KBRA Releases Research – CMBS Loan Performance Trends: November 2023

KBRA releases a report on U.S. commercial mortgage-backed securities (CMBS) loan performance trends observed in the November 2023 servicer reporting period. The delinquency rate among KBRA-rated U.S. CMBS in November climbed 19 basis points (bps) to 4.4%, up from October’s 4.21% rate. The total delinquent and specially serviced loan rate (distress rate) experienced a larger increase of 35 bps to 6.88% from October’s 6.53%. On a positive note, the retail and lodging sector distress rates declined month-over-month (MoM) for the sixth and fourth consecutive month, respectively. However, continued growth in the office distress rate eclipsed the improvement, as it increased 116 bps MoM to 8.84%.

CMBS loans totaling $2.1 billion were added to the distress rate this reporting period, with office accounting for nearly three-quarters (74.6%, $1.6 billion) of the newly distressed loans. Of note, a majority of the office special servicing transfers this month were not driven by imminent or actual maturity default, as was the case in prior months, but by term defaults—including those where borrowers sought relief well in advance of maturity. Of the 26 newly distressed office loans this month, 15 (57.7% by count) have maturity dates that are over a year away. This month’s office transfers include 230 Park Avenue ($670 million in MSC 2021-230P) and 40 Wall Street ($122.6 million across three conduits), as well as mixed-use properties like 750 Lexington Avenue ($123.6 million across two conduits), which have a meaningful office component as part of the collateral.

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

• October’s respite in the office sector distress rate, which declined after trending upward for six straight months, abruptly ended in November. The distress rate meaningfully increased 116 bps to 8.84%, up from 7.68%.
• In addition to 230 Park Avenue, 750 Lexington Avenue, and 40 Wall Street becoming newly specially serviced, the distress among office and mixed-use was widespread with $1.9 billion of loans added to the rate, spanning 33 loans.
• The distress rate for the retail sector has decreased for the sixth straight month, a trend started in June, while the lodging sector saw its fourth straight MoM drop, which started in August.

In this report, KBRA provides observations across our $315.4 billion rated universe of U.S. private label CMBS including conduits, single-asset single borrower (SASB), and large loan (LL) transactions.

Click here to view the report.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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