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SF Credit Brief: U.S. CMBS Delinquency Rate Rose 34 Bps To 5.2% In September 2024; Office Rate Surges Past 8.0%

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SF Credit Brief: U.S. CMBS Delinquency Rate Rose 34 Bps To 5.2% In September 2024; Office Rate Surges Past 8.0%

(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 Rose 34 Bps

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 $724.7 billion as of September 2024 (a net increase of $500 million month over month). The overall U.S. CMBS delinquency (DQ) rate rose 34 basis points (bps) month over month to 5.2% in September 2024 and soared 145 bps year over year (a 38.5% increase by DQ balance). By dollar amount, total delinquencies grew to $38.0 billion, representing net month-over-month and year-over-year increases of $2.5 billion and $10.6 billion, respectively (see charts 1A and 1B).

Chart 1A

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Chart 1B

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Several Large Loans Moved Into Delinquency

The overall DQ rate increased in September with an additional 154 loans ($4.4 billion) becoming delinquent. Table 1 shows the top five of these loans by balance.

Table 1

Top five newly delinquent loans in September 2024
Property City State Property type Delinquency balance ($)
Bank of America Plaza Los Angeles California Office 400,000,000
Destiny USA Phase I Syracuse New York Retail 300,000,000
20 Broad Street New York New York Multifamily 220,000,000
Eastview Mall and Commons Victor New York Retail 210,000,000
Sunvalley Shopping Center Concord California Retail 139,975,809

Delinquent And Modified Or Extended Loans

Modified loans represented approximately 10.4% ($75.4 billion) of the $724.7 billion total U.S. CMBS outstanding balance as of September 2024. Table 2 shows the top five modified loans by balance; three of which are backed by multifamily.

By sector, lodging had the highest modification rate (20.9% by balance) as of September. However, this standout rate is more a function of the legacy modifications that were allowed soon after the onset of the COVID-19 pandemic and is not an accurate indicator of current sector stress. Retail loans had the second-highest modification rate (14.5%), 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 7.6% and 10.0% 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 2 shows the breakout of the delinquency rate and modified loan rate by property type.

Chart 2

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The largest loan modified in September was GVA Sunrise Portfolio Pool C.

Table 2

Top five modified loans in September 2024
Property City State Property type Outstanding balance ($)
GVA Sunrise Portfolio Pool C Various Various Multifamily 148,944,680
RiverTown Crossings Mall Grandville Michigan Retail 121,108,425
25 Broadway New York New York Office 116,640,000
Portofino Place West Palm Beach Florida Multifamily 115,000,000
100 York Jenkintown Pennsylvania Multifamily 90,000,000

The Special Servicing Rate Increased By 25 Bps

The overall special servicing rate increased 25 bps month over month to 7.7% in September (see charts 3A and 3B). By sector, the special servicing rate rose for lodging (45 bps to 6.7%), office (45 bps to 12.3%), retail (25 bps to 10.6%), multifamily (16 bps to 4.8%), and industrial loans (10 bps to 0.4%). The overall special servicing rate remains below the 9.5% peak of September 2020.

The largest loan to move into special servicing in September 2024 is 150 East 42nd Street. The loan is secured by the borrower's ground leasehold and sub-subleasehold interests in a 1.7 million sq. ft. class A office property located at 150 East 42nd St. in Midtown, Manhattan. Occupancy at the property was 89.2% as of the June 2024 rent roll and the NCF DSC was 1.35x as of March 2024.

The loan was transferred to the special servicer on Sept. 5, 2024, due to imminent monetary default. There are ongoing discussions between the servicer and the borrower on possible extension options.

Chart 3A

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Chart 3B

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DQ Rates Increased For Four Sectors

By balance, the overall DQ rate increased for retail (85 bps to 6.6%; 273 loans; $7.9 billion), office (55 bps to 8.2%; 342 loans; $14.4 billion), lodging (34 bps to 5.4%; 134 loans; $5.5 billion), and multifamily loans (19 bps to 4.2%; 211 loans; $5.6 billion); and decreased for industrial loans (8 bps to 0.3%; 13 loans; $0.2 billion). Charts 4A and 4B show the historical DQ rate trend by property type.

There were 154 newly delinquent loans totaling $4.4 billion in September, led by multifamily (49 loans; $1.2 billion), retail (38 loans; $1.4 billion), office (32 loans; $1.3 billion), lodging (12 loans; $265.5 million), and industrial loans (four loans; $66.1 million).

By property type, DQ composition rates increased year over year for office (to 37.75% from 37.26%) and multifamily (to 14.74% from 6.37%) loans; and decreased for retail (to 20.77% from 28.42%), lodging (to 14.49% from 17.31%) loans, and industrial (to 0.50% from 0.54%) loans. Charts 5A and 5B show the year-over-year change in the property type composition for delinquent loans.

Chart 4A

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Chart 4B

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Chart 5A

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Chart 5B

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Table 3

Top five loans that moved out of delinquency in September 2024
Property City State Property type Outstanding balance ($)
JPMCC 2021-NYAH Portfolio Various New York Multifamily 392,382,500
Santa Monica Place Santa Monica California Retail 300,000,000
Lafayette Centre Washington District of Columbia Office 243,000,000
Tucson Mall Tucson Arizona Retail 190,792,717
Core Office Portfolio Various Various Multiple 148,069,281

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:Amanda Blatz, New York;
amanda.blatz@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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