NEW YORK CITY-Dispositions from a single CMBS transaction lay behind the largest post-recession monthly drop in the delinquency rate for securitized commercial mortgages, according to data from Fitch Ratings. The 40-basis point decline from 7.18% in June to 6.78% in July brought the late-pay rate down 223 bps from its July 2011 peak as measured by Fitch, and Mary MacNeill, managing director with the firm, tells GlobeSt.com we can expect the downward trend to continue.
Similarly, Trepp reported earlier this month that July’s rate of 8.48% is down 186 bps from the July 2012 peak of 10.34% in the Trepp CMBS delinquency rate. The rate has improved by 123 bps since the start of this year, Trepp said.
Asset sales by special servicer by ORIX Capital Markets from the LB-UBS 2007-C2 securitization accounted for $759 million of dispositions during July, according to Fitch. In all, the month saw $2 billion of loan resolutions, far outpacing the $561 million in new delinquencies.
Further, new delinquencies are continuing to get smaller, with the largest addition to the Fitch delinquency index in July being the $37-million loan on the Mall at Steamtown in Scranton, PA, part of LB-UBS 2003-C5. New delinquencies averaged $8.5 million during the month, with just four loans exceeding $25 million.
By property sector, delinquencies fell across the board during July, led by office with a 59-bp decline from 8.18% to 7.59%, as measured by Fitch. Loans backed by industrial assets maintained the highest delinquency rate, although July’s 9.56% was off from the June rate of 9.77%.
Hotel delinquencies declined 31 bps to 8.04, while multifamily dipped 18 bps to 7.41%. Bringing up the rear was retail, formerly among the most troubled sectors, which fell 47 bps in July to 6.37%.
Similarly, Trepp attributes the continuing improvement in the delinquency rate to large loan resolutions. Only a four-bp increase in May marred what otherwise would be a four-month streak of continuing declines in the late-pay rate.
“After a rough month for the CMBS market in June—with rising interest rates and widening spreads—everyone was on tenterhooks about future issuance,” says Manus Clancy, senior managing director at Trepp. “July saw the return of stability, and the forward-looking calendar for new deals is full. This should bode well for continued improvement in the delinquency rate going forward.”