CMBS Delinquency Rate, Disposition Volume Remain Flat

While the overall commercial mortgage-backed securities delinquency rate remained relatively unchanged in March, CMBS 2.0 delinquencies saw a modest uptick, reported Fitch Ratings, New York.

The CMBS delinquency rate fell a single basis point between February and March to 2.90 percent, Fitch said. But the delinquency rate for CMBS 2.0 loans continued its steady increase, rising from 0.05 percent at year-end 2015 to 0.07 percent in January, 0.08 percent in February and 0.10 percent in March.

Property type composition of current outstanding CMBS 1.0 and CMBS 2.0 delinquencies differ significantly, Fitch said. CMBS 1.0 delinquencies consist primarily of retail (39 percent of total CMBS 1.0 delinquency balance) and office (32 percent), while CMBS 2.0 delinquencies consist primarily of multifamily (48 percent of total CMBS 2.0 delinquency balance) and hotel (17 percent).

“The 2.0 delinquencies, not surprisingly, are mostly in energy-dependent markets where in many cases the properties and the communities were recently built,” Fitch said.

Meanwhile, loan disposition volume in March remained close to year-ago levels, dipping below $500 million for the first time since February 2010, said Sean Barrie, Research Analyst with Trepp, New York.

Barrie said servicers liquidated 36 loans totaling $435.9 million in March, down from $567 million in February and an “astounding” $2.4 billion liquidated in January.

But Barrie noted that average loss severity jumped to 69.86 percent in March, its highest level since Trepp started tracking these data in 2010. “Contributing to this record-high loss severity were three loans taking 100 percent losses, which happen to be some of the largest loan losses incurred in March,” he said.

The month’s largest realized loss was the $77.5 million loan behind St. Louis Mills, a 1.2-million square-foot mall in Hazelwood, Mo. built in 2003. “The note was resolved with a 100 percent loss of its then-current balance,” Barrie said. The loan was listed as REO and in special servicing since November 2011. A failure to pay off at maturity coupled with faltering occupancy led to the transfer.

The second-largest loss of the month belonged to the Ariel Preferred Retail Portfolio. “Much like St. Louis Mills, the $51.8 million loan was closed out a full loss,” Barrie said. “The loan was backed by six outlet centers across six different states totaling 1.3 million square feet.” He noted that the loan endured fluctuating occupancy among the backing properties as well as steadily dwindling appraisal since transferring to special servicing in 2009.

Backed by a 288-room full-service hotel in downtown St. Louis, Mo., the $25.1 million loan backing the Sheraton St. Louis City Center represented the third-largest loss, Barrie said. “The loan was closed out with a 100 percent loss severity, meaning the three largest losses incurred in March all amounted to the full loan balance of each respective note,” he said. “Much like the two loans with larger losses taken this month, the Sheraton St. Louis was in special servicing for a long period.”