Last month's spike in defaults due to loans maturing drove the greatest month-over-month surge of U.S. commercial mortgage-backed securities delinquencies in six years, according to Fitch Ratings. Despite this large jump, CMBS delinquencies still remain low.
Loan delinquencies increased 22 basis points from 3.5% in May to 3.72% in June. This change marks the largest monthly increase in U.S. CMBS delinquencies since July 2011, when they peaked at 9.01%.
Still, delinquencies remain fairly low midway through 2017 when compared with Fitch's previous estimate of between 5.25% and 5.75%. This is due mainly to the strong repayment activity for maturing loans during the first six months of the year. Many of these loans were once identified as high leverage and were presumed difficult to refinance.
The $1.24 billion in new delinquencies more than doubled the $527 million in resolutions for June. The majority of new delinquencies were maturity defaults.
An office property accounted the largest resolution in June, the $108 million Omni Marathon Reckson loan, a 660,223-square-foot office building located in Uniondale, N.Y. It was resolved with a 1% loss for special servicing fees. The $265 million interest-only 400 Atlantic Street loan was June's largest new delinquency. It is secured by a 527,424-square-foot office property in Stamford, Conn., and defaulted at its June 2017 maturity date.
With new issuance still healthy and $20 billion left to refinance in 2017, Fitch has revised its projection for loan delinquencies to be between 4.25% and 4.5% by the end of the year.