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CMBS Late-Pays Drop Slightly, Large Mod Looming

SEP 13, 2013 11:58am ET
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Although the latest downward drop in the commercial mortgage-backed securities delinquency rate tracked by Fitch Ratings was relatively milder than it was the previous month, the company said there is a “huge modification on the horizon” that may cause it to drop more precipitously in the future.

CMBS late-pays in August fell 10 basis points to 6.68%, a milder decline than the record 40 basis point month-to-month drop experienced in July, according to Fitch, which tracks delinquencies using a CMBS index containing 1,736 loans totaling $26.3 billion that are at least 60 days late.

“Despite the modest drop last month, Fitch Ratings’ delinquency rate is poised for another dip once the impending modification of the $678 million Skyline Portfolio loan is finalized,” Fitch said in a report Friday, noting that Skyline is the second largest delinquent loan in its index.

According to Fitch, the sponsor, Vornado, cited the Defense Base Realignment and Closure statute as contributing to recent and upcoming vacancies at the properties and the modification it is closing on would contribute a 12 basis point drop in CMBS delinquency rate tracked by Fitch if it goes through.

Fitch said in August “resolutions of $1 billion outpaced new additions to the index of $559 million” and delinquency rates dropped month-to-month for all property types.

Industrial dropped to 9.41% from 9.56%, hotels fell to 7.68% from 8.04%, late-pays in the office sector slid to 7.56% from 7.59%, multifamily declined to 7.3% from 7.41%, and retail also was down at 6.23% compared to 6.37%.

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