NEW YORK–After a big spike in April, Trepp is reporting its CMBS delinquency rate dipped back below 5% in May—but the data comes with some caveats.
Nonetheless, the company called the numbers a “welcome sign” after the prior month’s surge in the index that offers a measure of the collateralized mortgage-backed securities market.
Overall, the delinquency rate declined 10 basis points to 4.97%, Trepp said.
“The decrease was primarily driven by some sizable resolutions in the office sector,” Trepp reported. “A little more than $2 billion in office loans resolved in May, either because the loans flipped back to non-delinquent during the month, or because the loan was disposed. Five office loans accounted for $1.7 billion of the $2 billion. If the $2 billion in office resolutions had remained delinquent, the overall May CMBS delinquency rate would have been almost 26 basis points higher at 5.33% and the May office delinquency rate would have been roughly 90 basis points higher at 8.48%.”
The Irony
In releasing its latest report, Trepp asked, “Since the overall rate only decreased 10 basis points, what offset the sizable amount of office resolutions?”
Its answer “Ironically, it was also due to office, at least in part. There were approximately $1.2 billion in newly delinquent office loans in May. In addition, the retail, lodging, and multifamily sectors also had sizable amounts of newly delinquent loans, with $995 million in newly delinquent retail loans, $238 million in lodging loans, and $245 million in multifamily loans,” the company said. “The net increase in delinquent loans for each of these three sectors was less since, similar to the office sector, there was a solid amount of loans that resolved in May as well.”
Trepp said that if it included that are beyond their maturity date but current on interest, the delinquency rate would be 6.00%, up 16 basis points from April.
Trepp’s numbers assume defeased loans are still part of the denominator unless otherwise specified.
The Overall Numbers
According to Trepp, its data show:
- The overall US CMBS delinquency rate decreased to 4.97%, a decrease of 10 basis points for the month. (The all-time high on this basis was 10.34% registered in July 2012. The COVID-19 high was 10.32% in June 2020.)
- Year-over-year, the overall US CMBS delinquency rate is up 135 basis points.
- The percentage of loans that are seriously delinquent (60+ days delinquent, in foreclosure, REO, or non-performing balloons) is now 4.62%, down 22 basis points for the month.
- If defeased loans were taken out of the equation, the overall headline delinquency rate would be 5.20%, down 9 basis points from April.
- One year ago, the US CMBS delinquency rate was 3.62%. • Six months ago, the US CMBS delinquency rate was 4.58%
The CMBS 2.0+ Numbers
Trepp also reported:
- The CMBS 2.0+ delinquency rate fell 10 basis points – at 4.86% – in May. The rate is up 143 basis points year-over- year.
- The percentage of CMBS 2.0+ loans that are seriously delinquent is 4.51%, down 22 basis points from the prior month.
- If defeased loans were taken out of the equation, the overall CMBS 2.0+ delinquency rate would be 5.08%, down 11 basis points for the month.
Overall Property Type Analysis (CMBS 1.0 and 2.0+)
- The industrial delinquency rate increased 6 basis points to 0.50%.
- The lodging delinquency rate increased 25 basis points to 6.22%.
- The multifamily delinquency rate increased 37 basis points to 1.70%.
- The office delinquency rate declined 44 basis points to 6.94%.
- The retail delinquency rate remained unchanged at 5.94%.
Property Type Analysis CMBS 2.0+
Additional Trepp data reveal:
- Industrial delinquency rate: 0.40% (up six basis points)
- Lodging delinquency rate: 6.16% (up 25 basis points
- Multifamily delinquency rate: 1.70% (up 37 basis points)
- Office delinquency rate: 6.86% (down 44 basis points)
- Retail delinquency rate: 5.56% (up 2 basis points)
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