NEW YORK--()--KBRA releases a report on U.S. commercial mortgage-backed securities (CMBS) loan performance trends observed in the December 2024 servicer reporting period. The delinquency rate among KBRA-rated U.S. private label CMBS in December increased to 6.5%, up 55 basis points (bps) from November. The total delinquent plus current but specially serviced loan rate (collectively, the distress rate) also increased by a slightly lower 38 bps to 9.33%. With another month of increases in hand, the 2024 delinquency and distress rates ended the year meaningfully up from 4.21% and 6.65% at year-end 2023, respectively.

Notably, while most sectors experienced an increase in their delinquency and distress rates over the past year, office and multifamily saw the biggest increases. Office delinquencies more than doubled year-over-year to 10.76% from 4.83%, while its distress rate approached 15%, versus last year’s 8.55%. The multifamily distress rate also more than doubled, to 9.61% from 4.02%, although much of the increase was driven by the special servicing transfer of a few large loans.

In December, CMBS loans totaling $2.5 billion were newly added to the distress rate, of which 51.7% ($1.3 billion) were due to imminent or actual maturity default. The office sector experienced the highest volume of newly distressed loans (37%, $939 million), followed by multifamily (32.6%, $826.3 million), retail (12.8%, $325.6 million), and mixed-use (7%, $176.4 million).

Key observations of the December 2024 performance data are as follows:

  • The delinquency rate increased to 6.5% ($20.8 billion), compared to 5.95% ($19 billion) in November.
  • The distress rate increased 38 bps to 9.33% ($29.8 billion), versus 8.95% ($28.6 billion) in November.
  • The office distress rate reached 14.77%, with an increase of 59 bps. The increase was widespread, with 19 office loans becoming newly distressed, including Selig Office Portfolio ($379.1 million in five deals) and Federal Center Plaza ($130 million in COMM 2013-CR6).
  • Multifamily saw the largest increase, as its delinquency rate jumped 282 bps due to Parkmerced ($1.5 billion), which is in seven deals (five conduits, two large loans, and one single borrower deal), of which four are KBRA-rated. It was transferred to the special servicer in March 2024 due to imminent monetary default and turned nonperforming in December as it reached maturity, and the borrower failed to close in on a modification that the special servicer indicated was substantively agreed upon. In addition, the multifamily distress rate also increased meaningfully after two large multifamily loans transferred to the special servicer, including Yorkshire & Lexington Towers ($539.5 million, seven conduits) and 180 Water ($265 million, three conduits).
  • The mixed-use distress rate decreased 72 bps after a 136-bp increase in the prior month, due mostly to Prime Storage Fund II ($340 million in CGCMT 2021-PRM2), which became a performing matured balloon in December. The borrower brought the loan current after being delinquent last month despite being under a forbearance agreement. Although the loan is mostly secured by self-storage, it is classified as mixed-use, as the loan includes some office.

In this report, KBRA provides observations across our $332.3 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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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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