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Upswing in office delinquencies add to commercial real estate distress

November 14,2023 | By ERICKSON J OCASIO

Office mortgage delinquency rates are now higher than those of retail properties. Mortgage delinquency rates for commercial and multifamily properties rose for the fourth consecutive quarter, with office delinquencies driving the increase in the third quarter. The early delinquency rate inched up four basis points to 97.3% at the end of the third quarter, according to the Mortgage Bankers Association’s recent Commercial Real Estate Finance (CREF) Loan Performance Survey. Loans that were 90+ days delinquent, or in REO, rose to 2.2%, up from 1.7% in the previous quarter. Jamie Woodwell, MBA’s head of commercial real estate research, pointed to a notable shift in the market, highlighting that: “The delinquency rate for loans backed by office properties now exceeds those of loans backed by retail and hotel properties.” Office property loans saw anothe

Commercial real estate expected to slip further as market continues to underperform

September 30,2023 | By ERICKSON J OCASIO

One-third of the supply needs to be taken out of office real estate, CEO says. The commercial real estate market is expected to slip further as the market continues its underperformance given that US workers are still reluctant about their full time return to the office, said Katie Koch, CEO of TCW group, as reported in an article by Bloomberg. “One-third of the supply has to be taken out of the office market,” said Koch at CNBC’s Delivering Alpha conference on Thursday. Koch also pointed out that $1.5 trillion worth of commercial mortgage-backed securities were maturing soon and they needed to be extended. What is going on with the commercial real estate market? ?With the shift to hybrid work, along with rising interest rates and the difficulty in accessing credit following a regional

Distressed US offices jump to huge total

July 22,2023 | By ERICKSON J OCASIO

They surpass the usual real estate laggards. About $24.8 billion of US office buildings were in distress at the end of the second quarter, surpassing previous leading commercial real estate laggards — hotels and retail properties. The total value of offices that were financially troubled or already repossessed by lenders shot up about 36% from the first quarter, MSCI Real Assets reported Wednesday. At the end of June, $22.7 billion of retail properties — including malls — and $13.5 billion of hotels were in distress. The total for all troubled commercial properties was almost $72 billion, up 13% from the first quarter. “The office sector was responsible for the largest share of marketwide distress,” according to the report, based on filings for bankruptcies, defaults and other publicly reported property issues. “It’s

Top US regulators flag increasing commercial real estate risks

June 19,2023 | By ERICKSON J OCASIO

Is the banking system well capitalized? The top US financial regulators say they are stepping up scrutiny of how exposed banks are to commercial real estate, as vacancy rates increase. The Financial Stability Oversight Council said in a statement Friday that delinquency rates are low, but empty offices are on the rise. The group, which was set up after the global financial crisis, includes the heads of the Treasury Department, the Federal Reserve and the Securities and Exchange Commission. “Regulators are taking steps to emphasize risk management and examine exposures to CRE loans at their regulated institutions,” the group said. After several wild months in finance during which three midsize banks failed, Washington’s watchdogs are under pressure to get in front of any looming issues. During their Friday meeting, the regulators di

Delinquent office loans hit five-year high

June 9,2023 | By ERICKSON J OCASIO

Tenants are canceling or not renewing their leases. ?Near-empty office buildings, already a problem plaguing US cities, are becoming a worry for mortgage bondholders as landlords fall behind on repayments at the fastest rate in five years and the difficulty of refinancing the loans grows. The work-from-home phenomenon spawned by the COVID-19 pandemic and a slowing economy are pushing tenants to cancel or not renew leases, making building owners miss loan payments. More than 4% of office loans packaged into securities were at least 30 days in arrears as of May, the highest level since 2018, according to a recent report from real estate data firm Trepp. The rise in delinquencies is leading some investors to avoid commercial mortgage-backed securities with too much exposure to office buildings, in turn causing some CMBS yields to spike. Slack demand may make matters w

Park Hotels stops payments on two San Francisco properties

June 6,2023 | By ERICKSON J OCASIO

It's another blow for a struggling downtown. Park Hotels & Resorts Inc. has stopped making payments on a loan tied to the Hilton San Francisco Union Square and the Parc 55 San Francisco, two of the city’s largest hotels, dealing another blow to a downtown struggling with remote work and mounting public safety concerns. Park is working with servicers on the $725 million loan to determine the best path forward for the 1,921-room Hilton property and the 1,024-room Parc 55 hotel, according to a statement Monday. The company expects that it will eventually remove the hotels from its portfolio. “Now more than ever, we believe San Francisco’s path to recovery remains clouded and elongated by major challenges,” chief executive officer Thomas Baltimore said in the statement. The city faces “record high office vacancy; concerns over street conditions; lower

Commercial, multifamily mortgage delinquency rates spike in Q1

June 2,2023 | By ERICKSON J OCASIO

Delinquencies for major investor groups rise as economic stress deals hammer blow to CRE industry. Commercial and multifamily mortgage delinquency rates climbed in the first quarter as a real estate recession hovers on the horizon. The Mortgage Bankers Association’s new quarterly analysis revealed that delinquency rates increased across the board for five of the largest investor groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, and Fannie Mae and Freddie Mac. These groups hold over 80% of commercial/multifamily mortgage debt outstanding. Based on the unpaid principal balance (UPB) of loans, delinquency rates for banks and thrifts increased to 0.58%. Life company portfolio delinquencies rose to 0.21%, Fannie Mae loan delinquencies edged up to 0.35%, Freddie Mac loan delinquencies were up to 0.13%, and CMBS delin