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SF Credit Brief: U.S. CMBS Delinquency Rate Rose 10 Bps To 5.3% In October 2024; Office Rate Surged Past 9.0%

(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 10 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 $727.2 billion as of October 2024 (a net increase of $2.46 billion month over month). The overall U.S. CMBS delinquency (DQ) rate rose 10 basis points (bps) month over month to 5.3% in October and soared 147 bps year over year (a 39.0% increase by DQ balance). By dollar amount, total delinquencies grew to $38.9 billion, representing net month-over-month and year-over-year increases of $0.9 billion and $10.9 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 October with an additional 141 loans ($4.2 billion) becoming delinquent. Table 1 shows the top five of these loans by balance.

Table 1

Top five newly delinquent loans in October 2024
Property City State Property type Delinquency balance ($)
Worldwide Plaza New York New York Office 940,000,000
Times Square Plaza New York New York Multiple 335,000,000
State Farm Portfolio Various Various Office 250,680,883
The Prince Building New York New York Multiple 200,000,000
Clackamas Town Center Happy Valley Oregon Retail 191,396,065

Delinquent And Modified Or Extended Loans

Modified loans represented approximately 10.2% ($73.8 billion) of the $727.2 billion total U.S. CMBS outstanding balance as of October. Table 2 shows the top five modified loans by balance; two of which are backed by office.

By sector, lodging had the highest modification rate (19.6% by balance) as of October. 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 (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 10.2% 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 October was Mall of America.

Table 2

Top five modified loans in October 2024
Property City State Property type Outstanding balance ($)
Mall of America Bloomington Minnesota Retail 1,385,591,387
280 Park Avenue New York New York Office 1,075,000,000
IMC Portfolio Various Various Other 975,000,000
One Market Plaza San Francisco California Office 850,000,000
Workspace Property Trust Portfolio - Component B Various Various Multiple 850,000,000

The Special Servicing Rate Increased By 28 Bps

The overall special servicing rate increased 28 bps month over month to 8.0% in October (see charts 3A and 3B). By sector, the special servicing rate rose for office (129 bps to 13.5%), lodging (39 bps to 7.1%), multifamily (15 bps to 4.9%), retail (9 bps to 10.7%), and decreased for industrial loans (9 bps to 0.3%). The overall special servicing rate remains below the 9.5% peak of September 2020.

The largest loan to move into special servicing in October was Worldwide Plaza. The loan is secured by a 2.0 million-sq.-ft. borrower's fee simple interest in an office building and a pledge of membership interests, with a collateral assignment of certain mortgages on the property's amenities parcel. As of June 2024, occupancy at the property was 90.0% and the NCF DSC was 2.23x. The $940.0 million loan has an original term of 120 months, and it is scheduled to mature in November 2027.

The loan transferred to the special servicer on Sept. 12, 2024, due to imminent monetary default; and, as of Oct. 16, 2024, the borrower is waiting for special servicer to provide the reporting files.

Chart 3A

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Chart 3B

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DQ Rates Decreased For Four Sectors

By balance, the overall DQ rate increased for office (92 bps to 9.1%; 361 loans; $15.9 billion); and decreased for retail (25 bps to 6.3%; 270 loans; $7.6 billion), multifamily loans (48 bps to 3.7%; 194 loans; $5.0 billion), and lodging (14 bps to 5.3%; 135 loans; $5.4 billion); and remained unchanged for industrial loans (at 0.3%; 13 loans; $0.2 billion). Charts 4A and 4B show the historical DQ rate trend by property type.

There were 141 newly delinquent loans totaling $4.2 billion in October, led by office (40 loans; $2.0 billion), multifamily (37 loans; $656.3 million), retail (28 loans; $577.0 million), lodging (14 loans; $135.4 million), and industrial loans (four loans; $90.0 million).

By property type, DQ composition rates increased year over year for office (to 40.90% from 35.57%) and multifamily (to 12.74% from 8.68%) loans; and decreased for retail (to 19.53% from 25.81%), lodging (to 13.84% from 15.21%) loans, and industrial (to 0.49% from 3.88%) 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 October 2024
Property City State Property type Outstanding balance ($)
Bank of America Plaza Los Angeles California Office 266,670,000
Providence Place Mall Providence Rhode Island Retail 254,930,762
Westfield MainPlace Santa Ana California Retail 140,000,000
Sunvalley Shopping Center Concord California Retail 139,001,144
The Centre Cliffside Park New Jersey Multifamily 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 121 243 80307;
mei.yolles@spglobal.com
Tamara A Hoffman, New York + 1 (212) 438 3365;
tamara.hoffman@spglobal.com
Lourdes Karam, Chicago +1-312-233-7022;
Lourdes.Karam@spglobal.com
Research Contact:James M Manzi, CFA, Washington D.C. + 1 (202) 383 2028;
james.manzi@spglobal.com

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