Loans Expert

Delinquencies on loans in commercial mortgage-backed securities increased last month, largely because of loans made in 2005.

Commercial-property owners got increasingly behind on their mortgages last year as occupancy rates and rents fell, driving property values down from their bubble highs.

Fitch said CMBS delinquencies were 6.29% in February, up from 6% in January. The delinquency index includes 2,505 loans totaling $28.5 billion. Five-year loans originated in 2005 constituted about 30% of the month's newly delinquent loans and comprised the four biggest loans in the period.

Fitch managing director Mary MacNeill noted that five-year loans from 2005 will continue to have difficulty refinancing this year as liquidity remains limited. “In many cases, sponsors will have to either contribute additional equity in order to refinance their loans or look to the servicers for extensions and modifications,” she added.

For the first time, office properties saw a greater increase in delinquencies than the overall average, with a 0.45 percentage-point rise from January to 3.5%. Multifamily and industrial properties also exceeded the overall index change with a 0.64-point rise to 9% and a 0.43-point gain to 4.16%, respectively.

In February, hotels still had the highest delinquency rate, rising to 16.6%.

Looking ahead, Fitch said the delinquency index will take a large blow this month as it books the default of $4.4 billion in debt that Tishman Speyer and its primary partner, BlackRock Inc. (BLK), used to buy the huge Manhattan apartment complexes Peter Cooper Village and Stuyvesant Town. When the Peter Cooper Village/Stuyvesant Town loan hits 60 days delinquent, the overall index will increase 0.6 percentage point and multifamily will increase by more than 4 points.

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