Fitch: U.S. CMBS Delinquencies Nearing 8 Percent on Office Defaults

Throughout the month, 44 office loans went delinquent, including 14 loans with a balance greater than $20 million. The largest new delinquency was the $380 million Columbia Center loan, whose collateral is located in Seattle.

June 4, 2010
By Allison Landa, News Editor

Courtesy Flickr Creative Commons user on1stsite

Here’s some news to put a damper on recovery: According to Fitch Ratings, CMBS delinquencies are on the rise in the office sector. A $1 billion net increase in office loan delinquencies caused a 49 basis-point rise in delinquencies, translating to a 7.97 percent increase during the month of May.

Throughout the month, 44 office loans went delinquent, including 14 loans with a balance greater than $20 million.

The largest new delinquency was the $380 million Columbia Center loan, whose collateral is located in Seattle. Sponsored by Beacon Capital Partners, L.L.C., the loan was transferred to special servicing in February and is now 60 days past due. Other major loans include a $180.9 million balance on the DRA-CRT Portfolio I, with collateral in Florida, Maryland and North Carolina, as well as a $165 million balance on 550 South Hope St. in Los Angeles.

“As expected, office loan delinquenies have begun to increase and will continue to rise well into next year,” Fitch managing director Mary MacNeill said when announcing the news. “Landlords are facing tenant downsizing and in many cases must offer significant concessions and reduced rent to maintain their existing tenant bases”

Delinquency increases aside, the office sector is still the strongest amongst traditional property types with a rate of 4.59 percent. The hotel sector had the highest delinquency rate at 18.63 percent, while multi-family was second with a rate of 13.65 percent. Retail and industrial posted rates of 6.03 percent and 5.07 percent, respectively.

Fitch’s delinquency index includes 2,938 loans totaling $35.4 billion that are at least 60 days delinquent or in foreclosure.