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CMBS Delinquencies Rise Across Multiple Sectors

Once again, the overall commercial mortgage-backed securities (CMBS) delinquency rate rose. December 2024 brought another 17 basis points to 6.57%. Four property-type sectors saw changes of 40 basis points or more.

Three of the four saw increases. Retail delinquency rose from November to December by 86 basis points to 7.43%. The second-highest increase was in office, which rose 63 basis points to an all-time high of 11.01%. Multifamily had the third-largest increase of 40 basis points from November 2024 to 4.58% in December.

The fourth of the large changes was a decrease in lodging — 78 basis points from November to December, dropping to 6.14%. Industrial was fairly flat, down three basis points to 0.29%.

Trepp analyzed the largest CMBS loans that either turned delinquent or missed loan payments in December. Category delinquencies are based on loan values rather than the number of loans, so a smaller number of large loans can have an outsized effect on the delinquency rate.

The largest new delinquent loan was the $670 million loan on 230 Park Avenue, a 1.4 million-square-foot office, also known as the Helmsley Building. The owners kept flipping from performing and non-performing matured balloon loans during 2024. In December, the special server documented that it had started foreclosure on December 3, 2024. During the 2021 securitization, the appraisal was for $1.25 billion, which went down during an October 2024 appraisal for $770 million. Three of the top tenants have leases that expire in 2025. With their loss, assuming they don’t review, occupancy would drop from 83% to 68%. Even though it is in a desirable area and has through recent renovation, the owners have had trouble refinancing the property.

The $266.7 million loan on the 1.4 million-square-foot Bank of America office tower in Los Angeles went into delinquency from a performing matured balloon to non-performing. The loan was current until the third quarter of 2024 when it missed the September balloon payment. The Capital Group and Bank of America are the two largest tenants, together occupying 39% of the total square footage. The former has a lease expiring in 2033; the latter in 2029. In 2014 during securitization, the appraisal valued the property at $605 million. That dropped to $188.9 million, during a July 2024 appraisal. This is another situation when a building is in a strong office market, but refinancing has been difficult and the last time the property was renovated was 16 years ago.

The $505 million loan on the 1.04 million square for the Natick Mall in Massachusetts turned delinquent in December after a non-performing matured balloon. The loan was current during most of 2024. The largest tenant is Wegman’s, which occupies 19% of the space and has gone dark but continues to pay rent.

Reprinted with permission from the Friday, 31 January 2025 07:03:50 EST online edition of GlobeSt © 2025 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.