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CMBS Delinquencies Dip to 6.3%

CMBS Delinquencies Dip to 6.3%

By Commerical Mortgage
The weekly update on real estate finance and securitization
November 15, 2013


The delinquency rate among securitized commercial mortgages continued to drop last month, following the workout of a large loan on a suburban Washington office complex and the sale of a struggling mall in Georgia.

The past-due rate hit 6.32% on Oct. 31, down 25 bp from a month earlier, according to Fitch. The percentage of commercial MBS loans deemed at least 60 days late, in foreclosure or in maturity default hasn’t been lower since February 2010, and has shrunk by nearly two full percentage points during the past 12 months.

About half of last month’s drop stemmed from the “hope note” workout of a $678 million office loan. The fixed-rate loan to New York REIT Vornado Realty is backed by the 2.6 million-square-foot Skyline Office Park in Falls Church, Va. Special servicer CWCapital split it into a $350 million A-note, with interest-only payments at an unchanged coupon of 5.7%, and a $328 million B-note that requires no payment except under certain conditions. The term was extended by five years until 2022, plus a one-year extension option.

The borrower put up about $46 million, including $35.5 million of accumulated net cashflows on the property, to pay accrued interest, a $4.5 million modification fee and other expenses. Vornado also provided a credit facility of up to $150 million to cover operating deficits, future interest shortfalls and the costs of stabilizing the eight-building complex.

Bank of America and Eurohypo originated the 10-year mortgage in 2007. BofA’s $474.6 million share of the balance was split between the collateral pools of two securitizations (BACM 2007-1 and GECMC 2007-C1) rated by Fitch, which has now removed that amount from its delinquency index. Eurohypo’s $203.4 million piece went into a transaction that Fitch didn’t rate (JPMCC 2007-LDP10). Under the modification, the A and B notes were split proportionally among the three deals.

The other big loan to come off the delinquent list was a $115 million mortgage on the 1.3 million-sf Gwinnett Place mall in Duluth, Ga. The property was sold last month — resulting in an almost-complete loss for the corresponding securitization.

Merrill Lynch originated the five-year loan, with a fixed rate of 5.68%, for a Simon Property partnership in 2007 and securitizedit in a $4.1 billion pooled transaction (MLMT 2007-C1). The mall soon ran into trouble amid the recession and increasing competition from newer malls nearby, and the mortgage defaulted at maturity in mid-2012. Special servicer C-III Asset  Management took control of the property and sold it last month to Moonbeam Capital, a Las Vegas real estate private equity firm. The price was just $13.5 million, according to a CMBS research report from Nomura.

 Fitch’s delinquency index tracked 1,754 loans with a combined balance of $25 billion at the end of October. Another $672 million were past due by 30-59 days. Fitch currently maintains ratings on $396 billion of CMBS backed by about 31,000 commercial mortgages. 


By Commerical Mortgage, the weekly update on real estate finance and securitization (15, November 2013). CMBS Delinquencies Dip to 6.3%  (November 18, 2013)