CMBS Issuance Up, Delinquency Rate Down
Commercial mortgage-backed securities issuance increased, while delinquencies fell in May, reported Kroll Bond Rating Agency and Trepp.
May issuance activity included six conduits totaling $5.1 billion and six single-borrower transactions totaling $3.0 billion, bringing the year-to-date volume to $24.3 billion, KBRA Director Larry Kay said. “Although volume is slightly down on a year-over-year comparison, momentum is building,” he said.
Kay noted that May issuance more than doubled April’s $3.7 billion total.
Kay said the CMBS pipeline could see up to nine single-borrower deals and five conduits could price in June. “If all of these deals are completed, June will be the largest month for single-borrower deals since March 2015,” Kay said. “Most of the single-borrower deals completed this year consisted of office and lodging collateral; however, we understand that a couple of shopping mall deals could come to market as well.”
Trepp said the CMBS delinquency rate fell in May, marking just the third time the reading has moved lower in the past year. The delinquency rate for U.S. commercial real estate loans in CMBS now equals 5.47 percent, down five basis points from April.
One notable factor for the lower rate: a change in delinquency status for a small group of sizable loans from “non-performing, past maturity” to “performing, past maturity,” said Trepp Senior Managing Director Manus Clancy.
“Although we noted that it was difficult to envision the delinquency rate falling anytime in the immediate future, this month’s data defied that prediction for at least one period,” Clancy said. “The rate should be expected to crawl higher in the coming months as more pre-crisis loans reach their maturity dates, but May’s decrease is certainly a welcome respite.”
Nearly $1.15 billion in CMBS loans were cured in May, including the group of large notes whose designation switched to “performing, past maturity,” Trepp reported. In addition, nearly $735 million in CMBS debt previously delinquent resolved with a loss or at par in May. Both of these figures helped nullify the nearly $1.7 billion in CMBS loans that became newly delinquent last month.
The office sector represented the only property type to see a delinquency-rate drop last month as its reading tumbled 51 basis points to 7.46 percent, Trepp reported. The largest increase by property type belonged to the industrial segment, as its delinquency rate climbed 22 basis points to 7.37 percent. The delinquency rates for retail and lodging each moved up 20 basis points last month.
CMBS loan prices also posted a small increase in April–the most recent data available–said DebtX, Boston. The estimated price of whole loans securing the CMBS universe increased to 98.7 percent from 98.1 percent at the end of March, DebtX Managing Director Will Mercer said.
“The April CMBS loan price increase was primarily due to a decline in both the base market spreads and U. S. Treasury yields,” Mercer said.
