CMBS Delinquency Rate Dips, KBRA Reports

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The delinquency rate among KBRA-rated commercial mortgage-backed securities dipped four basis points in October to 4.21%, the rating agency reported.

The total delinquent and specially serviced loan rate (distress rate) declined 22 basis points to 6.53%, according to KBRA’s latest CMBS Loan Performance Trends report, available here with a subscription. “The drop was led by a decreased distress rate in the office and retail sectors, as the balance of distressed loans brought current or returned to the master servicer following modifications and/or extensions outpaced newly distressed loans,” the report said.

KBRA reported CMBS loans totaling $1.3 billion were added to the distress rate this reporting period, 41.3% of which–$543.3 million–was due to imminent or actual maturity default. The office sector has the highest exposure, accounting for 55.2% ($726.3 million) of the newly distressed loans. Mixed-use ranked second at 36.8% ($484.4 million).

Other key observations of the October 2023 performance data include:

After six straight months of deterioration in the distress rate, the office sector had the largest improvement in October, decreasing 62 basis points to 7.68% from 8.3% in September.

The retail sector also saw a decrease in delinquency, as multiple previously distressed loans were disposed in October.

The report tracks KBRA’s $315 billion rated universe of U.S. private label CMBS including conduits, SASB and large loan transactions.