NEW YORK CITY-Fitch Ratings and Trepp, in separate reports, eachsay June’s 17-basis point increase in CMBS delinquencies was thesmallest since July 2009. However, Trepp points out the delinquencyrate is still the highest in CMBS history, while Fitch doesn’t seethe month’s slowdown as a precedent-setter.

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'While delinquencies slowed for the month, this trend is notexpected to continue,” Mary MacNeill, managing director at Fitch,in a release. “The number of distressed properties continues togrow, and if borrowers are unable to access capital for leasingcosts or are unable to restructure their loans to a leverage levelcommensurate with sustainable property values, they may stopsubsidizing debt service payments.”

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In its monthly delinquency commentary, Trepp says the rate ofincrease in delinquencies averaged 39 bps per month for the ninemonths prior to June. Before June, the smallest increase sinceSeptember 2009 was February’s 23-bps gain.

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Trepp puts the percentage of CMBS loans 30 or more daysdelinquent, in foreclosure or REO at 8.59% as of June 30; Fitchmeasures it as 8.14%. If defeased loans were added to the total,says Trepp, the tally of delinquent CMBS would exceed 9%.

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And while the rate of new delinquency took a breather duringJune, Fitch says loans continued to transfer to special servicingat “an elevated rate,” adding $4.2 billion of performing speciallyserviced loans during the month. “In total, $23 billion of loans inspecial servicing remain less than 60 days delinquent but face anincreased risk of default,” according to Fitch.

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Conversely, June also marked the fifth consecutive month of morethan $1 billion in loan resolutions, and Fitch says the $1.5billion of loans leaving the index in June helped to offset the $2billion of new delinquencies. June also saw a smaller averagebalance for newly delinquent loans: $10.1 million, compared withthe $13.1-million average in Fitch’s CMBS delinquency index. Themonth also brought no newly delinquent loans with a balance of morethan $100 million.

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Among the delinquency rates in the major sectors, only lodgingremained basically flat from May to June, posting an increase ofonly one basis point to reach 18.63%. However, the sector has thehighest delinquency rate of any, and Fitch says that hoteldelinquencies could break the 20% barrier during July if borrowersfall farther behind on most of the $1.3 billion in loans that arenow 30 days past due.

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The largest monthly increase was the 41-bps rise in industrialdelinquency from 5.07% to 5.48%. Office rose 25 bps to 4.84%,multifamily delinquency added 17 bps for a new total of 13.82% andretail gained 16 bps to reach 6.19%.

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In what may be a harbinger of things to come, Fitch on Thursdayrated newly issued CMBS: specifically, the two classes of bondsthat back the $1.3-billion refinancing of the Durst Organization’soffice tower at 1 Bryant Park in Manhattan. The ratings agencyassigned a stable outlook to $650 million of OBP Depositor LLCTrust 2010-OBP and a comparable amount of New York LibertyDevelopment Corp. second priority liberty revenue refunding bonds,series 2010.

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