Strong New Issuance Offsets CMBS Delinquencies
Strong new issuance volume led to a decline in the U.S. commercial mortgage-backed securities delinquency rate last month, reported Fitch Ratings, New York.
Loan delinquencies declined six basis points to 3.53 percent in September, Fitch said. Resolutions of $639 million and new delinquencies of $600 million last month remained well below their year-to-date monthly averages of $693 million and $767 million, respectively.
Trepp, New York, noted the CMBS delinquency rate has fallen three months in a row. “The wave of maturities has been reduced to more of a ripple,” Trepp said. “When combined with the continued resolution of distressed loans, the largest monthly rate increases should be behind us. In fact, further declines in the overall reading are quite possible in the coming months.”
The industrial sector’s delinquency rate held steady at 6.55 percent, Trepp reported. CMBS hotel loan delinquencies moved up 35 basis points to 3.84 percent and multifamily delinquencies inched up nine basis points to 3.00 percent but maintained their status as the best-performing major property type. The office delinquency rate dropped 21 basis points to 7.10 percent while the retail delinquency rate fell six basis points to 6.55 percent during September.
Fitch rated $7.3 billion in new issuance volume from eight transactions in September, which significantly exceeded last month’s $2.9 billion portfolio runoff figure, resulting in a higher overall index denominator. Fitch said it expects new issuance volume will continue to outpace portfolio runoff as an additional $8 billion of new issuance from seven transactions will be added to October’s figures compared to less than $7 billion of outstanding loan maturities through the end of 2017.
Fitch said it maintains a stable outlook on 94 percent of its U.S. CMBS portfolio by balance. Most of the remaining bonds are either considered distressed (5 percent), have a negative outlook (0.8 percent) or have a positive outlook (0.2 percent).
Fitch also received updated insurance reports from CMBS servicers in areas affected by Hurricanes Irma and Maria. “Although the exposure and number of properties reporting in Puerto Rico and the Virgin Islands is limited, the majority of the properties that have responded are reporting major damage due to the effects of Hurricane Maria,” Fitch said.
CMBS servicers have noted that blanket coverage for borrowers with properties in areas affected by Hurricanes Harvey, Irma and Maria should not have problems with coverage limits because each hurricane is categorized as a separate event, Fitch said. For example, of the 1,829 properties in Florida affected by Hurricane Irma, just over 550 have coverage under a blanket policy. Only four properties are covered by blanket policies in Puerto Rico and the Virgin Islands.
