March's CMBS Late-Pay Decline Makes It 10 in a Row

NEW YORK CITY—For the 10th consecutive month, US CMBS delinquencies declined in March, Trepp said this week. The rate of late-pays on securitized commercial mortgages is 6.54%, off 288 basis points from a year ago. The 24-bp decline from the prior month was more moderate than what we saw in February, though, and 2014 will likely see the declines begin to settle down.

“The CMBS market had the pleasure of singing the same happy refrain in March, as delinquencies continued to fall,” says Manus Clancy, senior managing director at Trepp. CWCapital Asset Management's massive selloff of non-performing assets produced an expectedly steep drop of 47 bps in the overall delinquency rate last month, since many of the sales were resolved in time for February's report. “But that descent has been extended, as the notes didn't really begin to make it through remittance cycles until the New Year,” says Clancy. “We suspect the rate will stabilize somewhat in coming months.”

During March, more than $2.1 billion in previously delinquent loans were resolved with losses. Although down from $2.6 billion in February, the resolutions were still well above the normal monthly average over the last two years.

On a sector-by-sector basis, the steepest decline during March was office at 50 bps to 6.73%, followed by industrial's 46-bp drop. However, industrial continues to have one of the highest delinquency rates at 8.82%, exceeded only by multifamily, which dipped 13 bps last month to 10.22%.

The lodging delinquency rate trimmed 16 bps during March and now stands at 6.46%. While retail's six-bps decline in CMBS delinquency was the smallest of the major property types, the sector as a whole remains the best-performing asset class at 5.71%.

Trepp says there are now $34.6 billion in delinquent loans, down from $36 billion the previous month. The figure excludes loans that are past their balloon date but are current on their interest payments. Nearly 2,500 loans are in special servicing, for a total of $42.7 billion in unpaid principal balance, says Trepp.