CMBS Late-Pays Likely to Finish Year Below 6%

FITCH-Delinquencies on CMBS could dip below 6% by year's end, the lowest level since 2009, Fitch Ratings said Monday. The ratings agency cited a 22-basis point drop in November to 6.10% on the strength of four large loan dispositions. With the $2.57-billion CWCapital Asset Management asset sale still in process, Fitch is expecting more such dispositions in the weeks to come.

Even as late-pays continue to decline, Fitch notes that the prior month was not without several notable additions to the ranks. The largest was the $92-million Cerritos Corporate Center (securitized as MLMT 2006-C1), for which a deed in lieu foreclosure now appears imminent. At the same time, Fitch says the $78-million Sierra Vista Mall (COMM 2006-C8) fell 60-days delinquent last month, while the $63-million Buckingham Portfolio (GCCFC 2007-GG9) defaulted at maturity and is now reported as a nonperforming matured balloon loan.

Both of these loans date from the heyday of commercial mortgage securitization, and although the performance of so-called “CMBS 2.0” loans has been for the most part healthy, October and November saw several new CMBS 2.0 delinquencies. In October, the $6.6 million Wood Forest Apartments loan (COMM 2012-LC4) fell 60 days delinquent, although the borrower is working to bring the loan current. Two additional 2.0 loans were reported as 60 days delinquent in November: the $9.4=million Lynn Portfolio (COMM 2012-CCRE3) and the $9.1-million Campus Habitat (FREMF 2010-K9). This brings to five the total of Fitch-rated CMBS 2.0 loans in delinquency.

In November, loan resolutions of $1.4 billion outpaced the new additions to Fitch's CMBS delinquency index, which totaled $620 million. Additionally, Fitch-rated new issuance volume of $4.8 billion exceeded $4.5 billion in portfolio runoff, causing a modest increase in the index.

November saw considerable movement in delinquency rates among the major property types. Most notably, the delinquency rate for industrial plunged over one percentage point, thanks to the note sale at the end of October of the original $190-million StratReal Industrial Portfolio I loan (BACM 2007-1) via a fair-value purchase option.

Hotel also posted a strong performance due to the Windsor Capital Portfolio disposition. Fitch says lodging delinquencies are expected to fall even further once the ratings agency confirms the sale of the $73-million Astor Crowne Plaza. Office delinquencies showed more modest improvement, with a high volume of resolutions partly offset by the addition of Cerritos Corporate Center. Multifamily and retail were mostly flat from October to November.

Industrial CMBS posted a late-pay rate of 8.50% last month, down from 9.68% in October. Multifamily's delinquency rate rose slightly from 6.98% to 7.01%, while retail ticked down just one percentage point to 5.78% from the previous month. Hotel delinquencies dropped to 6.96% from 7.64% the previous month, while office ticked downward from 6.95% to 6.77%.

Fitch's CMBS delinquency index includes 1,715 loans totaling $24.2 billion that are currently at least 60 days delinquent, in foreclosure or REO, or considered non-performing matured. Its total rated universe runs to approximately 31,000 loans comprising $396.2 billion.