CMBS delinquency rates have been climbing steadily during the past year. The December numbers from Trepp show that the overall rate grew by 191 basis points during 2024. Office delinquency rates reached 11.01% last month.
There’s other mixed news in CMBS too, as Trepp research associate Vivek Denkanikotte wrote. CMBS issuance topped $100 billion last year, almost three times as high as in 2023. But as issuance increased, so did the number of borrowers who had problems paying off their loans at maturity.
The interplay of factors is a factor of the inherent complexity of CMBS and the difficulty of tracking effects on individual loans in real-time. To better show some of the effects over time, they took four large CMBS loans that made headlines in 2024 and looked at what had happened since the initial stories.
First is the $1.08 billion 280 Park Avenue, New York City loan. In January 2024, it was transferred to special servicing for imminent maturity default. The building is a 1.26 million-square-foot office, built in 1962 and renovated in 2015. In the middle of the year, the maturity date was extended to September 2026. In May, the collateral was reappraised and cut by almost half, from $1.85 billion to $1.03 billion, below the loan balance. It went back to the special servicer in July. DSCR fell to 1.10x from 2.36x. Occupancy dropped from 95% to 93%. In the first nine months of 2024, DSCR went to 0.64x with 89% occupancy, so the loan remains on the special servicer’s watchlist.
The $975 million IMC Portfolio loan was transferred at the end of March for imminent maturity default and then modified a few weeks later to a June 2026 maturity date. The portfolio has 16 retail properties in High Point, North Carolina, and Los Vegas, Nevada. The loan has stayed on payments all through 2024. DSCR in 2023 was 1.01x; in 2024 it improved to 1.19x. Occupancy went from 77% to 74%. The valuation has grown from $1.65 billion to 1.75 billion.
Third, One Market Plaza in San Francisco and its $180 million loan. In January 2024 it went to special servicing for imminent majority default. The nearly 1.6 million-square-foot office had Google as the top tenant with 21.6% of the face, but it will leave this year. In February, the owner paid $125 million down on the loan and maturity was extended to February 2027. But the asset’s value was chopped by 30% in April, down from $1.77 billion to $1.26 billion.
Finally, 230 Park Avenue in New York City. The $620 million loan is backed by the Hemsley Building, a 1.4 million-square-foot property. The loan went to special servicing in late 2023. In November 2024, the asset value was slashed from $1.25 billion to $770 million. DSCR in 2022 was 1.55x with 84% occupancy. In the first half of 2021, DSCR was down to 0.79x. “Updated special servicer commentary from last month reveals that the servicer commenced a foreclosure action in December and will dual track other potential alternatives in order to maximize return to bondholders on a net present value basis.”