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Delinquency Rates on Commercial Mortgage-backed Securities Rise for Three Consecutive Months

January 03, 2023, 08:00 AM
Filed Under: Real Estate

KBRA released a report on U.S. commercial mortgage-backed securities (CMBS) loan performance trends observed in the December 2022 servicer reporting period. The delinquency rate among KBRA-rated U.S. CMBS rose 8 basis points (bps) in December 2022 to 2.97%, up from 2.89% in November and a low of 2.76% in September 2022. The rate has now increased for three consecutive months; however, it remains below the year-end (YE) 2021 rate of 4.06%. By property type, multifamily (1.83%; +27 bps), retail (5.73%; +20 bps), and office (1.58%; +13 bps) reported delinquency rate increases for the month while mixed-use declined 20 bps to 3.61%.

In this report, KBRA provides observations across our $319.6 billion rated universe of U.S. private label CMBS including conduits, single-asset single borrower (SASB), and large loan (LL) transactions.

A total of $1.3 billion of newly delinquent loans were reported in the final month of the year, the same level as last month. More than three-quarters of the delinquencies were reported as nonperforming matured balloons—up from 50% in November. In addition, of the $819.6 million transferred to the special servicer this reporting period, over 80% identified imminent or actual maturity default as the reason compared to 70% last month.

This month the maturity defaults and imminent maturity defaults were led by several large office loans including:

  • $327.7 million Wells Fargo Center (MSC 2019-NUGS)
  • $243.6 million Republic Plaza (WFRBS 2012-C10 & WFRBS 2013-C11)
  • $130.0 million Federal Center Plaza (COMM 2013-CR6)
  • $103.7 million 515 Madison Avenue (WFRBS 2013-C11)
  • $98.2 million Gateway Center (JPMCC 2013-C10)

Notably, none of the loans were reported as delinquent during their respective terms, and the assets are geographically diverse, as they are situated in Denver, Washington, D.C., New York City, and Pittsburgh. The refinancing difficulties are likely indicative of capital market disruption owing to the uncertain interest rate and economic outlook, as well as ongoing concerns about remote and hybrid work’s impact on the office sector.

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