NEW YORK CITY — The percentage of loans contained in commercial mortgage-backed securities (CMBS) that are paying off on their balloon date has exceeded 60 percent for the fourth time in the last five months, according to the Trepp January Payoff Report.
In January, 66.9 percent of loans reaching their balloon date paid off — an increase of more than 12 percentage points from the December reading. The total was also the second highest total over the last four years. Only September's 68.2 percent reading was higher.
The January rate of 66.9 percent is well above the 12-month moving average of 49.2 percent. (This number sums the averages of each month and divides by 12. There was no balance weighting across the months.)
At the end of the summer, Trepp reported that the payoff rate could move to the upside for the remainder of 2012. The commercial real estate research firm also stated that loans reaching their maturity date would likely be more heavily populated with loans from earlier vintages, and assets from that time frame were made with lower leverage and more reasonable valuations. The result should be better payoff numbers. Data from the past five months has confirmed this trend.
Loans from older vintages will have a much better chance of paying off on time than loans from 2007, Trepp states. However, with new issue CMBS spreads at their tightest levels in four years, and with the Treasury curve near historic lows, more loans should be able to refinance now than at any time since 2008. The vibrant new issue market reinforces that point.
By loan count (as opposed to balance), 62.6 percent of loans paid off. The 12-month rolling average on this basis is now 57.9 percent.
Below is the data for the past 12 months. The second column shows the percentage of loans (by balance) that paid off in the month of the maturity date. The third and fourth columns contain the percentages that paid off (again by balance) after three months and six months, respectively. (After three months, the percentage of loans that payoff really starts to level off.) In the last column are the percentage of loans, by count, that paid off in the balloon month.
It is important to note that this statistic was developed for the purpose of honing extension scenario assumptions. The analysis looks only at loans that have gotten all the way to their balloon date without having prepaid or defeased. If a loan paid off or defeased in the months prior to maturity (one month, five months, fifty months — it doesn't matter), it is not part of the percentages above. The table only contains data on loans that survive to their balloon date.
— Liz Burlingame