KBRA Releases Research – CMBS Loan Performance Trends: October 2023

KBRA releases a report on U.S. commercial mortgage-backed securities (CMBS) loan performance trends observed in the October 2023 servicer reporting period. The delinquency rate among KBRA-rated U.S. CMBS in October held steady at 4.21%, just four basis points (bps) lower than September’s 4.25% rate. The total delinquent and specially serviced loan rate (distress rate) experienced a larger decline of 22 bps to 6.53%. The drop was led by a decreased distress rate in the office and retail sectors, as the balance of distressed loans brought current or returned to the master servicer following modifications and/or extensions outpaced newly distressed loans.

CMBS loans totaling $1.3 billion were added to the distress rate this reporting period, of which 41.3% ($543.3 million) was due to imminent or actual maturity default. Office continues to have the highest exposure, accounting for 55.2% ($726.3 million) of the newly distressed loans; however, this negative effect was more than offset by the return of the $765.3 million 375 Park Avenue loan (CGCMT2013-375P, COMM 2013-CR8) to the master servicer. Mixed-use came in second at 36.8% ($484.4 million), which was largely driven by the addition of the $340 million Prime Storage Fund II loan being classified as a nonperforming matured balloon.

Other key observations of the October 2023 performance data are as follows:

• After six straight months of deterioration in the distress rate, the office sector had the largest improvement in October, decreasing 62 bps to 7.68%, from 8.3% in September. The improvement is primarily due to 375 Park Avenue, as mentioned, as well as Republic Plaza ($234.6 million in WFRBS 2012-C10 and WFRBS 2013-C11)—both were returned to the master servicer this month.
• The retail sector also saw a decrease in delinquency, as multiple previously distressed loans were disposed in October. The largest is The Mall at Tuttle Crossing, with a securitization balance of $125 million and loss severity of 74.2% in two conduit deals. In addition, Bridgewater Commons ($300 million in GSMS 2012-BWTR) was returned to the master servicer this month.
• The other property type witnessed the steepest decrease in delinquency rate, as the loan status for 20 Times Square ($734.1 million in three conduits and one non-KBRA rated single-asset single borrower (SASB) transaction) changed to performing matured balloon from foreclosure, while maintaining its specially serviced status.

In this report, KBRA provides observations across our $315 billion rated universe of U.S. private label CMBS including conduits, SASB, and large loan (LL) transactions.

Click here to view the report.

Related Publications

• CRE CLO Refinance: Challenges Ahead for 2021-22 Vintage Loans
• Building Vintage Driving Office Distress; Municipal Response Varies
• CMBS Trend Watch: September 2023
• CMBS Loan Performance Trends: September 2023

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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