CRE CDO delinquencies up slightly in August, near record-high
Delinquencies on commercial real estate loan collateralized debt obligations rose slightly in August, up to 12.1%, according to Fitch Ratings. The agency's CREL CDO index in July was 12% and 7.5% a year earlier. The record reached a record high of 13% in January. Loans in the land sector had the highest percentage of delinquency at 24%, followed by loans for multifamily properties at 21% and hospitality properties at 13%. Whole loans performed the worst with a 61% delinquency rate in August. Rated debt had a delinquency index of 13% and B-notes were 11% delinquent. Source: Fitch Ratings Realized losses totaled $68 million last month from the disposal of distressed assets. Fitch reported that two junior mezzanine loans were sold at 85% and 92% of the total value of the loan, signifying an increasing demand for that type of product. "There continues to be investor interest in junior mezzanine loans," said Stacey McGovern director at Fitch Ratings. "Junior mezzanine loans can provide the purchaser with an opportunity to gain control over a collateral asset." The mezzanine loan index was 15% in August. Of the 35 CRE CDOs rated by Fitch, 34 reported delinquencies in August. Additionally, 15 rated CRE CDOs were failing at least one over-collateralization test, which is one less CDO than last month. Failure of test leads to the cutoff of interest payments to subordinate classes, including preferred shares, which are typically held by the CDO asset managers. Fitch Ratings' universe of 35 rated CRE CDOs currently includes approximately 1,100 loans and 350 rated securities/assets with a balance of $23.8 billion. The firm had 17 new delinquent assets reported in August. The CRE loan-delinquency index includes loans and assets that are 60 days or longer delinquent, matured balloon loans, and the current month's repurchased assets. Write to Christine Ricciardi.