CMBS Delinquency Rate Stopped Falling in March

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“The most beautiful experience we can have is the mysterious.”
-Albert Einstein

Apr 9, 2015     Elaine Misonzhnik

The improvement in the CBMS market faced a small roadblock in March, as the delinquency rate for CMBS loans stopped falling after four consecutive months of decreases. Research firm Trepp LLC reports that the overall delinquency rate remained on par with February, at 5.58 percent, while increasing for industrial, multifamily and retail properties.

Trepp researchers noted that $1.1 billion in loans entered delinquency in March, which was what prevented the delinquency rate from falling further. Some of the newly delinquent loans included loans on the 390 Park Avenue office building in New York City, the Vista Ridge Mall in Lewisville, Texas and the Collin Creek Mall in Plano, Texas.

The delinquency rate for industrial properties rose 29 basis points month-over-month, to 7.68 percent, according to Trepp. The delinquency rate for retail properties went up 13 basis points, to 5.51 percent, and the delinquency rate for multifamily assets spiked 8 basis points, to 8.73 percent.

Hotel and office sectors, on the other hand, experienced an improvement in CMBS delinquencies. The delinquency rate fell 31 basis points for hotels, to 4.20 percent, and 8 basis points for office buildings, to 6.06 percent.

Is there enough issuance?

Meanwhile, another $10 billion in CMBS loans got issued in March, bringing the year’s total to $26.9 billion, according to Commercial Mortgage Alert, an industry newsletter. During the same period last year, the market saw $20.3 billion in new issuance.

However, even though the volume of issuance is ticking up, the increase may not be sizeable enough to provide refinancing options for all the CMBS loans due to mature this year, notes Rich Walter, senior managing director and head of Bank Assetpoint, which specializes in buying and selling bank assets, including loans, loan participations and bank-owned real properties.

“I am not sure CMBS maturities are not going to be a problem,” notes Walter. He expects that refinancing challenges may become more apparent by the end of this year, when banks and mezzanine lenders may step in to cover the shortfalls.

Last year, Dr. Peter Linneman, global chief economist with commercial brokerage network NAI, warned in a research paper that even if there will be $120 billion in new CMBS loans issued annually from 2015 through 2017, that may still leave the industry with a $240 billion refinancing shortfall.



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