CMBS Delinquency Rate Reaches Another Post-Crisis Low
The commercial mortgage-backed securities delinquency rate fell again in August, setting another post-crisis low in the process, reported Trepp LLC, New York.
Trepp Senior Managing Director Manus Clancy said the August CMBS delinquency reading fell to 2.54 percent, an eight basis point drop month over month. The delinquency rate is down 57 basis points year to date and 110 basis points year over year and has fallen in 22 of the past 26 months.
“The concerns about the global economy and a possible U.S. recession have failed to have an impact thus far on the CMBS market,” Clancy said. “As volatility touched many markets in August, CMBS held steady.”
Clancy noted CMBS lending and issuance continued at a “healthy” rate in August. Kroll Bond Rating Agency, New York, said August CMBS private-label pricing volume equaled $5.7 billion, up 43 percent from July’s $4.0 billion figure. “Falling interest rates appear to be driving loan demand and helping to spur issuance,” said KBRA Senior Director of CMBS Surveillance Larry Kay. “Up to nine single-borrower deals, seven conduits, two Freddie Mac K-Series securitizations and as many as four commercial real estate collateralized loan obligations transactions could launch this month.”
Trepp reported the overall CMBS 2.0+ delinquency rate climbed five basis points in August to 0.89 percent, while the percentage of CMBS 2.0+ loans in serious delinquency increased one basis point to 0.80 percent. The CMBS 1.0 delinquency rate dropped 145 basis points during August to 42.03 percent and the percentage of CMBS 1.0 debt that is seriously delinquent now equals 41.97 percent, down 246 basis points from July.
The retail sector saw the biggest delinquency rate improvement among major property sectors in August, Trepp said. The retail space delinquency reading dropped 28 basis points to 4.07 percent. The lodging delinquency rate also fell last month, dropping 26 basis points to 1.54 percent. On the other side of the ledger, multifamily delinquencies climbed 35 basis points to 2.39 percent and the office delinquency reading rose 12 basis points to 2.83 percent.
Meanwhile, the price of commercial real estate loans underlying CMBS decreased in July, reported DebtX, Boston. The estimated price of whole loans securing the CMBS universe decreased to 99.4 percent at the end of July from 99.9 percent on June 30. Prices equaled 96.2 percent in July 2018.
“The modest decrease in loan prices in the CMBS universe in July was due primarily to an increase in U.S. Treasuries,” said DebtX Managing Director Will Mercer.
