CMBS Performance Stable for Now: KBRA
- Jan 07, 2021
U.S. commercial mortgage-backed securities saw their overall delinquency rate fall 30 basis points in December—to 6.5 percent—versus the previous month, according to the latest CMBS Loan Performance Trends update from the Kroll Bond Rating Agency.
It was the sixth straight month that delinquencies, after peaking at 8.2 percent in June, were either flat or had declined. Nonetheless, delinquencies remain elevated by 5.5 percent from a year ago.
The report is based on December performance data on the $294 billion universe of U.S. private-label CMBS rated by KBRA, including conduits, single-asset single-borrower and large loan transactions.
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The balance of newly delinquent CMBS loans in December decreased by 50 percent from November. “While this is a positive sign, there are concerns that borrowers coming out of forbearance or temporary relief measures could be challenged to bring loans current as the pandemic continues,” the KBRA report authors cautioned.
From its review of the 65 newly delinquent loans—which total $1 billion—KBRA concluded that only nine had previously received forbearance or some other form of relief. Thirty-eight percent had been in special servicing before October, however, which suggests to KBRA that “many were experiencing financial pressure and/or working with the servicer for relief prior to becoming delinquent.”
Among the 271 conduit transactions—totaling a balance of $241 billion—that KBRA rates, the delinquency rate decreased to 7.6 percent in December across all property types, though this remained higher than in the overall KBRA-rated CMBS universe.
The lodging delinquency rate was unchanged from November, at 23.6 percent, while retail delinquencies slid to 10.1 percent, from 10.8 in the prior month. In addition, the number of late payments continued to fall, in what KBRA considers a good sign, because the figure is a precursor of loans that will be delinquent in the following payment period.
Conduit loans in special servicing are increasing, though at a slower pace than in mid-2020.
SASB and Large Loan CMBS
Among the 93 SASB and large-loan transactions—with a total balance of about $53 billion—that KBRA rates, the overall delinquency rate did not change from November, nor did the number of loans that are current but nonetheless are specially serviced.
One SASB loan (THPT 2018-THL) was returned to the master servicer after having been modified in August. It’s collateralized by 89 properties, including about 46 percent extended-stay, 25 percent limited-service, and a mix of select- and full-service hotels.
According to KBRA, the loan’s sponsor, Colony Capital Inc., has announced that it’s selling a 55 percent interest in the portfolio to an affiliate of Highgate, a major hotel owner/operator.
One development in the nonconduit world is one newly specially serviced loan securing COMM 2013-GAM, a SASB transaction collateralized by Green Acres Mall, a super-regional mall in Valley Stream, N.Y. The property’s owner, Macerich, has requested a maturity extension on the loan in question, which is set to mature in February 2021. Though the master servicer has transferred this loan to the special servicer for that reason, the loan remains current as of the December reporting period.