CMBS Late-Pays Make Best Showing in 12 Mos.

NEW YORK CITY—Although an increase in CMBS delinquencies likely is in the offing, for the moment they're continuing to improve. Trepp LLC said Monday that the delinquency rate fell 17 basis points in September for the largest single-month improvement in 12 months.

September's rate of CMBS late-pays dipped to 5.28%, while the rate of seriously delinquent loans—those 60-plus days delinquent, in foreclosure, REO or non-performing balloon—declined by 13 bps to 5.15%. The overall CMBS delinquency rate is down 47% bps year to date and 75 bps year over year.

“After negligible rate movement during the summer months, the CMBS delinquency rate's slow march downward continued in September,” says Joe McBride, research associate at Trepp. “We still expect an uptick in delinquencies in the near future as the brunt of peak era maturities come due, but the Fed's rate hike procrastination should push off an increase. If rates stay lower for longer, borrowers will refinance more easily with higher DSCRs all else equal. ”

Deliqnuencies for all but one of the five major property types declined in September. The biggest monthly improvement was posted by industrial, where delinquencies slid 144 bps to 6.18%. Although multifamily continues to be the worst performing major property type in the CMBS realm, the delinquency rate for the sector dropped 79 bps to 8.20%.

Lodging, the best-performing property type, had a more modest month-to-month decrease in delinquencies, dipping 16 bps to 3.28%. Office late-pays declined by five bps to 5.81%. Only retail delinquencies moved in the opposite direction, gaining 20 bps to finish September at 5.73%.

The month saw $1.4 billion in newly delinquent CMBS loans, bringing total delinquencies to $27.5 billion. About $700 million in loans were cured last month, while loans that were previously delinquent but paid off either at par or with a loss totaled over $1.3 billion, according to Trepp.