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Fitch: Sale of REO Assets Lowers CMBS Delinquency Rate in June

In June, an increase in the sale of REO properties drove down the CMBS delinquency rate, bringing it to a three-year low, ""Fitch Ratings"":http://www.fitchratings.com/web/en/dynamic/fitch-home.jsp reported.


At 7.18 percent, the CMBS delinquency rate fell 19 basis points (bps) from the month before in May and is at its lowest level since March 2010.

Last month, there were two major REO loan sales that sold at significant losses: Silver City Galleria and Continental Towers, which had original loan amounts of $138 million and $115 million, respectively.


In addition, the upcoming sale of more REO assets should lead to another decrease.

""The CMBS delinquency rate is likely to improve further in the coming months as other large REO properties are sold, including a slew from ORIX's portfolio,"" said Scott Pritchard, director at the New York-based rating agency.

""Re-defaults of struggling properties like the Park Hyatt Aviara Resort will continue to slow improvements on an otherwise favorable picture for CMBS delinquencies,"" he added.

Fitch also reported resolutions outpaced new additions, at $1.2 billion compared to $709 million, while new issuance volume totaled $5 billion compared to $2.1 billion in portfolio runoff.

The delinquency rate for the retail sector was the lowest in June, at 6.74 percent after dropping 18 bps.

Meanwhile, the multifamily delinquency rate plummeted over the previous month, falling 35 bps to 7.59.

The office sector fell 17 bps to 8.18 percent, while the industrial sector decreased by 104 bps, though it still maintained the highest rate at 9.77 percent in June. The hotel sector experienced an increase, rising 65 bps to 8.35 percent.

About Author: Esther Cho


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