(Editor's Note: This report is S&P Global Ratings' monthly summary update of U.S. CMBS delinquency trends.)
Key Takeaways
- The U.S. CMBS overall delinquency rate rose 5 bps month over month to 4.9% in August.
- By balance, DQ rates increased for multifamily (42 bps to 4.0%) and retail (19 bps to 5.7%); and decreased for office (23 bps to 7.6%), lodging (16 bps to 5.1%), and industrial (10 bps to 0.4%).
- Special servicing rates rose for office, multifamily, industrial, and retail loans, and fell for lodging loans.
- The share of loans that were either modified or extended increased 20 bps month over month to 10.3% in August.
The Overall Delinquency Rate Increased By 5 Basis Points
In this report, S&P Global Ratings provides its observations and analyses of the U.S. private-label commercial mortgage-backed securities (CMBS) universe, which totaled $724.2 billion as of August 2024 (a net increase of $2.1 billion month over month). The overall U.S. CMBS delinquency (DQ) rate rose 5 basis points (bps) month over month to 4.9% in August 2024. The rate soared 129 bps from a year earlier, representing a 35.9% year-over-year increase by DQ balance (see chart 1). By dollar amount, total delinquencies grew to $35.5 billion, representing net month-over-month and year-over-year increases of $0.5 billion and $9.4 billion, respectively (see chart 2).
Chart 1
Chart 2
Several Large Loans Moved Into Delinquency
The overall DQ rate increased in August with an additional 115 loans ($3.6 billion) becoming delinquent. Table 1 shows the top five of these loans by balance, which are all secured by office, retail, and multifamily asset types.
Table 1
| Top five newly delinquent loans in August 2024 | ||||
|---|---|---|---|---|
| Property | City | State | Property type | Delinquency balance ($) |
| JPMCC 2021-NYAH Portfolio | Various | New York | Multifamily | 392,382,500 |
| Santa Monica Place | Santa Monica | California | Retail | 300,000,000 |
| 17 State Street | New York | New York | Office | 180,000,000 |
| 1213 Walnut | Philadelphia | Pennsylvania | Multifamily | 125,000,000 |
| Stamford Plaza Portfolio | Stamford | Connecticut | Office | 119,140,228 |
Delinquent And Modified Or Extended Loans
Modified loans represented approximately 10.3% ($74.7 billion) of total U.S. CMBS issuance ($724.2 billion) as of August 2024. Table 2 shows the top five modified loans by balance. Two of the top five modified loans are backed by office.
By sector, lodging had the highest modification rate (21.2%) as of August. However, this standout rate is more a function of the legacy modifications that were allowed soon after the onset of the COVID-19 pandemic; it is not an accurate indicator of current sector stress. Retail loans had the second-highest modification rate (14.3%), reflecting a mix of modifications granted due to the pandemic and, of more concern, for loans commonly backed by retail malls that are unable to refinance and, therefore, receive extensions. The 7.5% and 9.4% modification rates for office and multifamily, respectively, are also revealing, as they indicate that the delinquency rates for those sectors would be notably higher if CMBS servicers weren't granted modifications. Chart 3 shows the breakout of the delinquency rate and modified loan rate by property type.
Chart 3
The largest loan modified in August was North Star Mall, a two-year first-lien mortgage on the borrower's fee simple interest in the North Star Mall, a 1,281,437-sq.-ft. super-regional mall located in San Antonio, Texas. As of year-end 2023, occupancy was 97.4% and NCF DSCR was 1.35x.
The loan is subject to three, one-year extension options. On Aug. 9, 2024, a loan modification was executed, extending the maturity date to Aug. 15, 2025. The loan status is current and not with the special servicer.
Table 2
| Top five modified loans as of August 2024 | ||||
|---|---|---|---|---|
| Property | City | State | Property type | Outstanding balance ($) |
| North Star Mall | San Antonio | Texas | Retail | 290,000,000 |
| AGW Office Portfolio | Various | New York | Office | 280,000,000 |
| Woolworth Building | New York | New York | Office | 137,323,343 |
| Piazza & Liberties Walk | Philadelphia | Pennsylvania | Multifamily | 130,746,520 |
| Gateway Net Lease Portfolio | Various | Various | Multiple | 116,252,704 |
The Special Servicing Rate Increased By 14 Bps
The overall special servicing rate increased 14 bps month over month to 7.4% in August (see chart 4). By sector, the special servicing rate rose for office (58 bps to 11.8%), multifamily (45 bps to 4.6%), industrial (3 bps to 0.3%), and retail loans (1 bp to 10.4%); and decreased for lodging loans (9 bps to 6.3%). The overall special servicing rate remains well below the 9.5% peak reached in September 2020.
