According to a new report from Kroll Bond Rating Agency examining U.S. commercial mortgage-backed securities loan performance trends in December, the delinquency rate among KBRA-rated U.S. commercial mortgage-backed securities rose eight basis points (bps) in December to 2.97%, up from 2.89% in November and a low of 2.76% in September. The rate has now increased for three consecutive months; however, it remains below the year-end 2021 rate of 4.06%. By property type, multifamily (1.83%; up 27 bps), retail (5.73%; up 20 bps), and office (1.58%; up three bps) reported delinquency rate increases for the month, while mixed-use declined by 20 bps to 3.61%.
A total of $1.3 billion of newly delinquent loans were reported in the final month of the year, the same level as November. More than three-quarters of the delinquencies were reported as non-performing matured balloons, up from 50% in November. In addition, of the $819.6 million transferred to the special servicer this reporting period, more than 80% identified imminent or actual maturity default as the reason compared to 70% in November.
In December, the maturity defaults and imminent maturity defaults were led by several large office loans, including:
- $327.7 million Wells Fargo Center
- $243.6 million Republic Plaza
- $130 million Federal Center Plaza
- $103.7 million 515 Madison Ave.
- $98.2 million Gateway Center
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Notably, none of these loans were reported as delinquent during their respective terms, and the assets are geographically diverse, as they are situated in Denver, Washington, D.C., New York City and Pittsburgh. According to KBRA, the refinancing difficulties are likely indicative of capital market disruption owing to an uncertain interest rate and economic outlook, as well as ongoing concerns about remote and hybrid work’s impact on the office sector.
