April showers are supposed to bring May flowers, but for the commercial mortgage-backed securities market, last month brought something far less welcome. After three consecutive months of declining distress rates, the sector was hit with a sharp reversal: distress rates jumped by 70 basis points, climbing from 10.3% in April to 11%. In total, about $58 billion in CMBS loans were classified as distressed, according to CRED iQ.
CRED iQ’s distress rate captures loans that are at least 30 days delinquent as well as those in special servicing and the sudden uptick signals mounting volatility in the commercial real estate market. The shift underscores the importance of closely monitoring these trends as the sector faces ongoing uncertainty.
Breaking down the numbers, $10.4 billion, or 17.9% of the CMBS loans, were current in May—a slight improvement from 15.7% in April, though still down from 24.4% a year earlier. Loans that were late but still within the grace period accounted for 1.3% in May, compared to 1.6% in April and 2% in the previous year. Those late but less than 30 days delinquent stood at 4.4%, a modest decline from 4.7% in April and 5.5% year-over-year.
Recommended For You
Fully delinquent loans told a more troubling story. Those 30 days delinquent rose to 5.1% in May, up from 4.8% in April and 4.5% a year ago. Sixty-day delinquencies edged down to 1.8% from 1.9% in April, but were still higher than the 1.4% recorded the previous year. Meanwhile, loans delinquent 90 days or more held steady at 12.7%—unchanged from April but down from 15.6% a year earlier. Altogether, delinquent loans totaled $14.7 billion, representing 25.3% of the CMBS universe.
Matured loans made up the largest share, totaling $33 billion. Within this group, 18.1% were performing, up from 16.6% in April and the 15.6% recorded a year earlier. Non-performing matured loans, however, accounted for 38.6% in May—down from 42% in April, but up from 35% year-over-year.
One loan highlighted by CRED iQ was the $39.9 million Encino Financial Center, a 227,223-square-foot office property in Los Angeles. This property, which faced maturity in May, defaulted to non-performing mature status and was transferred to special servicing. As of the end of 2024, it reported 87% occupancy and a debt service coverage ratio (DSCR) of 1.67, illustrating the difficulties posed by loan maturities in the current market.
The analysis focused on conduit and single-borrower large loan structures, excluding Freddie Mac, Fannie Mae, Ginnie Mae, and CRE CLO metrics.
The timing of these results raises questions about their connection to broader market trends. In April, MSCI’s RCA Commercial Property Price Indexes recorded price drops across every property type for the first time since September 2010. This widespread decline may have made it even harder for property owners to refinance, further fueling distress in the CMBS market.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
