NEW YORK CITY—CMBS delinquencies, which had steadily improved over the past several months, took a small step backward in June, Trepp LLC said Tuesday. The late-pay rate ticked upward five basis points to 5.45%, after making a significant, 17-bp improvement the previous month. Even so, delinquency is now 60 bps lower than a year ago and has declined 30 bps year-to-date.

“For most of the year, the commercial real estate markets have been the model of stability in terms of CMBS spreads, delinquency rates and lending levels,” says Manus Clancy, senior managing director at Trepp. At the beginning of this month, Clancy cited “incredibly low” spread volatility in May, helping to account for the decline in CMBS late-pays seen last month.

That began to change late this month, he now says, “as spreads began to widen outside of the range from the first half of the year. With Greece putting everyone on edge and liquidity retreating, we will get a taste of just how resilient the CMBS market is in the face of this uncertainty.”

In June, $1.4 billion in loans became newly delinquent, which put 27 bps of upward pressure on the delinquency rate. About $400 million in loans were cured in June, which helped push delinquencies lower by eight bps. CMBS loans that were previously delinquent but paid off either at par or with a loss totaled over $1.1 billion in June. Removing these previously distressed assets from the numerator of the delinquency calculation helped move the rate down by 21 bps, Trepp says.

On a sector-by-sector basis, the best performance for June was put in by industrial, which saw its delinquency rate decline by 38 bps to 7.12%. Even so, that's well above the 3.75% late-pay rate recorded by the hotel sector for June, although its five-bp improvement was more modest, as was the three-bp improvement by office, which now stands at 5.9%.

Retail's delinquency rate finished June at 5.54%, a better showing than office's, but unlike office CMBS, the retail late-pay rate moved in the wrong direction, ticking upward by 11 bps. The multifamily delinquency rate also increased by 11 bps, to 8.73%. Apartment loans remain the worst performing among the major property types, says Trepp.

Instant Insights /

CMBS Late-Pays Take Small Step Backward

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