(Editor's Note: This report is S&P Global Ratings' monthly summary update of U.S. CMBS delinquency trends.)
Key Takeaways
- The U.S. CMBS overall delinquency rate decreased by 19 basis points (bps) month over month to 3.6% in August.
- Seriously delinquent (60-plus-days) and 120-plus-days delinquent loans represented 87.1% and 20.5% of delinquent loans, respectively.
- Special servicing rates increased for office (28 bps) and multifamily (11 bps) loans, while rates remained flat for lodging and industrial loans, and decreased for retail (83 bps) loans.
- By balance, delinquency rates increased for office (22 bps) loans for the eighth consecutive month, but they remained flat for industrial loans and decreased for lodging (42 bps), multifamily (30 bps), and retail (2 bps) loans.
The Overall Delinquency Rate Decreased 19 Basis Points
In this report, S&P Global Ratings provides observations and analyses across the rated U.S. private-label CMBS universe, representing $724.0 billion. The overall U.S. CMBS delinquency rate (DQ rate) declined 19 basis points (bps) month over month to 3.6% in August 2023. The rate increased 110 bps from a year earlier (see chart 1). By dollar amount, total delinquencies declined to $26.2 billion, a net decrease of $1.3 billion month over month and a net increase of $7.6 billion year over year (see chart 2).
Chart 1
Chart 2
Several Large Loans Moved Into Delinquency
Despite the overall DQ rate decreasing in August, an additional 92 loans (totaling $2.3 billion) became delinquent. Table 1 shows the top five of these loans by balance.
The largest delinquent loan was 681 Fifth Avenue, which is secured by an 82,573-sq.-ft. mixed-use property located on Fifth Avenue in New York. Built in 1913 and renovated in 2009, the property's retail space was previously occupied by Tommy Hilfiger (27.3% of net rentable area [NRA]; May 2023 lease expiration), comprising 76.6% of total base rent. However, Tommy Hilfiger vacated in April 2019, prior to the May 2023 lease expiration. The borrower recently completed renovations to the space and continues to have discussions with potential tenants. In addition, clothing company Belstaff North America (7.1% of NRA; April 2022) vacated at lease expiration. The property's debt service coverage ratio was 1.24x and occupancy was 59.0% as of the trailing 12-month period ending March 31, 2023. The loan, which matures on Nov. 6, 2026, has a 30-day-delinquent status as of August 2023.
Table 1
| Top five newly delinquent loans in August 2023 | ||||
|---|---|---|---|---|
| Property | City | State | Property type | Delinquency balance ($) |
| 681 Fifth Avenue | New York | New York | Mixed-use | 215,000,000 |
| Augusta Mall | Augusta | Georgia | Retail | 170,000,000 |
| 700 Louisiana and 600 Prairie Street | Houston | Texas | Office | 163,000,000 |
| One Whitehall | New York | New York | Office | 110,166,048 |
| One City Centre | Houston | Texas | Office | 100,000,000 |
Seriously Delinquent Loan Levels Remain High
Loans that are 60-plus-days delinquent (i.e., seriously delinquent loans) represented 87.1% ($22.79 billion) of the delinquent loans in August (see chart 3). Meanwhile, 120-plus-days delinquent loans (i.e., those reported in the CRE Finance Council investor reporting package with a loan code status of "6"), represented 20.5% ($5.4 billion) of the delinquent loans in August (see chart 4). The 120-plus-days delinquent loans have been on an overall downward trend since peaking at 44.6% ($14.9 billion) of delinquent loans in May 2021.
Chart 3
Chart 4
The Special Servicing Rate Decreased 5 Bps
The overall special servicing rate decreased 5 bps month over month to 5.7% in August (see chart 5). By sector, the special servicing rate rose for office (28 bps to 7.3%) and multifamily (11 bps to 2.0%) loans; remained flat for lodging (6.5%) and industrial (0.3%) loans; and declined for retail (83 bps to 9.7%) loans. However, despite increasing in recent months, the overall special servicing rate remains well below the 9.5% peak reached in September 2020.
The largest loan to move out of special servicing in August was The Shops at Mission Viejo. The loan is secured by a 1,155,369-sq.-ft. enclosed, super-regional mall located in Mission Viejo, Calif. The loan, which matured on Feb. 1, 2023, was transferred to the special servicer, Wells Fargo, on Jan. 1, 2023, due to imminent maturity default. A short-term forbearance was executed on Feb. 1, 2023, which expired on May 1, 2023, to allow time for continued discussions between the special servicer and borrower. On April 20, 2023, an extension was executed through February 2024, with an additional extension available through February 2025 subject to a debt-yield hurdle. Terms also include a cash trap that remains in place for the life of the loan (with excess cash above the amount needed for anticipated leasing and capital improvements to be applied quarterly to the principal balance) and the loan transferring back to the master servicer after three successful principal payments. After the initial quarterly paydown of approximately $3.0 million was made in July, the loan was returned to the master servicer. The loan has a current status as of August 2023.
Chart 5
DQ Rates Decreased For All Property Types Except Office
Chart 6 shows the historical DQ rate trend by property type. In August, the overall DQ rate increased for office (22 bps to 5.0%; 211 loans; $9.2 billion) loans for the eighth consecutive month, while DQ rates remained flat for industrial (0.3%; 10 loans; $136.8 million) loans. DQ rates decreased for lodging (42 bps to 4.7%; 133 loans; $4.8 billion), multifamily (30 bps to 1.3%; 85 loans; $1.7 billion), and retail (2 bps to 6.4%; 270 loans; $7.8 billion) loans.
There were 92 newly delinquent loans totaling $2.3 billion in August. These included 31 office loans ($979.1 million), 17 retail loans ($494.6 million), 15 multifamily loans ($142.8 million), eight lodging loans ($179.6 billion), and one industrial loan ($3.9 million).
Charts 7 and 8 show the year-over-year change in the property type composition for delinquent loans. DQ composition rates by property type increased year over year for office (to 35.0% from 14.7%) and multifamily (to 6.5% from 4.2%) loans, and decreased for retail (to 30.0% from 41.5%), lodging (to 18.3% from 26.3%), and industrial (to 0.5% from 1.2%) loans.
Chart 6
Chart 7
Chart 8
Several Large Loans Moved Out Of Delinquency
The overall DQ rate decreased in August, with 84 loans totaling $3.0 billion moving out of delinquency. Table 2 shows the top five of these loans by balance.
Table 2
| Top five loans that moved out of delinquency in August 2023 | ||||
|---|---|---|---|---|
| Property | City | State | Property type | Outstanding balance ($) |
| Greenway Plaza | Houston | Texas | Office | 465,000,000 |
| Westfield San Francisco Centre | San Francisco | California | Retail | 390,471,000 |
| Riverpoint | Washington | Washington | Multifamily | 228,615,731 |
| 805 Third Avenue | New York | New York | Office | 175,000,000 |
| Tower Place | Atlanta | Georgia | Mixed-use | 170,000,000 |
This report does not constitute a rating action.
| Primary Credit Analyst: | Senay Dawit, New York + 1 (212) 438 0132; senay.dawit@spglobal.com |
| Secondary Contacts: | Benjamin Ach, New York + 1 (212) 438 1986; benjamin.ach@spglobal.com |
| Tamara A Hoffman, New York + 1 (212) 438 3365; tamara.hoffman@spglobal.com | |
| Ambika Garg, Chicago + 1 (312) 233 7034; ambika.garg@spglobal.com | |
| Research Contact: | James M Manzi, CFA, Washington D.C. + 1 (202) 383 2028; james.manzi@spglobal.com |
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