The Needle Moves, Barely, on CMBS Late-Pays

NEW YORK CITY—The delinquency rate for CMBS has been caught in a tug of war between old and new deals. However, Trepp LLC says the late-pay rate saw a decline of one basis point in April after holding steady in March.

“The delinquency rate has been bumping along for the last few months, as two competing forces keep it fairly level,” says Joe McBride, research associate at New York City-based Trepp. “Special servicers have slowed the pace of resolutions slightly, keeping the rate from dropping as quickly as it had a year ago. New issuance will have to be the main driver of further rate decreases going forward.”

Even if the monthly declines have been more modest than steep, the delinquency rate has still managed to fall 21 times over the past two years. The delinquency rate for US commercial real estate loans in CMBS is now 5.57%, down 87 bps from a year ago.

The percentage of seriously delinquent loans—those that are delinquent for more than 60 days, in foreclosure, REO, or non-performing balloons—ended the month up three bps at 5.44%. If defeased loans were removed from Trepp's delinquency calculation, the 30-day delinquency rate would be 5.90%, up two bps from March.

Trepp says $1.35 billion in loans became newly delinquent last month, putting 26 bps of upward pressure on the delinquency rate. Conversely, more than $700 million in loans were cured in April, which helped push delinquencies lower by 14 bps.

CMBS loans that were previously delinquent, but paid off either at par or with a loss, totaled almost $600 million last month, says Trepp. Removing these previously distressed assets from the numerator of the delinquency calculation helped move the rate down by 11 bps. Almost $1.9 billion in loans were defeased in April, not including loans from agency deals.

Looking at delinquencies by major property type, only lodging and retail loans posted improvement in April. Lodging remains the best performing property type, with a rate of just 4.18%, while retail's late-pay rate ticked downward six bps to 5.45%.

Multifamily delinquency remains the worst by property type, with a delinquency rate of 8.92% in April, representing a 19-bps increase from March. On a year-over-year basis, however, multifamily is ilooking better than it did in April 2014, when the delinquency rate stood at 9.83%.

The delinquency rate for office ticked upward five bps to 6.11% in April, while that of industrial rose by 15 bps to 7.83%. In common with the other three major property types, office and industrial nonetheless are in better shape than they were the year prior.