In July workouts outnumbered new delinquencies among securitized commercial property loans of all types leading to a 14 basis point decrease in the CMBS delinquency index, according to Fitch Ratings.
Mainly due to more aggressive loan resolution efforts driven by two large loan modifications, the U.S. CMBS delinquency rate in July dropped to 8.48% from 8.62% in June.
It marks the second consecutive monthly decline in overall U.S. CMBS delinquencies.
Compared to June delinquency rates decreased for all property types monitored by the Fitch index, which includes 2,332 loans totaling $33.2 billion that are currently at least 60 days delinquent, in foreclosure or real estate owned, or considered non-performing.
The Multifamily CMBS rate dropped to 10.89% from 11.64%, the Hotel rate to 11.46% from 11.22%, the Industrial to 8.68% from 9.93%, Office to 8.43% from 8.58%, and Retail to 7.40% from 7.67%.
The $305 million Schron Industrial Portfolio (GCCFC 2007-GG9) and the $210 million Savoy Park (CSMC 2007-C1) were among the largest modified loans that contributed to the decline.
The modification of the Schron Industrial Portfolio loan and the resolution of nine other industrial loans totaling $47 million led to a 125 bps improvement in the industrial delinquency rate, Fitch said.
Similarly, the multifamily rate improved by 75 bps with the modification of the Savoy Park loan and the resolution of 75 other multifamily loans totaling $335 million.
The office sector delinquency rate improved by 15 bps following the return to performing status of 42 office loans totaling $512 million—compared to 23 newly delinquent office loans totaling $372 million.
So even though the rate improved, Fitch said, the office sector will continue to face stress.
Meanwhile the retail property rate improved by 27 bps, as 51 retail loans totaling $404 million returned to performing status—compared to the 31 newly delinquent retail loans totaling $258 million.
Despite recent improvements the hotel sector was the weaker performing sector in July with 11 newly delinquent loans totaling $280 million--compared to only 10 hotel loans totaling $123 million that were resolved during the month.
The deterioration was driven by the $78 million JW Marriott located in Tucson, AZ (CSMC 2006-TFL2), which is the second largest loan addition to the index this month, Fitch said.
