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Increasing struggles for office properties, most notably in Atlanta, overshadowed what was otherwise a flat February for delinquencies among loans held in commercial mortgage-backed securities (CMBS), according to the latest index results from Fitch Ratings.
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By the agency's assessment, CMBS late-pays fell two basis points last month to 8.30 percent from 8.32 percent a month earlier. The decline was led by a large hotel loan that was brought current, Fitch explained. However, the office sector continues to struggle, particularly in Atlanta where another large office loan was added to Fitch's CMBS delinquency index.
One Alliance Center, securitized in LB-UBS 2007-C2, became 60 days delinquent last month. The $165 million loan is secured by a two-building, 553,017-square foot office property built in 2001 and located in the Buckhead section of Atlanta.
Following the high-profile default in December of the $363 million Bank of America Plaza in downtown Atlanta (now part of REO inventory), the addition of One Alliance Center highlights a broader trend, according to Fitch.
A staggering 37 percent of all Atlanta office loans in Fitch-rated deals are now considered delinquent. Another $314 million -- 10 percent -- reported recent debt service coverage ratios (DSCRs) below 1.0x or were already 30-days delinquent.
One Alliance Center has suffered from lease rollover of above-market rents, the rating agency explained. It marks
[COLUMN_BREAK]the third Tishman Speyer office property out of the company's five in the Atlanta market to enter the CMBS delinquency ranks.
The other two include Colony Square and Midtown Plaza, which are both located in Midtown Atlanta and failed to pay off at their October 2011 maturity dates. Special servicer CWCapital Asset Management is continuing negotiations with the borrower regarding potential modifications or foreclosure.
One positive development last month was the conversion of the $675 million Innkeepers Portfolio to current for the first time since March 2010, Fitch said. The portfolio consists of two loans and is backed by 45 hotels in 16 states.
The loans transferred to special servicing in April 2010. In October 2011, following Innkeepers USA's bankruptcy, Cerberus Capital bought the properties and assumed the debt. The loans were modified with the principal balances written down in December 2011. The application of the losses was finalized last, along with both loans now being reported as current. This drove the hotel delinquency rate down to 10.75 percent from 12.21 percent in January, according to Fitch's report.
Multifamily is now the worst performing of commercial real estate property types, with a delinquency rate of 13.30 percent, Fitch says. Past-due loans on industrial properties rose from 10.40 percent to 10.54 percent last month, while retail delinquencies declined from 7.21 percent to 7.15 percent.
Fitch's delinquency index includes 2,536 loans totaling $32.6 billion that are currently at least 60 days delinquent, in foreclosure or REO, or considered nonperforming matured. That's out of the outstanding rated universe of approximately 32,800 loans comprising $393.1 billion. The index excludes loans that are 30 to 59 days delinquent, which totaled $1.5 billion in February.
Fitch Ratings maintains a Stable Outlook on approximately 84 percent of its U.S. CMBS portfolio by balance. Most of the remaining bonds are either considered distressed (9 percent) or have a Negative Outlook (6 percent).
