Underperforming commercial properties in states with weak economies led to another increase in U.S. commercial mortgage-backed securities (CMBS) delinquencies for April to 7.48%, according to the latest index results from Fitch Ratings, which were published in the firm's U.S. CMBS newsletter last week.
The 34 basis point (bp) climb did represent a slowdown relative to previous months, owing in part to special servicers working through the inventory of defaulted loans.
Nonetheless, ‘As expected, property-market weakness is now emerging in states that were hit hardest during the recession,’ notes Mary MacNeill, a managing director at Fitch. "The highest loan delinquencies are concentrated in Sun Belt and Rust Belt states characterized by high unemployment, low personal income growth and weak productivity."
Eight states have CMBS delinquency rates in excess of 10%, Fitch says.
With no significant movement in delinquencies specific to any one property type last month, current delinquency rates by property type are as follows:
- hotel: 18.42%;
- multifamily: 13.60%;
- retail: 5.83%;
- industrial: 4.60%; and
- office: 3.97%.
Though delinquencies will continue to increase, Fitch says it maintains stable or positive rating outlooks on 75% of it U.S. CMBS portfolio, as recent rating actions have taken into account a continued rise in delinquencies.
Approximately 15% of the bonds have a negative outlook, while the remaining 10% are either on "rating watch negative" or considered distressed.
SOURCE: Fitch Ratings