CWCAM Sales Drive Down CMBS Late-Pays
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NEW YORK CITY—As was expected, CWCapital Asset Management’s massive selloff of non-performing assets has had a positive effect on the CMBS delinquency rate. A sizable portion of the assets were resolved in time to make February reports from Trepp LLC and Fitch Ratings, and both companies have reported drops of more than 45 basis points from the month prior.
Trepp has stated the late-pay rate for securitized commercial mortgage loans at 6.78% for February, a 47-bps drop and the ninth consecutive month this rate has declined. It marked the first time the delinuency rate had fallen below 7% since February 2010. Among Fitch-rated CMBS, the delinquency rate fell 46 bps to 5.43%, its lowest level in five-and-a-half years.
“The long-awaited resolution of the CWCapital distressed asset portfolio helped push delinquencies to multi-year lows,” says Manus Clancy, senior managing director at Trepp. “Beyond that, the removed uncertainty and decent results gave investors greater confidence to reach for yield in February. The outcome was a big rally of legacy mezzanine paper over the last 28 days.”
Additionally, GlobeSt.com reported in February that CWCAM expected to realize $2.26 billion from the pool of 134 assets it brought to market last October, with an unpaid principal balance of $3.43 billion. The assets consisted of predominantly real estate and non-performing commercial mortgage loans spread across the US and were marketed through two sale platforms, CBRE and Auction.com.
Sixty-two of the assets sold through CBRE and 60 more found buyers via Auction.com. The remaining dozen assets were expected to close no later than md-March. CWCAM says it will consider addditional, more limited bulk sales in the future, “provided market conditions remain favorable.”
Although Fitch and Trepp provide different figures for the volume of newly delinquent CMBS last month—$383 million and $1.4 billion, respectively—the volume was smaller than that of loan resolutions during the month. Fitch notes that February’s resoluton of $2.2 billion in Fitch-rated loans marked the highest amount of resolutions since January 2012, while the new delinquencies for the month came in lower than any month since September 2008.
Further, according to Fitch, the GSMS 2007-GG10 remittance released on March 12 indicates that another seven CWCAM bulk sale assets totaling $583 million were disposed. Largest of these was the $468-million Two California Plaza, which was reported as sold at a 43% loss. These resolutions by themselves will account for a 14-bps drop in the delinquency rate this month, says Fitch.
Both Trepp and Fitch say that delinquencies improved for all five asset classes last month, and that the best-performing asset class continues to be retail, although they differ in terms of which sector saw the steepest decline from the previous month. With a drop of more than 100 bps, industrial led the way for the month, according to Trepp, while Fitch says the most improved asset class was lodging, which saw an 84-bps decline in late-pays. Other sectors that saw steep drops during the month, according to Fitch, were industrial (down 62 bps to 7.38%) and office (down 72 bps to 6.05%).
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