(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 rose 3 bps month over month to 4.9% in July.
- By balance, DQ rates increased for office (50 bps to 7.8%) and multifamily (33 bps to 3.6%), decreased for retail (67 bps to 5.5%) and lodging (25 bps to 5.2%), and remained essentially flat for industrial (0.5%).
- Special servicing rates rose for office, retail, and lodging loans, and fell for multifamily and industrial loans.
- The share of loans that were either modified or extended increased 16 bps month over month to 10.1% in July.
The Overall Delinquency Rate Increased By 3 Basis Points
In this report, S&P Global Ratings provides its observations and analyses of the U.S. private-label commercial mortgage-backed securities (CMBS) universe, which totaled $722.1 billion as of July 2024 (a net increase of $2.9 billion month over month). The overall U.S. CMBS delinquency (DQ) rate rose 3 basis points (bps) month over month to 4.9% in July 2024. The rate soared 105 bps from a year earlier, representing a 27.6% year-over-year increase by DQ balance (see chart 1). By dollar amount, total delinquencies grew to $35.1 billion, representing net month-over-month and year-over-year increases of $0.4 billion and $7.6 billion, respectively (see chart 2).
Chart 1
Chart 2
Several Large Loans Moved Into Delinquency
The overall DQ rate increased in July with an additional 118 loans ($2.9 billion) becoming delinquent. Table 1 shows the top five of these loans by balance, which are all secured by office and multifamily asset types.
The largest delinquent loan was Queens Atrium, a 1,032,402-sq.-ft. office property located in Long Island City, New York. The loan's debt service coverage ratio (DSCR) was 2.09x and occupancy was 100% as of the trailing three-month period ended March 2024.
The loan has been on the watchlist since Jan. 5, 2024, due to its upcoming maturity. The borrower submitted an extension and modification request to the servicer for review on May 20, 2024. The loan, which was current through June 2024, eventually defaulted on its July 6, 2024, maturity date and was transferred to the special servicer. The loan is currently delinquent and classified with a nonperforming maturity balloon status.
Table 1
| Top five newly delinquent loans in July 2024 | ||||
|---|---|---|---|---|
| Property | City | State | Property type | Delinquency balance ($) |
| Queens Atrium | Long Island City | New York | Office | 164,424,434 |
| Lafayette Centre | Washington | Washington, D.C. | Office | 160,500,000 |
| Piazza & Liberties Walk | Philadelphia | Pennsylvania | Multifamily | 130,746,520 |
| The Centre | Cliffside Park | New Jersey | Multifamily | 130,000,000 |
| Fairview Park Drive | Falls Church | Virginia | Office | 90,000,000 |
Delinquent And Modified Or Extended Loans
Modified loans represented approximately 10.1% ($73.0 billion) of total U.S. CMBS issuance ($722.1 billion) as of July 2024. Table 2 shows the top five modified loans by balance. Four of the top five modified loans are backed by office and multifamily properties, and one is backed by land previously occupied by the Row NYC Hotel.
By sector, lodging had the highest modification rate, at 21.7%, as of July. However, this standout rate is more a function of the legacy modifications that were allowed soon after the onset of the COVID-19 pandemic; it is not an accurate indicator of current sector stress. Retail loans had the second-highest modification rate, at 14.2%, reflecting a mix of modifications granted due to the pandemic and, of more concern, for loans commonly backed by retail malls that are unable to refinance and, therefore, receive extensions. The 7.1% and 9.1% modification rates for office and multifamily, respectively, are also revealing, as they indicate that the delinquency rates for those sectors would be notably higher if CMBS servicers weren't granted modifications. Chart 3 shows the breakout of the delinquency rate and modified loan rate by property type.
Chart 3
The largest loan modified in July was 1440 Broadway, which is secured by a 740,387-sq.-ft. mixed-used office and retail property located in Midtown Manhattan. As of year-end 2023, the DSCR was 0.66x and occupancy was 85.0%.
