CMBS Late-Pays See Biggest One-Month Drop

The resolution of the Stuy-Town loan was reflected in January remittance data.

NEW YORK CITY—CMBS delinquencies have posted the biggest monthly decline since Fitch Ratings began keeping track in 2001, the ratings agency said Friday. Predictably, the sale of Peter Cooper Village/Stuyvesant Town was largely responsible for the drop in the Fitch delinquency index, as the payoff on the sprawling Manhattan apartment complex was reflected in January’s remittance information. Delinquencies on Fitch-rated CMBS loans fell 109 basis points in January to 2.93% from 4.02% at year-end 2015. The last time late-pays were below 3% was in June 2009. The dollar balance of delinquencies fell $4.2 billion to $11.1 billion from $15.3 billion in December. Using a different yardstick, Trepp LLC reported earlier this month that delinquencies had declined 82 bps to an overall rate of 4.35%. Both Fitch and Trepp say that the $5.4-billion sale of the Stuy-Town complex to a partnership of the Blackstone Group and Ivanhoe Cambridge resulted in multifamily having the lowest delinquency rate—0.82% by Fitch’s reckoning, 2.31% according to Trepp. However, Trepp data has the sector moving from worst to best in the space of a month; among Fitch-rated CMBS, retail and office both had higher delinquencies in December. All property sectors, though, showed month-over-month improvements in December, according to Fitch. Along with multifamily improving 337 bps from 4.19%, January also saw retail delinquencies decline 24 bps to 4.96%; office decline 79 bps to 3.82%; hotel, down 41 bps to 3.41%; industrial, down 50 bps to 3.38; and mixed use, down 16 bps to 2.57%. Fitch expects the delinquency rate to fluctuate between 2.50% and 3% during the year. The primary reason, according to the ratings agency, is that maturity defaults on 2006-vintage loans, primarily those that are highly leveraged and are weaker performing, are expected to increase. Meanwhile, liquidations of already delinquent assets are expected to continue. January resolutions of $4.8 billion overwhelmingly outpaced new delinquencies of $637 million. By balance, nearly 95% of total resolutions were REO liquidations, largely from the Stuy-Town payoff. The portfolio runoff of $10.3 billion in January exceeded Fitch-rated new CMBS issues of $7.6 billion in December, which caused a decrease in the index denominator.