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Based on new data released by ""Fitch Ratings"":http://www.fitchratings.com, $512 million of loans held by investors in commercial mortgage-backed securities (CMBS) were added to the past-due bucket last month.
[IMAGE]The net increase pushed the U.S CMBS delinquency rate to 8.14 percent. While it's the first time Fitch has reported delinquencies beyond the 8 percent mark, June's 17 basis point rise was the smallest increase in 11 months. However, the ratings agency says this trend isn't likely to continue.
Fitch noted that the slowdown is likely because June marked the fifth straight month of loan resolutions in excess of $1 billion, as $1.5 billion of loans leaving the company's delinquency index last month helped to offset $2 billion in new delinquencies.
The agency says the newly delinquent loans in June also had smaller average balances at $10.1 million, compared with an average of $13.1 million when looking at the full index. No loans with a balance in excess of $100 million became newly delinquent in June.
""While delinquencies slowed for the month, this trend is not expected to continue,"" said Mary MacNeill, managing director at Fitch. ""The number of distressed properties continues to grow, and if borrowers are unable to access capital for leasing costs or are unable to restructure their loans to a leverage level commensurate with sustainable property values, they may stop subsidizing debt service payments.""
Despite the temporary lull in delinquency increases, Fitch study shows commercial mortgages continued to transfer
[COLUMN_BREAK]to special servicing at an elevated rate, with a net increase of $4.2 billion in June. In total, $23 billion of loans in special servicing remain less than 60 days delinquent but face an increased risk of default, Fitch says.
The hotel sector was the only major property type that did not post a slight increase in its respective delinquency rate in June. However, Fitch says the hotel delinquency rate has the potential to breach 20 percent next month if borrowers for most of the $1.3 billion in hotel loans that are now 30 days delinquent fall further behind.
The most notable of the 30-day past due hotel loans is the $825.4 million Innkeepers Portfolio loan that was securitized in two 2007-vintage transactions rated by Fitch Ratings. The loan, which was also 30 days delinquent in May, transferred to special servicing in April 2010 due to monetary default and it has been reported that the borrower may be positioning to file for bankruptcy protection.
Another large hotel loan, the $200 million Renaissance Mayflower Hotel loan, was 30 days delinquent at the end of the month. The loan transferred to special servicing in November 2009. The borrower previously indicated that it did not expect to make future debt service payments and requested a loan modification in conjunction with a $10 million capital program.
Fitch's June delinquency rates by property type, as compared to May, are as follows:
* Hotel: to 18.62% from 18.63%
* Multifamily: to 13.82% from 13.65%
* Retail: to 6.19% from 6.03%
* Industrial: to 5.48% from 5.07%
* Office: to 4.84% from 4.59%
Fitch Ratings' delinquency index includes 2,962 loans totaling $35.9 billion that are at least 60 days delinquent or in foreclosure out of the agency's rated universe of approximately 40,000 loans comprising $440.8 billion. The index excludes rated loans that are 30 to 59 days delinquent, which currently total $3.4 billion.
Fitch Ratings says it is maintaining ""Stable Rating Outlooks"" for approximately 78 percent of its U.S. CMBS portfolio because recent prospective rating actions take into account anticipated future deterioration in property performance. The agency has said it expects CMBS delinquencies to surpass 11 percent by 2011.
