The Trepp CMBS delinquency rate continued to race lower
in October, falling below the 8% level for the first time since early 2010. October marks the fifth consecutive month of rate improvement. Over the course of the month, the rate dropped 16 basis points, bringing the delinquency rate for US commercial real estate loans in CMBS to 7.98%.
The Trepp delinquency rate has dropped 236 basis
points since the summer of 2012 when it reached an all-time high of 10.34%. While 2013 is almost over,
there could be more meaningful gains for the rate before year-end. Special servicer CWCapital has noted that it will be looking to sell more than $2.5 billion of distressed assets before the end of the year. Substantial note sales are also expected during this time frame. Assuming the sales close prior to the December remittance cycle, the CMBS delinquency rate could improve even more. Removing over $3 billion of non-performing assets from the delinquent loan bucket would result in a 50-basis-point decrease in the rate. October’s improvement in loan delinquencies can be attributed in part to a modest reduction in newly delinquent loans. New delinquencies totaled $1.7 billion in September, which compares to $1.6 billion in October. 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 basis points of downward pressure on the delinquent loan reading. Loan resolutions totaled almost $1 billion in October, which is an increase from the $873 million in resolutions last month. Removing these distressed loans from the pool of delinquent assets resulted in an additional 18 basis points of improvement in October’s rate.
The Numbers:
• The overall US CMBS delinquency rate decreased 16 basis points to 7.98%.
• The percentage of loans 30+ days delinquent or in foreclosure:
Oct ’13: 7.98% Sept ‘13: 8.14% Aug ‘13: 8.38%
• The percentage of loans seriously delinquent (60+ days delinquent, in foreclosure, REO, or
non-performing balloons) is now 7.69%, down 18 basis points for the month.
• If defeased loans were taken out of the equation, the overall 30-day delinquency rate would be
8.28%—down 16 basis points from September.
• There are currently $43.2 billion in delinquent loans. (This number excludes loans that are past
their balloon date but are current on their interest payments.)
• There are $52.0 billion in loans with the special servicer. This represents about 2,900 loans.
Historical Perspective:
• One year ago, the US CMBS delinquency rate was 9.69%.
• Six months ago, the US CMBS delinquency rate was 9.03%.
• One year ago, the rate of loans seriously delinquent was 9.16%.
• Six months ago, the rate of loans seriously delinquent was 8.72%.
All Five Major Property Types Improve
• The industrial delinquency rate decreased 28 basis points to 11.31%, but remains the worst
major property type.
• The lodging delinquency rate fell 21 basis points to 8.94%.
• The multifamily delinquency rate dropped by 11 basis points to 11.02%.
• The office delinquency rate decreased 24 basis points to 9.07%.
• The retail delinquency rate improved by 16 basis points and is now 6.34%. Retail remains the
best performing major property type.
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