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SF Credit Brief: U.S. CMBS Delinquency Rate Fell 335 Bps To 3.6% In 2021; All Property Types Improved, Except Office


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SF Credit Brief: U.S. CMBS Delinquency Rate Fell 335 Bps To 3.6% In 2021; All Property Types Improved, Except Office


Delinquency Increased And Forbearance Declined

The U.S. commercial mortgage-backed securities (CMBS) overall delinquency (DQ) rate increased 8 basis points (bps) month over month to 3.6% in December but fell 335 bps from 7.0% a year earlier (see chart 1). By dollar amount, total DQs increased to $25.7 billion, representing a net increase of $1.0 billion month over month and a net decline of $16.5 billion year over year (see chart 2).

Chart 1


Chart 2


Forbearance decreased 20 bps to 5.9% in December, which is below the 8.1% peak reached in July and August 2020 (see chart 3). The forbearance rate reflects all loans, which comprise almost equal proportions of loans already in forbearance and loans requesting forbearance that are currently on the master servicer's watchlist for COVID-19-related hardship. Of the loans that were in forbearance as of November 2021, 2.6% are now performing and 0.5% became delinquent.

The lodging and retail sectors continued to represent the largest proportion of loans in forbearance and loans currently requesting forbearance relief due to the COVID-19 pandemic, at 61.1% ($25.4 billion) and 27.3% ($11.3 billion), respectively (see chart 4).

Chart 3


Chart 4


Seriously Delinquent Loan Levels Still High

The share of delinquent loans that are 60-plus-days delinquent (i.e., seriously delinquent loans) was 87.4% as of December (see chart 5). Further, loans that are 120-plus-days delinquent (those reported in the CRE Finance Council investor reporting package with a loan code status of '6') continued to represent the largest portion of delinquent loans, at 37.7%. The $9.7 billion outstanding balance as of December is much higher than the pre-pandemic level. As of July 2020, 120-plus-days delinquent loans comprised less than 5.0% of all delinquent loans(see chart 6).

Chart 5


Chart 6


Special Servicing Declined 18 Bps

The overall special servicing rate declined 18 bps month over month to 5.4% in December, with retail decreasing 32 bps to 12.0% and lodging falling 63 bps to 11.9% (see chart 7). The overall special servicing rate has been declining since it peaked at 9.5% in September 2020.

The largest lodging loan to come out of special servicing in December was Newport Centre, a $160.0 million loan that transferred to the special servicer in May 2021. The collateral comprises 968,477 sq. ft. of a 1,148,477 sq. ft. class A regional shopping mall in Jersey City, New Jersey. The property is shadow anchored by JC Penney (180,000 sq. ft.) and other anchors, including Macy's (229,889 sq. ft.), Sears (192,889 sq. ft.; with ground leases its parcel), and Kohl's (144,654 sq. ft.). Other major tenants at the property include AMC Theatres (47,615 sq. ft.; 11 screens), H&M (26,863 sq. ft.), Zara (23,606 sq. ft.), and Forever 21 (22,366 sq. ft.). The borrower was seeking a loan modification to extend the maturity. The loan modification closed on Aug. 26, 2021, and the maturity date was extended by 24 months.

In-grace loans decreased 1 bps to 1.8% of the $13.1 billion overall outstanding balance in December. This is in line with the pre-pandemic levels observed at the start of 2020. However, the grace-to-DQ conversion rate (i.e., the proportion of outstanding balance that moved from in-grace into DQ month over month) remained elevated at 15.7% in December, compared with the 2.4% reported in March 2020. Newly in-grace loans totaled $7.9 billion in December.

Chart 7


Chart 8


All DQ Rates Decreased, Except Office

By balance, delinquency rates decreased month over month for lodging (19 bps), retail (8 bps), multifamily (7 bps), and industrial (1 bps), and increased for office (66 bps) (see chart 8 above). Year over year, delinquency rates decreased by balance for lodging (11.0%), retail (4.8%), multifamily (1.2%), and industrial (0.7%), and increased for office (0.3%).

There were 90 newly delinquent loans totaling $2.8 billion in December. These included 34 office loans (total $1.6 billion), 27 retail loans ($604.1 million), 16 lodging loans ($366.9 million), six multifamily loans ($102.8 million), and three industrial loans ($20.4 million). The newly delinquent office loans include four loans that have balances greater than $100 million (see table).

Newly Delinquent Office Loans(i)
Transaction Loan Location Balance Deal type
PRKAV 2017-245P 245 Park Avenue New York City $500,000,000 Single borrower
COMM 2013-CR12 175 West Jackson Chicago $138,282,269 Conduit
JPMCC 2020-LOOP 181 West Madison Street Chicago $133,100,000 Single borrower
CGCMT 2015-GC31 135 South LaSalle Chicago $100,000,000 Conduit
(i)As of December 2021.

Charts 9 and 10 show the year-over-year change in the property type composition for delinquent loans. Lodging fell to 31.0% from 41.2% year over year, while retail decreased to 38.2% from 39.3%.

Chart 9


Chart 10


The authors would like to thank Bushra Dawawala for her research contributions to this report.

This report does not constitute a rating action.

Primary Credit Analysts:Ambika Garg, Chicago + 1 (312) 233 7034;
Tamara A Hoffman, New York + 1 (212) 438 3365;
Secondary Contacts:Senay Dawit, New York + 1 (212) 438 0132;
Benjamin Ach, New York 212 438 1986;
Deegant R Pandya, New York + 1 (212) 438 1289;
Research Contact:James M Manzi, CFA, Washington D.C. + 1 (202) 383 2028;

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