CMBS Late-Pays Dip Below 8%

NEW YORK CITY-A little more than a year after peaking at 10.34%, the delinquency rate for CMBS has dropped below 8%, Trepp said Thursday. An impending $2.5-billion sale of distressed assets by CWCapital could bring the late-pay rate down further in the next couple of months.

"In addition to the distressed assets that were recently identified for sale, a large number of note sales are also expected from the servicer," says Manus Clancy, senior managing director of Trepp. "As CW stated that it is looking to sell these before year-end, this could result in the removal of a number of loans from the delinquent category over the next 60 days."

October's improvement in loan delinquencies can be credited partly to a marginal reduction in newly delinquent loans. New delinquencies totaled $1.6 billion in October, which compares to $1.7 billion in September. These loans pushed the rate up by 29 basis points.

Offsetting these new delinquencies was the combination of loans that cured and loan resolutions. Loans that cured totaled $1.2 billion in October, which resulted in 22 bps of downward pressure on the rate.

Loan resolutions totaled almost $1 billion in October, which is an increase from the $873 million in resolutions the previous month. Trepp says removing these distressed loans from the pool of delinquent assets resulted in an additional 18 bps of improvement over September's rate.

At present, there are currently $43.2 billion in delinquent loans. The figure excludes loans that are past their balloon date but are current on their interest payments. There are $52 billion in loans with the special servicer, representing about 2,900 loans.

The decline in CMBS late-pays encompassed all five property types. Industrial saw a 28-bps improvement month over month, yet it's still the worst=performing sector at 11.31%. Best is retail at 6.34%, which represents a 16-bps improvement from September.

Multifamily's delinquency rate dropped by 11 bps to 11.02% in October, while office improved by 24 bps to 9.07%. The lodging sector, once the sick man among asset classes, is now the second healthiest with a CMBS delinquency rate of 8.94%, a month-over-month improvement of 21 bps.