CMBS Delinquencies Propelled by Five-Year Loans

The 29 basis-point (bp) increase in delinquencies to 6.26 percent at the end of February was driven in large part by upcoming maturities from U.S. commercial mortgage-backed securities (CMBS) deals originated in 2005, according to the latest U.S. CMBS delinquency index results from ""Fitch Ratings."":http://www.fitchratings.com/index_fitchratings.cfm

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""Five-year loans originated in 2005 will continue to have difficulty refinancing this year as liquidity remains limited,"" said Mary MacNeill, managing director at Fitch. ""In many cases, sponsors will have to either contribute additional equity in order to refinance their loans or look to the servicers for extensions and modifications.""

Fitch said approximately 30 percent of the newly-delinquent loans were from 2005 transactions. Furthermore, the four largest newly-delinquent loans, ranging in size from $65 million to $112 million, are from this period. Three of these four loans are already past their 2010 maturity dates and are now categorized as non-performing matured loans.
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Because these three non-performing loans are office properties, this property type had a greater bp increase than the overall average increase for the first time. Fitch recorded a month-to-month movement of 45 bps for office properties, notably higher than the overall index of 29 bps. In addition, multifamily, increasing 64 bps, and industrial, jumping 43 bps, also exceeded the overall index change.

Current delinquency rates by property type are as follows:
* Office - 3.5 percent
* Industrial â€" 4.16 percent
* Retail â€" 5.09 percent
* Multifamily â€" 8.97 percent
* Hotel â€" 16.61 percent

According to Fitch, when the Peter Cooper Village/Stuyvesant Town loan hits 60 days delinquent, the overall index will increase 60 bps and multifamily will increase by more than 400 bps.

The delinquency index includes 2,505 loans totaling $28.5 billion of the Fitch-rated universe of approximately 42,000 loans comprising $452.6 billion that are at least 60 days delinquent or in foreclosure. The index excludes Fitch-rates loans that are 30 to 59 days delinquent, which currently total $3.2 billion.

In addition to the increased rate of delinquency, Fitch also reported that nine CMBS loans were transferred to special servicing during the period of February 25 to March 4. The individual loans ranged from an outstanding balance of $84 million to $20 million.