Stress in the U.S. private label commercial mortgage-backed securities market remains uneven in September, with late-payment performance worsening even as broader distress edges lower. KBRA says the 30-day-plus delinquency rate increases to 7.7% from 7.6% in August, while the distress rate declines by 4 basis points.
Highlights
- Kroll Bond Rating Agency reports the rated U.S. private label CMBS delinquency rate increased in September, covering a $344.4 billion market universe.
- Newly distressed loans in September totaled $1.6 billion, with 74.9%, or $1.2 billion, related to imminent or actual maturity default, highlighting refinancing and payoff challenges.
- Office loans comprised the largest share of new distress at 47.7% ($757.5 million), while the overall distress rate declined modestly, indicating concentration of risk in specific sectors.
September performance across rated CMBS loans
As reported by Kroll Bond Rating Agency, the monthly review covers a $344.4 billion universe of rated U.S. private label CMBS spanning conduit, single-asset single borrower, and large-loan transactions. Within that total, the transactions are backed by $9.2 billion of fully defeased loans and $335.3 billion of non-fully defeased loans.The increase in delinquency comes as newly distressed loans total $1.6 billion during the month. Of that amount, 74.9%, or $1.2 billion, is tied to imminent or actual maturity default, pointing to refinance and payoff pressure within the market.
Office loans lead new distress additions
The office sector records the largest share of newly distressed volume at 47.7%, equal to $757.5 million. Multifamily follows with 14.6%, or $231.5 million, while mixed-use accounts for 13.6%, or $216 million.The sector mix suggests office properties continue to drive a significant portion of CMBS credit strain, even as the overall distress rate declines modestly in September. The divergence between rising delinquencies and a lower distress rate indicates that loan performance pressure remains concentrated rather than broadening across the full rated market.
In our earlier article on private equity’s growing exit backlog under higher-for-longer rates, we explained how elevated borrowing costs are making pre-pandemic, debt-heavy buyout deals harder to sell. We noted that longer holding periods are tying up capital and weighing on expected returns as refinancing and liquidity conditions stay tight.
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