"While delinquent retail loans represent only 0.26% of all loans within the sector, retail delinquencies increased 29% over July's total", said Managing Director and U.S. CMBS group head Susan Merrick. "Fitch also continues to monitor an additional 45 retail loans which are performing, but have been transferred to special servicing."
To date, retail delinquencies have been comprised primarily of smaller loans collateralized by strip centers or older power centers. The average loan size is approximately $4.9 million, and these properties are typically located in secondary or tertiary markets, or in markets facing difficult economic conditions. The largest geographic concentrations of retail delinquencies are found in Indiana, Michigan, and Texas, which represent 14.7%, 10.8%, and 9.6% of the delinquencies, respectively. Fitch notes that approximately 22.5% of all retail delinquencies are classified as non-performing matured loans.
The profile differs for retail loans which have been transferred to special servicing but remain current. The average loan size is larger at approximately $16.4 million, and the group includes several malls and larger retail portfolios consisting of anchored retail centers or single-tenant properties. Fitch expects smaller, less competitive regional malls to face additional store closures and declining sales. Recent back to school sales have been disappointing and upcoming holiday sales are expected to be weak for retailers this season. Fitch anticipates that if sales results are significantly lower than expected, many operators will begin to close stores and/or scale back on new openings in first quarter-2009.
Multifamily remains the weakest property type in the index. However, the sector posted its second consecutive month of net decreases in delinquencies. The August decline can be attributed to the resolution of one large multifamily condominium loan totaling $128 million.
Delinquent multifamily loans currently represent 47.7% of all delinquencies within the index, though they make up less than 14% of all loans within the Fitch-rated universe. Of all delinquent multifamily loans, 29.0% are located in Texas, 14% in Florida, 11% in Michigan.
The seasoned delinquency index, which omits transactions with less than one year of seasoning, declined one basis point to end the month at 0.47%. Ten transactions totaling $26.0 billion became newly seasoned. Currently there is only one delinquent loan totaling $2.6 million in a newly seasoned transaction.
The loan delinquency index measures loans that are at least 60 days delinquent within the universe of all Fitch-rated transactions, which consists of 476 transactions totaling $559.6 billion.
