Nov. 2 (Bloomberg) -- The rate of defaults and late payments on real estate loans sold as commercial mortgage-backed securities surged more than fivefold in the third quarter and may worsen with the potential default of loans on Manhattan’s biggest apartment complex, Reis Inc. said.

There are $3 billion of loans included in five CMBS issues backing the 2006 buyout of Stuyvesant Town-Peter Cooper Village, the New York-based real estate research firm said in a report today. CMBS bonds tied to the complex were downgraded by Fitch Ratings on Oct. 30 on concern that the sponsors of the Stuyvesant Town loan -- Tishman Speyer Properties LP and BlackRock Realty -- are likely to default.

“The property is nearing depletion of interest rate reserves and will be unable to make debt payments without capital injection,” Reis said.

About $26.64 billion of CMBS loans outstanding were 60 days or more past due last quarter, according to Reis. The default and delinquency rate rose to 4.52 percent from 0.8 percent a year earlier and 3 percent in the second quarter. Defaults may top 6 percent by year-end, the firm said.

The credit crisis and recession are reducing occupancies and rents for apartments, offices, shopping malls, warehouses and hotels, cutting the cash flow landlords need to repay debt.

“Downward pressure on net operating income and declining property values continue to make refinancing activity for existing loans a challenge,” Reis said. Last quarter marked the fifth consecutive one in which no CMBS deals came to market in the U.S., the report said.

Hotels Worst

Hotel loans were the worst performers, with $6.83 billion of past-due loans, for a delinquency and default rate of 13.3 percent of outstanding balances, Reis said. The rate was 4.8 percent for apartments and 2.95 percent for offices in the quarter.

The Tishman Speyer group acquired Stuyvesant Town in 2006 for $5.4 billion. The property is now worth about $1.8 billion, Fitch said. The New York Court of Appeals ruled on Oct. 22 that rent increases at the complex violated the law because the development was built with city assistance and the owners received tax breaks.

A delinquent loan is at least 30 and as many as 89 days past due. It typically goes default after 90 days. The CMBS market represented 21 percent of total commercial loans outstanding as of the end of 2008, according to the Mortgage Bankers Association.

To contact the reporter on this story: Hui-yong Yu in Seattle at hyu@bloomberg.net.

Last Updated: November 2, 2009 00:00 EST