Large Defaults Hurt May CMBS

New York-Large loan defaults coupled with declining performance on multifamily and retail properties resulted in a 29 basis point climb to 2.1% for U.S. CMBS delinquencies in May, according to the latest Loan Delinquency Index from Fitch Ratings here.

This measurement marks the highest percentage of delinquencies since Fitch began its index in 2001.

In total, the index now includes 19 loans or crossed portfolios with balances of $50 million or greater, of which eight are in excess of $100 million. In May 2008 only two loans had a balance over $50 million.

Of the loans greater than $50 million, eight are retail properties, seven are multifamily and six are hotels.

Two of the largest 10 delinquent loans were added in May, the $160 million Mansions Multifamily Portfolio consisting of four cross-collateralized and cross-defaulted loans, and the $86 million Arizona Retail Portfolio, both of which are in 2007 vintage transactions.

"Defaults on larger loans continue to drive delinquency increases because later vintage transactions have larger loans, many underwritten with now unrealized pro-forma income, as well as now-depleted debt service reserves and high leverage," said Susan Merrick, Fitch managing director and U.S. CMBS group head.

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