Green Loan Service, a new special servicer, was appointed on Dec. 6, 2023. A loan modification was executed on May 2, 2024, that extended the maturity date to Oct. 9, 2025. Additionally, the general partner of the borrower, CIM Group, was replaced with Stepstone Group L.P., and a new property manager was appointed to oversee the asset. The loan is currently performing with a maturity balloon. However, the previous March 9, 2024, maturity date triggered an appraisal event, and the special servicer must order an appraisal.
Table 2
| Top five modified loans as of July 2024 | ||||
|---|---|---|---|---|
| Property | City | State | Property type | Outstanding balance ($) |
| 1440 Broadway | New York | New York | Office | 399,000,000 |
| Milford Plaza Fee | New York | New York | Others | 275,000,000 |
| NEMA San Francisco | San Francisco | California | Multifamily | 199,000,000 |
| Commons at White Marsh | Middle River | Maryland | Multifamily | 166,140,000 |
| 211 Main Street | San Francisco | California | Office | 124,633,638 |
The Special Servicing Rate Decreased By 4 Bps
The overall special servicing rate decreased 4 bps month over month to 7.3% in July (see chart 4). By sector, the special servicing rate rose for office (23 bps to 11.2%), retail (6 bps to 10.4%), and lodging (1 bp to 6.4%) loans; and decreased for multifamily (18 bps to 4.2%) and industrial (1 bp to 0.3%) loans. However, the overall special servicing rate remained 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 July is Bank of America Plaza, which is split across four conduits: WFRBS 2014-C22, WFRBS 2014-C23, CGCMT 2014-GC25, and GSMS 2014-GC26, which are all part of CMBX 8. The mortgage loan is secured by a 1,432,285-sq.-ft. office property in Los Angeles. The loan's DSCR was 2.26x and occupancy was 79.0% as of the trailing three-month period ended March 2024.
The loan was transferred to the special servicer on July 1, 2024, due to an imminent balloon or maturity default ahead of the Sept. 1, 2024, maturity. The special servicer is currently reviewing files to determine a workout strategy.
Chart 4
DQ Rates Increased For Office, Multifamily, And Industrial
Office loans had the highest DQ rate by property type in July. By balance, the overall DQ rate increased for office (50 bps to 7.8%; 319 loans; $13.9 billion), multifamily (33 bps to 3.6%; 179 loans; $4.7 billion), industrial (1 bp to 0.5%; 15 loans; $0.3 billion); and decreased for retail (67 bps to 5.5%; 252 loans; $6.7 billion) and lodging (25 bps to 5.2%; 130 loans; $5.3 billion). Chart 5 shows the historical DQ rate trend by property type.
There were 118 newly delinquent loans totaling $2.9 billion in July, led by multifamily (38 loans; $1.1 billion), office (30 loans; $1.1 billion), retail (16 loans; $241.9 million), lodging (11 loans; $182.7 million), and industrial (five loans; $114.9 million).
By property type, DQ composition rates increased year over year for office (to 39.6% from 31.8%), multifamily (to 13.3% from 7.6%), and industrial (to 0.8% from 0.5%) loans; and decreased for retail (to 19.0% from 28.6%) and lodging (to 15.0% from 19.0%) loans. Charts 6 and 7 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 increasing in July, 135 loans totaling $3.8 billion moved out of delinquency. Table 2 shows the top five of these loans by balance.
The largest loan modified in July was 1440 Broadway, which is secured by a 740,387-sq.-ft. mixed-used office and retail property located in Midtown Manhattan. As of year-end 2023, the DSCR was 0.66x and occupancy was 85.0%. (for more details on this loan, see the Delinquent And Modified Or Extended Loans section above).
Table 3
| Top five loans that moved out of delinquency in July 2024 | ||||
|---|---|---|---|---|
| Property | City | State | Property type | Outstanding balance ($) |
| 1440 Broadway | New York | New York | Office | 399,000,000 |
| Destiny USA Phase I | Syracuse | New York | Retail | 300,000,000 |
| Santa Monica Place | Santa Monica | California | Retail | 300,000,000 |
| State Farm Portfolio | Various | Various | Office | 253,344,063 |
| Destiny USA Phase II | Syracuse | New York | Retail | 130,000,000 |
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: | 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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