The long-anticipated leveling off of the U.S. CMBS delinquency rate became a reality in August. Over the last few months, we predicted that the Trepp CMBS Delinquency Rate would hit a high in early to mid-summer then decelerate in the second half of the year. That prognostication came to fruition in August when the delinquency rate fell sharply. The delinquency rate for U.S. commercial real estate loans in CMBS fell 21 basis points (bp) to 10.13% in August. It was the largest one-month drop since November 2011. And the decrease occurred after five consecutive months in which the rate increased, including three months that set all-time records.
The improvement in the rate was driven primarily by two factors. First, loan resolutions remained elevated. Almost $1.5 billion in loans were resolved with losses in August. The removal of these loans from the delinquent loan category accounted for 26 bp of downward pressure on the delinquency rate. Second, most of the 2007 securitized loans have passed their maturity date. The upward pressure that these loans put on the delinquency rate when they could not be refinanced upon maturity is now largely gone.
Among the major property types, the apartment, lodging, and office segments all improved. The laggards were industrial and retail loans; their rates drifted higher in August. Loans that were newly delinquent — around $3.3 billion in total — put upward pressure of about 57 bp on the rate. This was a sharp decline from July when newly delinquent loans resulted in an increase of 81 bp ($4.6 billion). Loans that cured — about $2.8 billion — put downward pressure of 48 bp on the rate in August. Added together, the impact of the loan resolutions, the effect of loans curing, and the effect of newly delinquent loans created a net decrease of 17 bp in the rate. One category to keep an eye on is loans that are past their balloon date but are current in their interest rate (“performing balloons”). This category now accounts for 1.13% of loans in the database, down 16 bp in August. If we were to consider these loans late, the delinquency rate would have been 11.26%. On this basis, the delinquency rate for August was down 37 bp from the July rate with performing balloons included.
|30 Days Delinquent||0.56|
|60 Days Delinquent||0.30|
|90 Days Delinquent||1.74|
(1) Loans that are past their maturity date but still current on interest are considered current.
|Period||% 30 Days
or More Delinquent
|3 Months Ago||10.04%|
|6 Months Ago||9.37|
|12 Months Ago||9.52|