What Trepp LLC calls the first decline in commercial mortgage-backed securities delinquencies in over a year suggests that the industry is in a “choppy” market where there is no specific improvement in fundamentals market-wide but some select trophy loan resolutions are moving forward.
The percentage of CMBS loans 30 or more days delinquent fell 47 basis points in October to 8.58%, as the value of delinquent loans fell to $58.3 billion.
The largest driver of the decline was the Extended Stay Hotels loan’s resolution. Trepp vice president Paul Mancuso told this publication some perceive the hotel market to be bottoming out and think there may be some opportunity there.
Multifamily delinquencies are meanwhile deteriorating and could rival lodging/hotels as the worst performing property type due to continuing supply-demand imbalance combined with the effects of loose underwriting from the “boom” years. Late payments on securitized multifamily loans rose by 20 bps to 14.63% in October. (Lodging’s delinquency rate was 14.92%.)
While the retail and office sectors have been relatively insulated from delinquencies due to the terms of their leases, as lease expirations come due delinquencies are rising in these categories, Mancuso said. Office delinquencies were up by 6 bps at 6.68% in October while the retail rate climbed by 4 bps to 7.17%.
Mancuso said while broadly markets are not improving going forward there might be more “choppiness” from occasional resolution of more loan “trophy” property loans in markets where fundamentals remain strong and opportunity is perceived. The resolution of Stuyvesant Town in New York City could be the next example of this.
