Kroll: CMBS delinquencies fell for sixth straight month

Delinquencies in private-label commercial mortgage securitizations declined 30 basis points to 6.5% in December, the sixth consecutive month in which rates were down or were flat month-over-month, according to Kroll Bond Rating Agency.

The rate is well below the peak 8.2% peak in June, but remains elevated year-over-year, however.

Observing activity across $294 billion in both conduit and single-asset/large-borrower deals rated by Kroll, the agency noted that even the highest stressed sectors — lodging (with a 22.4% delinquency rate) and retail (12.6%) — were down from November’s rates.

New delinquencies topped $1 billion across 65 loans, of which only nine had previously received a forbearance or other form of relief. A “sizeable” number, however, were in special servicing prior to October — suggesting “many were experiencing financial pressure and/or working with the servicer for relief prior to becoming delinquent.”

“Underlying the decrease in the delinquency rate, the balance of newly delinquent loans in December fell 50% from last month,” Kroll’s report stated. “While this is a positive sign, there are concerns that borrowers coming out of forbearance or temporary relief measures could be challenged to bring loans current as the pandemic continues.”

The delinquency rate for 271 multiborrower conduit deals rated by Kroll fell to 7.6% from November’s 7.9%, while the level in December for the 93 single-asset deals tracked by Kroll (totaling $53 billion in outstanding notes) was unchanged from the prior month, with four loans delinquent across three transactions (Atrium Hotel Portfolio Trust 2017-ATRM and two deals securitized by regional mall properties: CG-CCRE 2014-FL2 and the JPMCC 2014-FL6).

(Kroll noted that although one SASB deal — Tharaldson Hotel Portfolio Trust 2018-THPT — was returned to the master servicer last month, it’s removal from the delinquency list was offset with the transfer of a transaction collateralized by a New York regional mall, COMM 2013-GAM, into special servicing.)

A mortgage secured by Chicago's Civic Opera House was among newly delinquent loans in December.

While the volume of conduit loans heading into special servicing is increasing, Kroll stated the rate of increase is at a slower pace: the $19.8 billion of specially serviced loans (representing 8.2% of the Kroll universe of rated conduit loans) was just $257 million above December’s level, compared to the $933 million increase between October and November.

“There is still a sizeable amount of delinquent loans ($2 billion) that have not transferred to the special servicer, but the figure has significantly decreased from $2.5 billion and $3.3 billion in November and October, respectively,” the report stated. “This amounts to a decrease of almost 41% over the past two months.”

While most newly delinquent loans were in the hospitality/lodging industry (a 40.7% share), office properties were “relatively” high in December due to two larger office loans falling delinquent for the first time: the Civic Opera Building in Chicago (split between two conduit transactions) and the Excelsior Crossing building in Hopkins, Minn.

Of loans that were updated to current status in December, the largest share belonged to retail (39.4% of loan principal balance), lodging (28.7%) and mixed-use (15.7%), Kroll stated. It was the first time in four months that retail properties led the proportion of newly cured loans.

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