CMBS arrears accumulate in July as many hotel loans are resolved

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Fitch Ratings’ U.S. CMBS default rate fell 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 overdue.

The company noted that most loan resolutions were in the hotel industry, which accounted for $ 958 million of the total, followed by retail at $ 524 million. The two biggest resolutions concerned hotels: the $ 231 million Hammons Hotel portfolio, which was overdue in June 2020 and was amended in May 2021, became mainstream, and the $ 160 million loan from the Sheraton Grand Nashville Downtown was made current with the proceeds from the sale of the hotel in June.

“Borrowers continue to discount their loans as real estate cash flow improves, although some are still receiving debt relief,” Fitch noted in a statement detailing the July data.

New defaults also declined in July, reaching $ 853 million, from $ 1.0 billion in June. The biggest new delinquency in July was the default on the $ 106 million Plaza Mexico-Los Angeles loan, secured by a commercial property anchored in a grocery store.

The delinquency rate for hotels is 13.61%, compared to 15.30%, while the retail rate is 9.14%, a slight increase from 9.09% in June. Defaults for regional shopping centers fell to 15.9% from 16.42% in June.

The lowest delinquency rates were for industry (0.18%), multi-family (0.49%, although in the sector, the student housing asset class stood at 4.88% in delinquent ) and offices (1.47%).

The 30-60 day overdue turnover rate was 35% from June to July, compared to 39% from May to June. As 30-day defaults have gone from $ 1.7 billion to $ 2.5 billion; Fitch says he thinks there is a “reporting problem” on a large loan.

July Special Services volume was $ 26.3 billion (1,089 loans; 5.1% of Fitch-rated US CMBS universe), compared to $ 26.2 billion (1,116 loans) in June.

Earlier this summer, Fitch predicted CMBS resolution activity will resume at the end of the second semester.

“The ongoing vaccine rollout portends an increase in leisure travel and a widespread return to business activity, both of which will have a net positive effect on CMBS,” Senior Director Karen Trebach said in prepared remarks.


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