CMBS Payoff Rate Expected to Drop

Morningstar Credit Ratings’ headquarters at 4 World Trade Center. (Photo: Joe Woolhead)

NEW YORK CITY—Although June’s payoff rate for maturing CMBS improved from the month before, the rate has remained below 70% for two consecutive months, says Morningstar Credit Ratings. That portends what the rest of the year will look like, according to Morningstar. The ratings agency estimates that the payoff rate will fall to 70% by the end of this year, compared to 78.5% year to date through June 30 and 85.1% YTD through April 30.

“Many aggressively leveraged legacy loans made between 2006 and 2007 affected by poor underwriting and a decline in cash flow will be unable to be refinanced,” according to Morningstar’s latest CMBS remittance report. In terms of dollars, that means $38.64 billion scheduled to mature through the end of this year, followed by just over $100 billion in 2017.