Defaults on larger loans were again chiefly responsible for another increase in CMBS loan delinquencies, to 0.88%, according to Fitch Ratings.
The December climb stemmed largely from two loans with outstanding principal balances greater than $100 million. November featured two defaults in excess of $70 million. Additional delinquencies on larger loans will likely continue to drive the index higher in 2009, according to Fitch.
What began as weakness in the performance of smaller properties located in tertiary markets now includes larger collateral in secondary and primary markets, Susan Merrick, the rating agencys U.S. CMBS group head, said in a report. Highly levered loans on transitional assets that were originated at the height of the market are proving particularly susceptible to performance default, as the deepening recession continues to make stabilization according to schedule increasingly unlikely.
Fitchs CMBS loan delinquency index currently includes 20 loans with a balance of $25 million or greater, six of which became newly delinquent in December. Excluding small balance loans, the average loan size of delinquencies within the Fitch-rated universe now stands at $8.2 million. This compares to an average loan size of $6.4 million for the same subset in December 2007.
The December delinquencies included a $125.2 million loan secured by a retail property in Corona, Calif. and a $104 million pari passu note backed by a portfolio of two hotel properties in Tucson, Ariz. and Hilton Head, SC. In each case, the loan sponsor was experienced with the property type, but cited economic hardship due to market deterioration for the inability to meet debt service obligations. Both loans were securitized in early 2008.
