CMBS DELINQUENCY RATE DROPS IN FEBRUARY, BUT OUTLOOK UNCLEAR

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The delinquency rate for U.S. commercial real estate loans in CMBS fell 15 basis points in February to 9.37 percent, the lowest rate since June 2011, according to New York City-based Trepp LLC. But some of the overall improvement in the February delinquency rate can be attributed to a change in status of approximately $900 million of loans.

The loans whose status changed are past their balloon date, but are current in interest payments and no longer classified as delinquent, according to Trepp. Had these loans factored into the overall delinquency rate, the rate would have been 10.57 percent, up 22 basis points for the month, concludes Trepp.

“The resolution of these performing, but past maturity loans will likely determine whether the delinquency rate rises or falls over the next 12 months,” said Manus Clancy, senior managing director at Trepp, in a summary report. “The rate should remain fairly stable if they are modified or refinanced, but watch out if these loans slide into foreclosure.”

This category of loans that are past their balloon date, but are current in interest payments, now accounts for 1.2 percent of loans in Trepp’s database. That figure is up from 83 basis points in January.

Inside the numbers

The value of delinquent loans now stands at $56.4 billion. Trepp considers a loan delinquent if it is 30 days or more past due.

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Source:Trepp

The percentage of loans seriously delinquent (60 days or more delinquent, in foreclosure, REO or non-performing balloons) now stands at 8.94 percent, down two basis points for the month.

In February, the value of loans being resolved with losses was under $1 billion. Loan resolutions accounted for 15 basis points of downward pressure on the delinquency rate in February. The rate was pushed down further by the effects of loans curing (60 basis points), as well as new CMBS issuance and loans paying off in full (3 basis points combined). At the same time, newly delinquent loans put 63 basis points of upward pressure on the delinquency rate.

About 47 percent of the balance of loans that were securitized in 2007 and were due to pay off in February managed to pay off, according to Trepp. If one big Manhattan office loan (9 West 57th Street in New York) that refinanced were not included in that total, the total pay-off percentage would have only been about 23 percent.

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Among property types, the multifamily delinquency rate fell 74 basis points in February, yet remains the worst performing major property type at 14.65 percent. Industrial continued to be the second-worst performing sector in February, with its delinquency rate up 23 basis points to 12.37 percent. The lodging delinquency rate finished the month down 104 basis points to 11.05 percent, an improvement of 350 basis points within the last 12 months.

Conversely, the office delinquency rate rose to 9.04 percent, an increase of 14 basis points compared with the prior month. Retail remained the best performing property type, despite a modest rise of 12 basis points in the delinquency rate to 8 percent.

— Matt Valley

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