SAN DIEGO—If not for the Four Seasons Aviara Resort in Carlsbad becoming delinquent, San Diego would stand at 32^nd instead of 15^th out of 57 total markets tracked for delinquency, New York-based Trepp research analyst Sean Barrie tells GlobeSt.com. We spoke with Barrie exclusively about the most recent San Diego delinquency rate and what the numbers mean.

GlobeSt.com: What's unusual about the most recent San Diego loan-delinquency numbers?

Barrie: Though the national delinquency rate is used as a barometer for regional commercial loan statistics, it's not often one market's delinquency reading will come close to the national number. The overall trend is what's truly used as a measuring stick. In June, San Diego's delinquency rate came in at 5.42%, just three basis points below the national reading. This minute difference between the two rates doesn't have much significance, but the reason why San Diego posted the number it did lends some insight into the current state of the market.

GlobeSt.com: So what do those reasons suggest about the market?

Barrie: Since March 2015, San Diego's reading- and delinquent-loan balances have doubled, thanks to the Four Seasons Aviara Resort in Carlsbad, CA, becoming delinquent. The property's $186.5-million loan has bene in foreclosure for over a year, but he loan's borrower, Aviara Resort Associates SPE LLC, had only started to miss payments prior to April 2015. The hotel's occupancy was reported at 70.4% for February 2015. Special-servicer commentary states that parent company Hyatt “has provided an extensive six-year capital budget that encompasses several-million-dollars' worth of upgrades and replacements. The special servicer would appear to be emphasizing a reinvigoration of resources as means of recovering this loan as opposed to a full foreclosure.

GlobeSt.com: How does this delinquency compare to others in the market?

Barrie: Of the 16 severely delinquent loans in the San Diego MSA, the Four Seasons is the only one backing a lodging property. Eleven of the loans on the list are collateralized by office properties located in either San Diego or Chula Vista. The two office loans that comprise the Aero Business Center are in particularly dire straits, with both properties struggling with their occupancy levels. The $13.3-million 8825 Aero Business Center loan is currently 68% full, while $4.6-million loan for 8875 Aero is 49% occupied, though that will drop rapidly by the end of August. After Bank of America left its 51,301-square-foot space (50.5% of the leasable area) in March, Midland Credit Management was the lone tenant left. Not soon after B of A departed, Midland announced they would be scaling back their call centers, namely the location at 8875 Aero Dr. With Midland announcing their departure, the remaining 49% of occupancy will be wiped out.

GlobeSt.com: How does San Diego's overall delinquency rate look now and for the future?

Barrie: Despite these loans falling on hard times, the sunny outlook for the San Diego commercial market hasn't swayed drastically from the prior months. Removing the Four Seasons loan from delinquency equations brings the delinquent-loan balance down to $158.9 million, which would put San Diego at 32^nd out of 57 total markets instead of where it currently stands at 15^th. Dating back to June 2013, San Diego's

delinquency rate has only eclipsed 3% three times, which were all due to the Four Seasons' severely distressed status. The MSA has seen 25 loans originated to the tune of $532 million so far in 2015, accompanied by favorable underwriting standards and property valuations. The office property sector leads the way with $234 million of that issuance. With the origination engine set to finish 2015 strong, San Diego could see even more paper dished out, leading to smiles all around.