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With the exception of loans backed by industrial properties, all major property types saw their delinquency rates fall in May (see chart). The bulk of the degradation of the industrial rate in May can be traced to the $190 million StratReal Industrial Portfolio I, whose inclusion led to a 77 basis point increase in the property type's rate.
The Trepp CMBS delinquency rate inched up modestly in May, one month after posting its lowest reading in more than two years. The increase of four basis points comes on the heels of a 47-basis point drop in April, which was also the biggest one-month dip since Trepp began publishing the number in fall 2009. The delinquency rate for U.S. commercial real estate loans in CMBS was 9.07 percent at the end of May.
The resolution of distressed CMBS loans was a major factor in driving the delinquency rate lower during the past few months. However, loan resolutions dropped sharply in May with only $858 million in loans resolved, roughly 46 percent less than the amount resolved in April. The removal of these distressed loans from the delinquent assets bucket created 16 basis points of downward pressure on the delinquency number.
Furthermore, about $266 million in loans that were delinquent in April managed to pay off without a loss in May. Removing these loans from the delinquent category added an additional five basis points of downward pressure to the rate. Loans that cured put 23 basis points of downward pressure on the May delinquency rate. This included a few eight-figure hotel loans that saw their delinquency status flip from non-performing past balloon maturity date to performing past balloon maturity (Trepp treats the former as delinquent, but not the latter). These loans helped to drive some of the improvement in the rate for the overall property type.
Putting upward pressure on the rate were $2.5 billion in newly delinquent loans in May. New delinquencies were up significantly from April's $1.6 billion, totaling about 46 basis points. The May reading is more in line with the results for February and March of this year, making April's result that much more of an outlier.
With the exception of loans backed by industrial properties, all major property types saw their delinquency rates fall in May (see chart). The bulk of the degradation of the industrial rate in May can be traced to the $190 million StratReal Industrial Portfolio I, whose inclusion led to a 77 basis point increase in the property type's rate. Of the five major property types, hotel loans led the pack with a 65 basis points improvement. Two large, notable loans that became delinquent in May were the $716.5 million DRA/Colonial Office Portfolio and the $186 million Four Seasons Aviara Resort in Carlsbad, Calif. The DRA/Colonial Office Portfolio loan was a bit of a head-scratcher, according to Trepp. The loan was recently modified, but is now showing up 30 days delinquent. Without this one delinquency, the overall delinquency rate would have actually dropped nine basis points in May rather than jump four basis points.
Highlights:
• The overall U.S. CMBS delinquency rate increased four basis points to 9.07 percent.
• The percentage of loans 30+ days delinquent or in foreclosure in May was 9.07 percent, compared with 9.03 percent in April and 9.5 percent in March.
• The percentage of loans seriously delinquent (60+ days delinquent, in foreclosure, REO, or non-performing balloons) is now 8.67 percent, down five basis points for the month.
• If defeased loans were taken out of the equation, the overall 30 day delinquency rate would be 9.40 percent — up one basis point from April.
• There are currently $49.75 billion in delinquent loans. (This number excludes loans that are past their balloon date but are current on their interest payments.)
• There are $61.6 billion in loans with the special servicer. This represents about 3,100 loans.
— Staff reports