articles Ratings /ratings/en/research/articles/240430-sf-credit-brief-u-s-cmbs-overall-delinquency-rate-increased-by-32-bps-to-4-7-in-april-2024-office-loans-had-13091269 content esgSubNav
In This List
COMMENTS

SF Credit Brief: U.S. CMBS Overall Delinquency Rate Increased By 32 Bps To 4.7% In April 2024; Office Loans Had The Highest Increase

COMMENTS

Table Of Contents: S&P Global Ratings Credit Rating Models

COMMENTS

Lower Margin For Error On Debt Service Coverage Raises U.S. CMBS Performance Risk

COMMENTS

Weekly European CLO Update

COMMENTS

Select Servicer List


SF Credit Brief: U.S. CMBS Overall Delinquency Rate Increased By 32 Bps To 4.7% In April 2024; Office Loans Had The Highest Increase

(Editor's Note: This report is S&P Global Ratings' monthly summary update of U.S. CMBS delinquency trends.)

image

The Overall Delinquency Rate Increased By 32 Basis Points

In this report, S&P Global Ratings provides its observations and analyses of the U.S. private-label CMBS universe, which totaled $711.5 billion as of April 2024. The overall U.S. CMBS delinquency (DQ) rate increased by 32 basis points (bps) month over month to 4.7% in April 2024. The rate increased 190 bps from a year earlier, representing a 65.0% year-over-year increase by DQ balance (see chart 1). By dollar amount, total delinquencies increased to $33.3 billion, representing a net month-over-month increase of $2.05 billion and a net year-over-year increase of $13.2 billion (see chart 2).

Chart 1

image

Chart 2

image

Several Large Loans Moved Into Delinquency

The overall DQ rate increased in April with an additional 119 loans ($4.0 billion) becoming delinquent. Table 1 shows the top five of these loans by balance. Two of the five newly delinquent loans have an office component at the underlying properties.

The largest delinquent loan was 1440 Broadway. The loan is secured by a 740,387-sq.-ft. mixed-use office and retail property located in New York. The loan's debt service coverage ratio (DSCR) was 0.66x and occupancy was 85.0% as of the trailing six-month period ended in June 2023.

Green Loan Service, a new special servicer, was appointed on Dec. 6, 2023, and is currently evaluating servicing standards and the pooling and servicing agreement. The loan is current and in non-performing material balloon status; however, the maturity date of March 6, 2024, caused an appraisal trigger event and the special servicer must order an appraisal.

Table 1

Top five newly delinquent loans in April 2024
Property City State Property type Delinquency balance ($)
1440 Broadway New York New York Office 399,000,000
25 Broadway New York New York Office 250,000,000
Maine Mall South Portland Maine Retail 235,000,000
Crossland Portfolio III Various Various Lodging 195,500,000
Valencia Town Center Valencia California Retail 186,942,739

Seriously Delinquent Loan Levels Remain High

Loans that are 60-plus-days delinquent represented 85.5% ($28.5 billion) of the delinquent loans in April (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 17.8% ($5.9 billion) of the delinquent loans (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

image

Chart 4

image

The Special Servicing Rate Increased By 77 Bps

The overall special servicing rate increased by 77 bps month over month to 7.2% in April (see chart 5). By sector, the special servicing rate rose for multifamily (153 bps to 4.1%), retail (116 bps to 10.2%), office (56 bps to 10.7%), and lodging (8 bps to 6.8%), and remained relatively flat for industrial (0 bps to 0.3%) loans. However, the overall special servicing rate remains well below the 9.5% peak reached in September 2020, despite increasing in recent months.

The largest loan to move into special servicing as of April is Parkmerced. The mortgage loan is secured by an eight-story, 3,221-unit multifamily property in San Francisco that is used as student housing. The DSCR was 0.47x and occupancy was 80.0% as of the trailing nine-month period ending in September 2023.

The loan is currently less than one month delinquent and was transferred to the special servicer on March 14, 2024.

Chart 5

image

DQ Rates Increased For All Property Types Except Multifamily And Industrial

In April, office loans had the highest DQ rate by property type. The overall DQ rate increased by balance for office (73 bps to 7.1%; 272 loans; $12.7 billion), retail (28 bps to 5.4%; 242 loans; $6.5 billion), and lodging (28 bps to 5.3%; 137 loans; $5.3 billion), and decreased for multifamily (10 bps to 3.1%; 158 loans; $3.8 billion), industrial (2 bps to 0.4%; 14 loans; $211.0 million). Chart 6 shows the historical DQ rate trend by property type.

There were 119 newly delinquent loans totaling $4.0 billion in April. The sector leads were multifamily (34 loans; $815.4 million), office (29 loans; $1.6 billion), retail (25 loans; $783.7 million), lodging (15 loans; $400.5 million), and industrial (one loan; $10.3 million).

By property type, DQ composition rates increased year over year for office (to 38.3% from 25.3%) and multifamily (to 11.5% from 8.5%) loans, and decreased for retail (to 19.4% from 36.6%), lodging (to 15.9% from 19.2%), and industrial (to 0.6% from 0.9%) loans. Charts 7 and 8 show the year-over-year change in the property type composition for delinquent loans.

Chart 6

image

Chart 7

image

Chart 8

image

Several Large Loans Moved Out Of Delinquency

Despite the overall DQ rate increasing in April, 103 loans totaling $2.8 billion moved out of delinquency. Table 2 shows the top five of these loans by balance.

The largest loan to move out of delinquency was PFHP Portfolio. The loan is secured by 20 extended-stay, limited-service, or full-service hotels totaling 2,461 keys, which are diversified across six states: Florida, Texas, Indiana, Illinois, Colorado, and Michigan. As of the trailing nine-month period ended September 2023, the loan's DSCR was 1.58x and occupancy was 73.0%.

The loan was transferred to the special servicer on July 22, 2022, and is currently real estate owned because the borrower refused the modification proposals. The trust took the title of the 20 properties on Sept. 13, 2023, with the excess cash flow being used for advances.

Table 2

Top five loans that moved out of delinquency in April 2024
Property City State Property type Outstanding balance ($)
PFHP Portfolio Various Various Lodging 204,000,000
Carolina Place Pineville North Carolina Retail 147,426,931
Highland Park Washington Washington, D.C. Multifamily 146,000,000
Oglethorpe Mall Savannah Georgia Retail 133,551,519
Crossings at Canton Canton Michigan Multifamily 114,805,000

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:Amanda Blatz, New York;
amanda.blatz@spglobal.com
Tamara A Hoffman, New York + 1 (212) 438 3365;
tamara.hoffman@spglobal.com
Research Contact:James M Manzi, CFA, Washington D.C. + 1 (202) 383 2028;
james.manzi@spglobal.com

No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.

 

Create a free account to unlock the article.

Gain access to exclusive research, events and more.

Already have an account?    Sign in