CMBS Delinquencies Fall, Issuance Rises
Continued strong new issuance and active specially serviced loan resolutions led to another decline in the commercial mortgage-backed securities delinquency rate last month, reported Fitch Ratings, New York.
Fitch said loan delinquencies fell 21 basis points in November to 4.16 percent. The dollar balance of late-pays fell to $15.7 billion from $16.4 billion in October. But while the overall national CMBS delinquency rate decreased, many big cities witnessed a higher delinquency rate.
“The majority of the largest metropolitan areas had increased delinquency readings month-over-month,” said Sean Barrie, research analyst with Trepp, New York.
Barrie said delinquency rates worsened in 32 of the 60 largest metros, while 25 metros improved and three saw no change. Of the 32 markets that saw their rates worsen, eight ended November with more delinquent loans than in October. Chicago, Cincinnati, New York City and Washington, D.C. finished the month with fewer delinquent loans than the month prior. Of the four markets with a lower loan count, they had an average increase of $2.48 million in delinquent loans in their area this past month. The delinquency rate for the Durham, N.C. market deteriorated the most in November as the delinquency rate jumped 144 basis points to 5.25 percent.
Kroll Bond Rating Agency, New York, said strong underlying property fundamentals as well as positive credit performance and attractive yields have put CMBS issuance on track this year to exceed $100 billion compared to $84.2 billion in 2014.
“As we enter the new year, there is the potential for some disruption in investment activity and credit pricing, as the market adjusts to a rising interest rate environment,” KBRA said in a special report. “The impetus for any rate increase should not be overlooked, however, as economic conditions continue to bode well for CRE investments.”
KBRA said CMBS issuance could reach $125 billion next year.
Meanwhile, prices of loans underlying the CMBS universe decreased slightly in October, reported loan marketplace DebtX, Boston. “We saw a small decline in CMBS loan prices in October and year-over-year,” said DebtX Managing Director Will Mercer. “This decline was mainly due to an upward shift in the Treasury yield curve and a small increase in credit spreads.”
DebtX reported that the estimated price of whole loans securing CMBS decreased to 97.4 percent in October from 98.4 percent the month before. Prices equaled 98.7 percent one year ago. Median adjusted loan-to-value ratios decreased to 57 percent while median debt service coverage ratios remained at 1.46. Median estimated loan yields held steady at 4.4 percent.
