Commercial mortgage-backed securities fell to record lows over the course of three years due to increased sales of real estate-owned properties, Fitch Ratings reported Monday.
CMBS late-pays declined 19 basis points in June to 7.18%, down from 7.37% in May, the lowest level since March 2010.
The steep drop was fueled by the sale of $662 million of REO assets across 43 transactions – mostly from 2005 to 2007 vintages. This compares with $262 million in May, the credit ratings agency noted.
The June REO sales were led by two loans, including the Silver City Galleria and the Continental Towers.
Both assets were sold at significant losses of $138 million and $115 million, respectively.
Furthermore, several other large REO assets are poised to be sold in the coming months, which figures to drive the CMBS delinquency rate even lower, including a portfolio of assets that ORIX Capital Markets — as a special servicer — placed for sale.
"The CMBS delinquency rate is likely to improve further in the coming months as other large REO properties are sold, including a slew from ORIX’s portfolio," said Scott Pritchard, director of Fitch Ratings.
In June, resolutions of $1.2 billion outpaced new additions to the index of $709 million.
Additionally, new issuance volumes of $5 billion kept ahead of $2.1 billion in portfolio runoff, causing an increase in the index denominator.
"Re-defaults of struggling properties like the Park Hyatt Aviara Resort will continue to slow improvements on an otherwise favorable picture for CMBS delinquencies," Pritchard explained.