Trepp: May CMBS Delinquency Rate Slips
In a departure from a trend seen for well over a year, the commercial mortgage-backed securities delinquency rate dipped in May, reported Trepp, New York.
Trepp said the delinquency rate for U.S. commercial real estate loans in CMBS fell five basis points to 5.47 percent. The rate equaled 4.35 percent one year ago and 5.03 percent six months ago.
Since reaching a post-crisis low in February 2016, the delinquency rate reading climbed “consistently” as loans from 2006 and 2007 reached their maturity dates and have not been paid off via refinancing, the Trepp CMBS Delinquency Report said. The delinquency rate moved up in 12 of the last 14 months before May’s contraction.
The rate is up 24 basis points year-to-date, Trepp said. The measure peaked at 10.34 percent in July 2012.
“Last month, we noted that it was hard to see the [delinquency] rate going down any time in the near future,” Trepp said. “This month’s data defied that prediction for at least one period.”
Trepp Analyst Sean Barrie noted that the CMBS delinquency rate will likely continue to inch higher over the next few months as pre-crisis loans reach their balloon dates, “but we’re not complaining about a lower reading,” he said.
Though the overall delinquency rate decreased in May, readings for four of the five major property types moved higher. “Only a strong showing from office loans pulled the delinquency rate lower this month,” Trepp said.
Fitch Ratings, New York, called May a “quiet” month for CMBS delinquencies. The ratings agency noted that resolutions of $583 million and new delinquencies of $518 million were both well below their year-to-date monthly averages of $748 million and $843 million, respectively.
Fitch said regional malls account for 28 percent of total retail delinquencies. The largest new delinquency that drove a 28 basis point increase in retail late-pays was the $40 million interest-only Valle Vista Mall loan secured by a 500,000-square-foot regional mall in Harlingen, Texas. “Recently announced store closures by retailers could pave the way for pressure on retail property net cash flows headed into the midway point of 2017,” the report said.
Meanwhile, the hotel-sector CMBS delinquency rate fell nearly half a percentage point in May, Fitch reported. “The largest resolution responsible for much of last month’s 46 basis point decline in hotel delinquencies was the $201 million Resorts International-Casino Portfolio asset,” the report said.
