NEW YORK CITY—It's now seven for seven in terms of declines in CMBS delinquencies. Fitch Ratings said Monday that late-pays on Fitch-rated securitizations declined 10 basis points in January to 3.12%, representing the seventh consecutive monthly decline, thanks to low volume of new delinquencies along with steady issuance of new CMBS transactions.
Delinquencies fell in most property types during January, according to Fitch data. The exceptions were hotels, which posted a three-bp increase to 2.89%, and retail, for which late-pays ticked upward by one bp to 5.77%.
The gap in delinquencies between retail and the second worst-performing property type, office, widened during January as the office delinquency rate improved by 20 bps to 4.9%. With its Fitch delinquency rate now at 0.46%, down from 0.52% in December, multifamily remains the best performing asset class in terms of CMBS.
January's volume of new delinquencies was the lowest since 2015 at $264 million. Fitch-rated new issuance volume in December of $6.2 billion from seven transactions was more than triple the $2.0 billion in portfolio runoff, which resulted in a higher overall index denominator for January. Resolution volume was modest at $442 million, says Fitch.
Separately, S&P Global Ratings said Monday that annual defaults reached 555 in 2017, compared to 448 in 2016. However, S&P notes there's little surprise in that bump-up, since '17 represented the 10-year maturity date for “the more-aggressively underwritten” CMBS loans of 2007 vintage. 2007 vintage loans hitting their 10-year maturities. About 82% of last year's defaults were on '07-vintage loans, compared to the 65% of 2016 defaults that occurred with loans originated in 2006.
In the current year, S&P expects CMBS defaults to decline significantly, with just 85 2008-vintage loans due to mature in 2018. “On the term default side, we are now focusing on the 2013 through 2015 vintages, as years four to six of a loan's life are typically its peak term default period,” according to S&P. Thanks to above-average underwriting standards on loans of these vintages, S&P believes they're “better suited to weather this period.”
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