The largest loan to move into special servicing as of August is AMA Plaza. The loan is secured by the borrower's fee simple interest in a 1,186,081-sq.-ft., class A office building and leasehold interest in the adjacent parking garage in Chicago. As of year-end 2023, occupancy was 84.0% and NCF DSCR was 0.86x.
The loan transferred to the special servicer on July 22, 2024, due to imminent monetary default. In June 2024, the borrower extended the maturity to June 9, 2025. A month later, the master servicer triggered a cash management due to a debt yield (DY) trigger, and the borrower has indicated it would not be paying the August debt service or the $4.4 million in taxes due Aug. 1, 2024.
Chart 4
DQ Rates Increased For Multifamily And Retail
By balance, the overall DQ rate increased for multifamily (42 bps to 4.0%; 184 loans; $5.3 billion) and retail loans (19 bps to 5.7%; 252 loans; $6.9 billion); and decreased for office (23 bps to 7.6%; 325 loans; $13.4 billion), lodging (16 bps to 5.1%; 127 loans; $5.2 billion), and industrial loans (10 bps to 0.4%; 17 loans; $0.2 billion). Chart 5 shows the historical DQ rate trend by property type.
There were 115 newly delinquent loans totaling $3.6 billion in August, led by multifamily (43 loans; $1.5 billion), office (30 loans; $1.0 billion), retail (19 loans; $574.9 million), lodging (four loans; $114.4 million), and industrial loans (four loans; $27.3 million).
By property type, DQ composition rates increased year over year for office (to 37.8% from 35.0%), multifamily (to 14.9% from 6.5%), and industrial (to 0.7% from 0.5%) loans; and decreased for retail (to 19.5% from 30.0%) and lodging (to 14.5% from 18.3%) loans. Charts 6 and 7 show the year-over-year change in the property type composition for delinquent loans. Despite the monthly decline, office maintains the highest DQ rate by property type.
Chart 5
Chart 6
Chart 7
Several Large Loans Moved Out Of Delinquency
Despite the overall DQ rate increasing in August, 104 loans totaling $3.8 billion moved out of delinquency. Table 3 shows the top five of these loans by balance.
The largest loan modified in August was 230 Park Avenue, which is secured by the Helmsley Building, a 1,396,610-sq.-ft., class A office building with ground floor retail in New York City. As of year-end 2023, the occupancy was 83.0% and NCF DSCR was 0.75x.
The loan transferred to the special servicer on Oct. 19, 2023, due to imminent maturity default. According to the servicer, the borrower is exploring a change in usage for a portion of the building for better optimization and to increase value.
Table 3
| Top five loans that moved out of delinquency in August 2024 | ||||
|---|---|---|---|---|
| Property | City | State | Property type | Outstanding balance ($) |
| 230 Park Avenue | New York | New York | Office | 670,000,000 |
| Providence Place Mall | Providence | Rhode Island | Retail | 254,930,762 |
| Crossland Portfolio III | Various | Various | Lodging | 191,768,138 |
| 805 Third Avenue | New York | New York | Office | 175,000,000 |
| 1615 L Street | Washington | District of Columbia | Office | 134,250,000 |
This report does not constitute a rating action.
| Primary Credit Analyst: | Senay Dawit, New York + 1 (212) 438 0132; senay.dawit@spglobal.com |
| Secondary Contacts: | Sabrina Chiang, New York + 1 (347) 325 4501; sabrina.chiang@spglobal.com |
| Tamara A Hoffman, New York + 1 (212) 438 3365; tamara.hoffman@spglobal.com | |
| Research Contact: | James M Manzi, CFA, Washington D.C. + 1 (202) 383 2028; james.manzi@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.