CMBS Delinquency Rate Moves Higher in March
Delinquent loans in commercial mortgage-backed securities increased in March by eight basis points, but according to a Trepp executive, there is no reason to panic. After reaching its lowest level on a yearly basis in the February report, the delinquency rate for U.S. commercial real estate loans in CMBS reached 9.5% in March. Overall, the delinquency rate has fallen 84 basis points since hitting its all-time peak of 10.34% at the end of July 2012.
“A close examination of the data reveals that the weakening experienced in March is not nearly as worrisome as it seems,” said Manus Clancy, senior managing director of Trepp. “The jump in the rate was caused primarily by a reversal of status of a number of floating rate hotel loans.”
Trepp said there were $2.8 billion in newly delinquent loans reported in March, up slightly from the previous month. Also, there are currently $52.1 billion in CMBS loans 30 or more days delinquent, with 3,300 loans totaling $64.8 billion currently in special servicing.
Among the five major property types, the New York-based analytic provider said hotel loans saw a 174 basis point weakening from February’s delinquency rate of 10.08% in March. As Trepp said last month, many large hotel loans “cured” in February by being categorized as “performing matured balloons” instead of “nonperforming matured balloons.
While both categories include loans that are past their maturity dates, performing matured balloons have interest payments being made and are therefore not counted as delinquent.
Other notable data in the report is that the delinquency rate for apartment loans continued to improve in March, dropping 54 basis points to 12.73%. Also, the rates for industrial and office loans were lower, at 11.72% and 10.6%, respectively.
Lastly, retail loans posted the second worst month-over-month marking with an increase of 12 basis points to 7.91%. This sector remains the lowest among the five major property types, while multifamily remains the worst performing group.