP Office Portfolio (CMBS A) | Various | Various | Office | 484,742,628 |
| Hope & Flower | Los Angeles | California | Multifamily | 174,666,348 |
| 1551 Broadway | New York | New York | Retail | 152,573,386 |
| City Square and Clay Street | Oakland | California | Multiple | 90,000,000 |
Chart 3
The Special Servicing Rate Increased By Seven Bps
The overall special servicing rate increased by seven bps month over month to 7.3% in May (see chart 5). By sector, the special servicing rate rose for retail (24 bps to 10.5%), lodging (20 bps to 7.0%), and multifamily (16 bps to 4.2%), and decreased for office (20 bps to 10.5%) and industrial (one bp to 0.3%) loans. However, the overall special servicing rate remains well below the 9.5% peak reached in September 2020, despite increasing in recent months.
The largest loan to move into special servicing as of May is 731 Lexington Avenue. The mortgage loan is secured by a 909,369-sq.-ft. fee simple interest office property in Midtown Manhattan. As of the end of 2023, the DSCR was 2.08x, and occupancy was 100.0%.
The loan was transferred to the special servicer on April 22, 2024, due to an imminent monetary default. Although the loan is set to mature on June 11, 2024, with no remaining extension option, the borrower indicated that refinancing by the maturity date was improbable due to limited availability of CMBS, SASB, or balance sheet lenders for office properties. Currently, the borrower and special servicer are in discussions, and the loan remains current.
Chart 4
DQ Rates Increased For All Property Types Except Multifamily And Office
In May, office loans had the highest DQ rate by property type. The overall DQ rate increased by balance for retail (19 bps to 5.6%; 251 loans; $6.7 billion), lodging (two bps to 5.3%; 131 loans; $5.4 billion), and industrial (one bp to 0.4%; 15 loans; $222 million) and decreased for office (14 bps to 7.0%; 293 loans; $12.4 billion) and multifamily (10 bps to 2.9%; 165 loans; $3.7 billion). Chart 6 shows the historical DQ rate trend by property type.
There were 138 newly delinquent loans totaling $4.0 billion in May led by multifamily (41 loans; $1.0 billion), office (32 loans; $1.4 billion), retail (25 loans; $948.6 million), lodging (nine loans; $238.0 million), and industrial (three loans; $39.0 million).
By property type, DQ composition rates increased year over year for office (to 37.7% from 31.5%) and multifamily (to 11.3% from 5.7%) loans and decreased for retail (to 20.3% from 34.9%), lodging (to 16.3% from 17.8%), and industrial (to 0.7% from 0.8%) loans. Charts 7 and 8 show the year-over-year change in the property type composition for delinquent loans.
Chart 5
Chart 6
Chart 7
Several Large Loans Moved Out Of Delinquency
Despite the overall DQ rate decreasing in May, 87 loans totaling $3.8 billion moved out of delinquency. Table 2 shows the top five of these loans by balance.
The largest loan to move out of delinquency was 230 Park Avenue. The loan is secured by a 1,361,231-sq.-ft. office property located in Midtown Manhattan. As of the end of 2023, the loan's DSCR was 0.75x and occupancy was 83.0%.
The loan was transferred to the special servicer on Oct. 19, 2023, due to imminent maturity default, the loan matured on Dec. 8, 2023. The borrower is considering a change in the building's use, potentially affecting its value. The loan has a performing matured balloon status as of May 2024.
Table 3
| Top five loans that moved out of delinquency in May 2024 | ||||
|---|---|---|---|---|
| Property | City | State | Property type | Outstanding balance ($) |
| 230 Park Avenue | New York | New York | Office | 670,000,000 |
| CXP Office Portfolio (CMBS A) | Various | Various | Office | 484,742,628 |
| Maine Mall | South Portland | Maine | Retail | 235,000,000 |
| MFP Portfolio | Various | Various | Multifamily | 221,503,033 |
| Valencia Town Center | Valencia | California | Retail | 186,715,166 |
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: | Mei Yolles, New York +1 (212) 438 0307; mei.yolles@spglobal.com |
| Tamara A Hoffman, New York + 1 (212) 438 3365; tamara.hoffman@spglobal.com | |
| Research Contact: | James M Manzi, CFA, Washington D.C. + 1 (202) 383 2028; james.manzi@spglobal.com |
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