KBRA Releases Research – CMBS Loan Performance Trends: October 2023

NEW YORK, October 30, 2023–(BUSINESS WIRE)–KBRA releases a report on U.S. commercial mortgage-backed securities (CMBS) loan performance trends observed in the October 2023 servicer reporting period. The delinquency rate among KBRA-rated U.S. CMBS in October held steady at 4.21%, just four basis points (bps) lower than September’s 4.25% rate. The total delinquent and specially serviced loan rate (distress rate) experienced a larger decline of 22 bps to 6.53%. The drop was led by a decreased distress rate in the office and retail sectors, as the balance of distressed loans brought current or returned to the master servicer following modifications and/or extensions outpaced newly distressed loans.

CMBS loans totaling $1.3 billion were added to the distress rate this reporting period, of which 41.3% ($543.3 million) was due to imminent or actual maturity default. Office continues to have the highest exposure, accounting for 55.2% ($726.3 million) of the newly distressed loans; however, this negative effect was more than offset by the return of the $765.3 million 375 Park Avenue loan (CGCMT2013-375P, COMM 2013-CR8) to the master servicer. Mixed-use came in second at 36.8% ($484.4 million), which was largely driven by the addition of the $340 million Prime Storage Fund II loan being classified as a nonperforming matured balloon.

Other key observations of the October 2023 performance data are as follows:

• After six straight months of deterioration in the distress rate, the office sector had the largest improvement in October, decreasing 62 bps to 7.68%, from 8.3% in September. The improvement is primarily due to 375 Park Avenue, as mentioned, as well as Republic Plaza ($234.6 million in WFRBS 2012-C10 and WFRBS 2013-C11)—both were returned to the master servicer this month.

• The retail sector also saw a decrease in delinquency, as multiple previously distressed loans were disposed in October. The largest is The Mall at Tuttle Crossing, with a securitization balance of $125 million and loss severity of 74.2% in two conduit deals. In addition, Bridgewater Commons ($300 million in GSMS 2012-BWTR) was returned to the master servicer this month.

• The other property type witnessed the steepest decrease in delinquency rate, as the loan status for 20 Times Square ($734.1 million in three conduits and one non-KBRA rated single-asset single borrower (SASB) transaction) changed to performing matured balloon from foreclosure, while maintaining its specially serviced status.

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In this report, KBRA provides observations across our $315 billion rated universe of U.S. private label CMBS including conduits, SASB, and large loan (LL) transactions.

Click here to view the report.

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Contacts

Aryansh Agrawal, Analyst, CMBS Ratings Surveillance
+1 646-731-1381
[email protected]

Cammy Wan, Senior Analyst, CMBS Ratings Surveillance
+1 646-731-3327
[email protected]

Roy Chun, Senior Managing Director, CMBS Ratings Surveillance
+1 646-731-2376
[email protected]

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