NEW YORK CITY—Halloween proved to be a treat for the CMBS market this year, as the last day of October saw delinquencies for securitized commercial mortgages drop for the fourth month in a row. The three-basis point drop brought the late-pay rate down to 3.5%, as new issuance volume of $8 billion more than doubled portfolio runoff, Fitch Ratings said Friday.

In fact, delinquencies for so-called CMBS 1.0 transactions—those issued prior to the market for CMBS collapsing amid the Global Financial Crisis—have increased in each of the past 21 months, according to Fitch. The delinquency rate for these pre-2009 legacy transactions now exceeds 43%.

However, Fitch-rated CMBS 1.0 deals occupy an increasingly small quadrant of the overall CMBS universe. Currently, there are $27 billion of Fitch-rated 1.0 transactions, compared to $334 billion of 2.0 CMBS deals rated by Fitch.

Among major property sectors, only retail showed an increase in CMBS delinquencies from September, with late-pays overall rising two bps to 6.12%. Within the sector, though, regional malls posted a 28-bp rise in delinquencies to 5.33%, with the $80-million Bangor Mall loan representing October's largest new delinquency regardless of property type. Loans secured by regional mall properties account for approximately 34% of the overall retail universe, and regional mall delinquencies account for 29% of total overall retail delinquencies, Fitch says.

Multifamily continues to be the best-performing of the major property types, and October didn't move the needle one way or the other for CMBS delinquencies in the sector, which remained at 0.68% from September. The declines in the hotel, office and mixed-use delinquency rates all were due to an increase in each of these property types' denominator from the new issuance of three single borrower transactions.

A new Motel 6 portfolio securitization brought the lodging sector's delinquencies down 13 bps to 2.72%, while a $1.1-billion first-mortgage loan on 280 Park Ave. in Midtown Manhattan shaved eight bps of delinquencies from the office sector, which ended October at 5.76%. Mixed-use delinquencies also declined by eight bps, to 0.97%, after the addition of $800 million in floating-rate CMBS connected to Stonemont Financial's acquisition of a 100-property portfolio.

Industrial also posted a decline in CMBS delinquencies, dropping 14 bps to 4.10%. However, Fitch notes that volume in both resolutions and new delinquencies was low in October, and in any case industrial comprises the smallest component of the Fitch-rated universe with 2.8% of all CMBS deals.

Instant Insights /

Late-Pays Decline Again as Legacy CMBS Shrinks

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