“The CRED iQ overall default rate for commercial mortgage-backed securities (CMBS) showed nominal movement during the April 2022 rebate period, but still recorded a decline for the 23rd month. back-to-back,” wrote Marc McDevitt, senior managing director at CRED iQ.
“The delinquency rate, equal to the percentage of all delinquent loans with special services and delinquent loans without special services, for CRED iQ the sample universe of over $500 billion in CMBS conduits and single-asset, single-borrower (SASB) loans was 3.83%, which compares to the prior month rate of 3 .84%. CRED iQ’s Special Service Rate, equal to the percentage of CMBS loans that are with the Special Service (delinquent and non-delinquent), decreased month-over-month to 5.88% from 6.09% .
“The special duty rate is now about 45% below its pandemic-era peak of 10.79% in October 2020. The aggregation of the two distress indicators – delinquency rate and special duty rate – in an overall distress rating (special delinquency service) is 5.97. percent of CMBS loans that are specially managed, delinquent, or a combination of both.
“The overall distress rate decreased from the previous month’s rate of 6.19%. Overall distressed rates are generally slightly higher than special service rates, as most overdue loans are also with special service. The individual crime rate for the retail sector increased in April to 7.34% from 7.06% in March 2022.
“The sharp increase can be attributed in part to a return to delinquent payments on the $125 million Westfield Palm Desert loan, which is secured by a regional mall in California. The loan was marked as in payment in previous months, but became 30 days past due in April 2022.
“Westfield Palm Desert was transferred to special duty in August 2020 and has been in default for most of 2021. Notably, loan sponsor Unibail-Rodamco-Westfield made headlines in early April 2022 for having provides an update on its plan to sell regional shopping centers based in the United States.
“The delinquency rate for lodging properties continued to show significant and steady improvement. For a second consecutive month, the outstanding balance of delinquent home loans decreased by more than $450 million.
“The accommodation delinquency rate was 7.55% in April, down from 7.99% the previous month. One of the biggest delinquency remedies in April was the $135.1 million Marriott LAX loan, which is secured by a 1,004-room hotel adjacent to Los Angeles International Airport. The loan was amended in February 2022 and the terms of the agreement put the loan in payment. The loan was transferred to Special Service in December 2020 and had been past due until the amending agreement closed.
“Changes in special service rates by individual property type were mixed in April.
“The special service rate for accommodation has decreased by around 15%. Much of the change was caused by the $982 million loan backed by the Ashford Hospitality Trust portfolio. The loan was transferred to the special service in June 2020. The loan returned to the main servicer in April after the reserves of furniture, fixtures and equipment (FF&E) were replenished after being used to pay for the service of debt during a period of forbearance.
“The special service rates for retail (11.21%) and offices (3.73%) both increased compared to the previous month. The increase in the office’s special service rate was anticipated given the revelation in March of Blackstone’s intentions to return 1740 Broadway to the lender.
“Retail Special Service Rate Increase Driven by Destiny USA — a 2.1 million square foot regional shopping center in Syracuse, NY, owned by Pyramid Management Group. The struggling mall secures a $430 million loan that is securitized as part of the JPMCC 2014-DSTY CMBS transaction. The loan was transferred to special service due to imminent default prior to the loan’s maturity date in June 2022.
“The Syracuse Mall loan had previously been transferred to special service in April 2020 and returned to the primary servicer in March 2021 after a loan modification. Another of Pyramid’s properties, Walden Galleria, was a key driver of increased retailer distress in April.
“CRED iQ’s overall distressed CMBS rate by property type takes into account loans that qualify for delinquent or special service subsets. In April, overall distress rates for retail, office, industrial and self-storage increased, while accommodation and multi-family dwellings showed a decline in overall distress. Two of the biggest loans added to the distressed category, both via transfers to special services, were the aforementioned 1740 Broadway and Destiny USA.
