“The CRED iQ overall delinquency rate for commercial mortgage-backed Securities (CMBS) exhibited a precipitous decline during the May 2022 remittance period, marking two years of month-over-month decreases,” wrote Marc McDevitt, a senior managing director at CRED iQ.
“The delinquency rate, equal to the percentage of all delinquent specially serviced loans and delinquent non-
specially serviced loans, for CRED iQ’s sample universe of $500 billion-plus in CMBS conduit and single-asset single-borrower (SASB) loans was 3.32 percent, which compares to the prior month’s rate of 3.83 percent. CRED iQ’s special servicing rate, equal to the percentage of CMBS loans that are with the special servicer (delinquent and non-delinquent), declined month over month to 5.17 percent from 5.88 percent. The special servicing rate has declined for six consecutive months.
“Aggregating the two indicators of distress — delinquency rate and special servicing rate — into an overall distressed rate (DQ + SS percent) equals 5.33 percent of CMBS loans that are specially serviced, delinquent or a combination of both. The overall distressed rate declined compared to the prior month rate of 5.97 percent. The overall distressed rates typically track slightly higher than special servicing rates as most delinquent loans are also with the special servicer.
“By property type, the delinquency rate dipped in May for all sectors with delinquency cures totaling over $500 million by outstanding balance. As one example of a larger delinquency cure, CRED iQ’s May 2022 Market Delinquency Tracker report noted the Supor Industrial Portfolio as a new 30-day delinquency at the time; however, the late payment was a temporary occurrence and the loan was paid current this month. Lodging exhibited the greatest month-over-month improvement among all property types with its delinquency rate improving to 6.19 percent, compared to 7.55 percent last month.
“Retail had the highest delinquency rate (6.32 percent) by property type for the second consecutive month. Last month, we observed a delinquency crossover event where the percentage of delinquent lodging loans declined to a level below the delinquency rate for retail for the first time since May 2020, when the delinquency rate for lodging spiked to nearly 20 percent.
“However, the retail sector continues to get hit with new high-profile delinquencies each month. This month, a $100.6 million Arbor Place Mall loan passed its scheduled May 2022 maturity date without paying off. Prior to the maturity default, the loan had been specially serviced since April 2020.
“Additionally, an $86.5 million loan secured by the Outlet Shoppes in Oklahoma City failed to pay off at its scheduled maturity on May 1, 2022 and transferred to special servicing on May 5, 2022.
“Special servicing rates also declined across all major property types in May, exhibiting similar trend characteristics as property-specific delinquency rates. Despite the improvements in special servicing rates, the most recent reporting period was not without major credit developments in the office/mixed-use sector, especially within the Manhattan market with two notable special servicing transfers of office/mixed-use buildings occurring last month. The largest was a $235 million senior mortgage secured by 285 Madison Avenue, a 511,208-square-foot office tower located in the Grand Central submarket — as Commercial Observer reported on May 23. Additionally, the $226.3 million 693 Fifth Avenue loan transferred to special servicing in April 2022 after ongoing issues from the departure of the collateral property’s former retail tenant, Valentino.”