CMBS Delinquencies Tank In July As Bevy of Hotel Loans Resolve
Most loan resolutions were in the hotel sector, which accounted for $958 million of the total, followed by retail at $524 million.
The Fitch Ratings’ US CMBS delinquency rate plummeted 22 basis points to 3.59% in July from 3.81% in June, as $1.7 billion in loans were resolved and fewer loans were delinquent.
The firm noted that most loan resolutions were in the hotel sector, which accounted for $958 million of the total, followed by retail at $524 million. The two largest resolutions were hotels: the $231 million Hammons Hotel Portfolio, which had been delinquent in June 2020 and was modified in May 2021, became current, and the $160 million Sheraton Grand Nashville Downtown loan was brought current using proceeds from the hotel’s sale in June.
“Borrowers continue to bring loans current as property cash flows improve, although some are still receiving debt relief,” Fitch noted in a statement breaking down July data.
New delinquencies also declined in July, hitting $853 million, down from $1.0 billion in June. The default at maturity of the $106 million Plaza Mexico-Los Angeles loan, secured by a grocery-anchored retail property, was the largest new delinquency in July.
The hotel delinquency rate is 13.61%, down from 15.30%, while the retail rate is 9.14%, a slight increase from June’s 9.09%. Delinquencies for regional malls were down to 15.9% from 16.42% in June.
The lowest delinquency rates were for industrial (0.18%), multifamily (0.49%, though within the sector the student housing asset class sat at 4.88% delinquent), and office (1.47%).
The roll rate of 30 to 60 days delinquent was 35% from June to July, compared with 39% from May to June. While 30-day delinquencies rose to $2.5 billion from $1.7 billion; Fitch says it believes there is a “reporting issue” on one large loan.
July’s special servicing volume was $26.3 billion (1,089 loans; 5.1% of Fitch-rated U.S. CMBS universe), compared with $26.2 billion (1,116 loans) in June.
Earlier this summer, Fitch predicted CMBS resolution activity will pick up late in the second half of the year.
“The ongoing vaccine rollout portends a rise in both leisure travel and a widespread return of commercial activity, both of which will have a positive net effect on CMBS,” said Senior Director Karen Trebach in prepared remarks.