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CREFC's February 2024 Monthly CMBS Loan Performance Report

March 28, 2024

• Conduit/SASB CMBS combined delinquency of 4.71%
• Delinquency rate rose 5 bps in February, following a jump of 15 bps in the month prior
• On a YOY basis, the overall combined delinquency rate is up 159 bps (4.71% vs. 3.12% in February 2023)
• Delinquencies in the heavily watched office sector experienced another large increase in February
• Office delinquency rate jumped 33 bps to 6.63% in February, following a move of 48 bps in the prior month, and is 425 bps higher on a YOY basis
• Convergence of work-from-home (WFH)-induced demand shock, high benchmark, mortgage, and cap rates, and a pullback in bank lending will continue to present office headwinds
• Delinquency rate is still 561 bps below 10.32% peak in June 2020 – the height of pandemic-related lockdowns. Clearly, the situation today with limited office demand and higher rates suggests perhaps a less benign outcome for certain office loans.
• Loans in special servicing (SS) rose to 7.14% in February; up 19 bps from prior month and 196 bps higher on a YOY basis
• As per servicers, loans transferring to SS mostly related to current market dynamics; office loans dominate new entries
• Servicers say most loans with COVID-related forbearances have returned to original loan terms and are performing as expected
• Loans still in forbearance or modified are generally paying as required
• Delinquency and SS rates for SASB continue to climb
• SASB delinquency rate of 4.17% in February vs. 1.86% in year prior; SASB SS rate of 7.15% vs. 4.29% in year prior. SASB distress driven by floating-rate loans challenged with securing new interest-rate cap and swap agreements at higher strike rates and continued challenges in the office sector (much of which is financed by SASB CMBS).
• Conduit delinquency has also climbed but at more measured pace: 5.08% delinquency vs. 3.97% in year prior; 7.14% SS vs. 5.78% in year prior
• Loans in-foreclosure and REO asset rates remain low at 1.22% and 0.87%, respectively
• Office delinquency and SS rates will continue to increase as more loans with near-term maturity dates have difficulty refinancing; foreclosure and REO rates expected to trend upward as a result

*Source: Trepp. CMBS data in this report reflect a total outstanding balance of $606.2B: 58.9% ($356.8B) conduit CMBS, 41.1% ($249.5B) single-asset/single-borrower (SASB) CMBS.

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