Trepp: US CMBS Delinquency Rate Falls to Lowest Level in a Year

The Trepp CMBS Delinquency Rate dropped sharply once again, reaching its lowest level in a year.

The delinquency rate for US commercial real estate loans in CMBS fell 15 basis points to 9.42% in February. Overall, the Trepp CMBS Delinquency Rate has fallen 92 basis points since hitting a peak of 10.34% at the end of July 2012.

There were $2.7 billion in newly delinquent loans in February, which put about 48 basis points of upward pressure on the delinquency rate. This was slightly lower than January’s $2.8 billion in new delinquencies and is the third consecutive month this number has declined.

Loan resolutions dropped more noticeably, from $1.2 billion in January to just under a billion dollars in February. The removal of these loans from the delinquent category accounted for 18 basis points of downward pressure on the delinquency rate.

Finally, loans that cured put an additional 40 basis points of downward pressure on the rate.

Among the five major property types, hotel loans led the pack with a whopping 169 basis point improvement between January and February. The rate on apartment loans also improved, while the rates on industrial and office loans were modestly higher. The big drop in the hotel delinquency rate moved the property type from the second worst performer to the second best, leapfrogging both the office and industrial loan readings over the course of the month.

While the magnitude of change in the gains among hotel loans is striking, a further examination leads one to believe that this is not nearly as impressive as it seems at first glance. Many of the largest loans that “cured” were ones that went from “non-performing matured balloons” to “performing matured balloons.”
This happened to be a number of portfolio loans that are floating rate. As a result, this month’s gains in the hotel sector turn out to be fleeting, as they may be driven more by reclassification of reporting. (While both categories include loans that are past their maturity dates, performing matured balloons have an interest payment being made and thus are not counted as delinquent).

The Numbers:

- The overall US CMBS delinquency rate fell 15 basis points to 9.42%.

- The percentage of loans seriously delinquent (60+ days delinquent, in foreclosure, REO, or non-performing balloons) is now 8.96%, down 15 basis points for the month.

- If defeased loans were taken out of the equation, the overall 30 day delinquency rate would be 9.78%--down 19 basis points from January.

- There are currently $51.8 billion in delinquent loans. (This number excludes loans that are past their balloon date but are current on their interest payments.)

- There are $67.2 billion in loans with the special servicer. This represents about 3,300 loans.

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