CMBS delinquencies rise as late payments on retail properties increase

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The commercial mortgage-backed securities delinquency rate increased for the first time since October, led by a 31-basis-point rise in late payments for loans secured by retail properties, Fitch Ratings said.

Five times as many loans were added to the delinquent inventory ($417 million) than were resolved ($82 million) during March.

The overall CMBS delinquency rate increased by 8 basis points to 2.08% in March from February. But this was still 88 basis points below the 2.96% rate for March 2018.

Commercial real estate debt outstanding grew 6.8% last year to $3.39 trillion, according to a Mortgage Bankers Association report. Of that total, $466.1 billion held by securitizers.

Delinquencies in the retail segment increased by 31 basis to 5% from 4.69% in February; this segment had the highest delinquency rate.

The largest loan that went into delinquency was for $222.6 million. It is secured by eight community shopping centers in Florida and was not repaid by its maturity date. The original due date was extended after the loan was split into two notes and turned into an interest-only mortgage.

However, the borrower is reportedly selling the loans to a single buyer, where the proceeds will repay the senior note and a portion of the junior note.

There is another increase anticipated in the retail delinquency rate for April, as two regional mall loans became 30 days late on their payments during Mach, one for $49.9 million and the other for $45 million.

The mixed-use sector had a 30-basis-point rise in the rate, to 1.66% from 1.36% in February, the only segment with a significant increase in delinquencies. That increase was tied to a securitization, originally consisting of 14 properties leased (either fully or partially) to the federal government. There are three properties remaining; the borrower was late on a balloon payment due in March.

Across other commercial real estate segments, the CMBS default rate remained flat compared with February. The delinquency rate for the office sector fell 3 basis points, hotels rose 1 basis point, industrial declined 2 basis points, multifamily rose 2 basis points and other property types were down 1 basis point.

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CMBS Mortgage defaults Distressed CRE Commercial lending Fitch