CMBS Delinquency Rate Grows

The commercial mortgage-backed securities delinquency rate moved noticeably higher in June, reported Trepp, New York. 

“The rate was pushed up by loans that reached their maturity date but were not paid off,” said Trepp Research Analyst Sean Barrie, noting that June represented the fourth straight month the rate crept higher following two large decreases in January and February. 

The delinquency rate for U.S. commercial real estate loans in CMBS grew 25 basis points from May to 4.60 percent, Barrie said.

More than $2 billion in loans became newly delinquent in June, the highest monthly total in nearly a year, Trepp reported.

Barrie said the largest CMBS loans that became delinquent in June include:
–Skyline Portfolio’s $140 million A note, which is backed by eight Class A office buildings in Falls Church, Va. near Washington, D.C. that total 2.5 million square feet.
–A $121.5 million note collateralized by Two Gateway, a 782,800- square-foot Newark, N.J. office property.
–A $101.5 million note backed by 573,370 square feet of retail space in Sioux City, Iowa’s Southern Hills Mall. 
–Skyline Portfolio’s $98.4 million B note.
–An $87.25 million loan for Mesa Mall in in Grand Junction, Colo. The mall’s top three tenants are Sears, Herberger’s and Sutherland’s Lumber Home.

Morningstar, New York, said the delinquent CMBS unpaid balance increased 1.5 percent to $22.83 billion in June. Though an increase month-over-month, the UPB figure represents a 20.8 percent decrease from a year ago.  

Liquidations declined to $886 million in June from $1.05 billion in May, Morningstar said, but the ratings agency noted that June’s average loss severity spiked to 50.3 percent after two consecutive months below 30 percent. 

“The high severity rate was primarily the result of a substantial volume of office and retail loans,” Morningstar said. These two sectors accounted for more than 80 percent of June’s total. 

Specially serviced exposure also rose in June for the fifth consecutive month, Morningstar said. Exposure increased $293.8 million to $29.33 billion across 1,658 loans.