CMBS Delinquency Rate Shrinks, Cumulative Default Rate Increases

(Photo credit: Casey Horner)

The commercial mortgage-backed securities delinquency rate continues to shrink, but the cumulative loan default rate increased slightly in first-half 2021, according to two new reports from S&P Global Ratings and Fitch Ratings.

S&P Global Ratings, New York, reported the overall CMBS delinquency rate decreased 39 basis points in August to 4.7 percent. But the firm noted seriously delinquent loans–60 or more days past due–remain high at 88.5 percent of delinquencies.

When studied by dollar amount, total delinquencies fell $2.6 billion to $30.3 billion, S&P Global Ratings said in its Structured Finance Credit Brief.

Fitch Ratings, New York, said the cumulative loan default rate for fixed-rate conduit CMBS increased to 18.3 percent between January and June, exceeding year-end 2020’s former record peak of 18.2 percent. Most first-half 2021 defaults (104 loans, or 68 percent) happened during the term; just 21 loans or 32 percent defaulted at maturity.

Fitch reported 125 loans totaling $3.3 billion defaulted during the first half of the year, down from 536 loans totaling $12.1 billion that defaulted during first-half 2020. “Fitch expected the pace of defaults would slow in 2021 as vaccination rates increased and businesses reopened,” the report said.

The largest CMBS loan defaults in first-half 2021 included:

–Yorkshire & Lexington Towers in New York, a $200 million multifamily-backed loan;

–Park Place Mall in Tucson, Ariz., a $198.9 million retail-backed loan; and

–RiverTown Crossings Mall in Grandville, Mich., a $154.6 million retail loan.

–The largest hotel loan that defaulted was the $105 million Westin Nashville loan in Nashville, Tenn.

Fitch said it considers loans defaulted if they have been reported 60 or more days delinquent at least once before their maturity date. Loans that remain current until maturity but fail to repay by their maturity date are considered maturity defaults.

Conduit CMBS issuance totaled $12.9 billion in the first half, down from $15.9 billion in early 2020 and $16.2 billion in 1H19, the Fitch report said.