The addition of 432 commercial real estate loans roughly $5.2 billion resulted in a 7%
rise in U.S. CMBS Loans of Concern between June and last month, said Fitch Ratings in its latest edition of What's in Special Servicing.
A notable entry, according to the rating agency, is the $227.9 million Resorts International Casino portfolio loan, which transferred to special servicing in July as a result of monetary default when the borrower failed to make their July payment. The company cited considerable declines in cash flow at the properties.
"Properties directly tied to consumer spending such as hotels are the first to exhibit signs of performance declines," said Adam Fox, a senior director at the rating agency.
Declining property performance as well as increasing CMBS defaults withiin are still the main contributors to the increasing number of Loans of Concern.
Fitch designated loans with declining performance as a concern since they have a higher probability of future default and current market conditions would result in considerably higher losses if the loans were liquidated in today's market.
To date, the rating agency has identified above $80.7 billion in commercial real estate loans (17% of its rated U.S. CMBS portfolio) as having declining performance or defaulted loans, otherwise known as Loans of Concern.
Recent vintage loans account for over 12% of the $80.7 billion in Loans of Concern.