- What Data from KBRA shows second consecutive monthly increase in delinquencies and transfers to special servicing
- Why The metrics reflect weakness among some older CRE CLOs
- What next Issuers may continue to call deals before they mature
The late-payment rate among pools of CRE CLO loans shot up in August as transfers to special servicing also rose.
The share of securitized bridge loans at least 30 days past due jumped 130 bp to 6.70%, from 5.40% in July, according to investor-reporting data compiled by KBRA Credit Profile, a division of KBRA Analytics. The amount of CRE CLO loans in special servicing ticked up 7 bp to 6.54%.
The August reading marks the second consecutive monthly increase for both the delinquency and special-servicing rates. The special-servicing measure is up 86 bp year over year, while the late-payment rate is just 19 bp higher.
CRE CLO issuance has ballooned this year, with $21.58 billion of deals pricing so far – versus just $6.78 billion during the same period last year, according to Green Street’s CRE CLO Database. But the surge of new issuance partly has been offset by issuers calling outstanding deals, including four transactions totaling $2.04 billion in August. Together with normal runoff, the called deals contributed to a marginal decline in the overall amount of CRE CLO paper in the hands of investors, to $66.26 billion in August. That contraction reduced the denominator used in calculating the delinquency and special-servicer rates, contributing to last month’s increases in both metrics.
The largest called deal last month was a 2023 CRE CLO from Prime Finance with $764.8 million of outstanding loans, including $118.5 million classified as delinquent (PFP 2023-10). Multifamily mortgages comprised 60.2% of the original $901.7 million deal.
The largest new delinquency was a $98.9 million loan on the Caden at East Mil, a 768-unit multifamily complex in Orlando. Arbor Realty Trust securitized it in 2022 (ARCLO 2022-FL1).
In addition to tracking delinquency status, KBRA identifies so-called loans of concern, or K-LOCs. That category includes all loans in special servicing or in some stage of foreclosure, as well as those the firm deems to be at “heightened risk of default in the near term.” In August, KBRA listed 27.54% of all CRE CLO loans as K-LOCs, down 63 bp from July.
