KBRA Releases Research – CMBS Loan Performance Trends: February 2024

NEW YORK--(BUSINESS WIRE)--KBRA releases a report on U.S. commercial mortgage-backed securities (CMBS) loan performance trends observed in the February 2024 servicer reporting period. The delinquency rate among KBRA-rated U.S. commercial mortgage-backed securities (CMBS) in February decreased slightly from last month by 13 basis points (bps) to 4.48% after last January’s 10% increase. However, the total delinquent and specially serviced loan rate (distress rate) continued to rise, up 8 bps to 7.47%. This was led by mixed-use, which now has a distress rate close to 15%, and office which reached 11% this month.

CMBS loans totaling $1.1 billion were newly added to the distress rate this reporting period, and 17% ($185 million) stemmed from imminent or actual maturity default. The office sector represented the largest portion (51.6%, $563 million) of newly distressed loans. The retail sector came in second, accounting for 20.9% ($227.6 million) of newly distressed loans, followed by mixed-use at 12% ($131 million).

Other key observations of the February 2024 performance data are as follows:

• The distress rate, which increased 8 bps, was led by mixed-use (up 32 bps to 14.91%) and office (up 12 bps to 11%) which continued their general trend of month-over-month increases.
• The multifamily distress rate dropped 10 bps with the successful resolution of the Aire luxury apartment complex ($225 million, JPMCC 2013-C16 and JPMBB 2013-C17) after it failed to pay off at maturity.
• This month also saw the modification and extension of the One Market Plaza office loan ($975 million original balance, OMPT 2017-1MKT) which included a $125 million paydown of its loan to $850 million and an extension of the loan to February 2026 with an additional one-year extension option. In addition, a one-year forbearance option is available under certain conditions if the borrower is unable to pay off the loan at its February 2027 fully-extended maturity date. The forbearance period is noteworthy in that the transaction documents limit the special servicer’s ability to extend the loan to no more than five years before the rated final distribution date of February 2032, which would be February 2027. The forbearance effectively allows the borrower to have the option to extend the loan one more year beyond the limit.

In this report, KBRA provides observations across our $315.1 billion rated universe of U.S. private label CMBS including conduits, single-asset single borrower (SASB), and large loan (LL) transactions.

Click here to view the report.

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