According to Trepp LLC, the U.S. commercial mortgage-backed securities (CMBS) delinquency rate (comprised of the percentage of loans 30+ days delinquent, in foreclosure, or held on the books of the lender as real estate owned (REO)) increased 23 basis points (0.23 percent) in April to 9.65 percent, the highest rate in history and the largest increase on a monthly basis since December 2010. Here’s a disturbing number: the value of the delinquent loans now exceeds $62.8 billion.
The following chart traces the path of delinquency rates by property sector during the past 12 months:
Delinquency Rates – Property Types - % 30+ Days Delinquent | ||||||
4/2011 | 3/2011 | 2/2011 | 3 Months | 6 Months | 1 Year | |
Industrial | 10.76 | 10.25 | 10.44 | 10.12 | 6.27 | 5.41 |
Lodging | 15.45 | 15.97 | 14.61 | 15.08 | 14.92 | 17.16 |
Multifamily | 16.77 | 16.21 | 16.61 | 16.85 | 14.63 | 13.06 |
Office | 7.20 | 7.13 | 7.10 | 6.88 | 6.68 | 5.37 |
Retail | 8.15 | 7.72 | 7.81 | 7.72 | 7.17 | 6.44 |
Overall | 9.65 | 9.42 | 9.39 | 9.34 | 8.58 | 8.02 |
Source: Trepp, LLC. | ||||||
Here’s a disturbing series of facts: the delinquency rate is increasing as the amount (divisor) of outstanding CMBS is increasing via new issuance under securitization 2.0 and the amount previously delinquent loans is decreasing as delinquent CMBS loans are resolved by special servicers.
Long story short: CMBS delinquencies are expected to continue to increase and the often talked about over-under for CMBS delinquencies of 12.0 percent seems, unfortunately, an increasingly possible event. Much as we would like to think the worst is behind us, we seem to still have quite a distance to go.
On the bright side: for those seeking to acquire “troubled” assets, there will continue to be plenty of opportunities.
