CMBS Delinquencies Jump in February

The delinquency rate is equal to the percentage of all delinquent specially serviced loans and delinquent non-specially serviced loans, for CRED iQ’s sample universe of $600 billion-plus in CMBS conduit and single-asset single-borrower (SASB) loans. CRED iQ’s special servicing rate, equal to the percentage of CMBS loans that are with the special servicer (delinquent and nondelinquent), also increased month-over-month to 5.10 percent from 4.71 percent. 

Aggregating the two indicators of distress — delinquency rate and special servicing rate — into an overall distressed rate equates to 5.29 percent of CMBS loans that are specially serviced, delinquent or a combination of both. In parallel with delinquency and special servicing rates, the overall distressed rate increased compared to the prior month’s distressed rate of 4.84 percent. Distressed rates generally track slightly higher than special servicing rates as most delinquent loans are also with the special servicer.

Congruent with prior months’ trends and recent headline risk, loans secured by office properties exhibited the sharpest month- over-month increase in delinquency. The delinquency rate for office increased to 2.31 percent in February, compared to 2.16 percent as of January. 

Office delinquency has increased for four consecutive months and is at its highest level since January 2022. 

One of the largest loans to be reported as delinquent last month was a $66 million loan secured by 375 Pearl Street, a 573,083-square-foot office tower located near City Hall in Manhattan. The loan was previously reported delinquent in 2021 on multiple occasions. 

Central Business District office towers were not the only office subtypes showing increases in delinquency. A $31.3 million loan secured by an eight-property medical office portfolio owned by Global Medical REIT was also reported as 30 days delinquent in February.

Retail had the highest delinquency rate among all property types, equal to 7.78 percent, as of February. Over the trailing 12 months, retail delinquency was at its lowest point in July 2022 (5.38 percent), but consistently trended higher throughout the second half of last year.

The delinquency rate for lodging loans exhibited a modest month-over-month increase to 4.38 percent. The multifamily (1.57 percent) and industrial (0.34 percent) delinquency rates declined in February compared to January.

Special servicing rates in February were impacted by several new transfers, including two notable regional malls. The $295 million Shops at Mission Viejo loan transferred to special servicing after a maturity default on Feb. 1. Additionally, the Pyramid Management Group’s Crossgates Mall transferred to special servicing due to its $245 million mortgage facing imminent default ahead of the loan’s May 2023 maturity date. 

The retail special servicing rate was 10.74 percent as of February, highest among all property types. The special servicing rate for lodging was second highest at 5.94 percent, followed by office (4.18 percent), multifamily (2.07 percent) and industrial (0.42 percent).

CRED iQ’s CMBS distressed rate by property type accounts for loans that qualify for either delinquent or special servicing subsets. 

Last month, the overall distressed rate (delinquency plus special servicing percent) for CMBS increased to 5.29 percent. The jump was driven by increases in delinquency rates for loans secured by office, retail and lodging properties that became delinquent but have not yet transferred to special servicing. As such, the spread between the delinquency rate and the special servicing rate widened modestly in February compared to the prior month. 

Marc McDevitt is a senior managing director at data analytics firm CRED iQ.