CMBS Delinquencies Hit New Peak, but Growth Rate Slows: Trepp Report

By Paul Rosta, Senior Editor

CMBS delinquencies reached an all-time high of 9.34 percent last month, but that dubious distinction may mask something of a silver lining.  Although the total delinquencies may continue to tick up for a while, they are also increasing far more slowly than they were just a few months ago, according to Trepp L.L.C. “While the rate continues to head higher, optimists can point to the fact that the rate of increase is significantly smaller than it was in the prior two months,” said Marius Clancy, managing director at Trepp, in a statement accompanying the monthly report. “Pessimists can counter that the jump comes despite the fact that new issues continue to make their way into the calculation and servicers continue to resolve troubled loans.”

As Clancy suggests, optimists and pessimists will likely draw varying conclusions from the latest figures, but last month’s 14 basis-point uptick was only about half the 27 basis-point jump from November to December and smaller yet than the 35 basis-point increase recorded a month earlier. All told, last month’s tally reflects a 63 basis-point increase in the past six months and a 285 basis-point jump in the past year.

Trepp’s report also confirms that CMBS delinquency trends continue to skew by property type.  Leading the charge upward in January was the industrial sector, where the delinquency rate rose from 8.97 percent in December to 10.12 percent last month. Also on the upswing were hospitality (15.08 percent, up 77 basis points) and multifamily (16.85 percent in January, a 37 basis-point hike. Heading in a more positive direction last month was the office sector (6.88 percent, basically a wash with December) and retail (a 14 basis-point drop on the heels of a previous 27 basis-point month-over-month upturn).

Those rates should continue to fall throughout the year as new CMBS offerings come to the market, offsetting delinquency rates among existing pools. An analysis issued this week by Cushman & Wakefield Sonnenblick Goldman points out CMBS offerings are growing steadily on both size and number as major institutional players return to the market. Familiar names dipping their toes into the pool include JPMorgan Chase, Deutsche Bank, Cantor Fitzgerald, UBS, RBS and Morgan Stanley.  “The offerings are growing in size as bankers gain confidence in the market’s ability to digest larger deals,” the report notes.

Forthcoming pools will reach $1.5 billion to $2 billion in value—only a fraction of a $7.9 billion securitization by Wachovia four years ago, but still twice as large as the biggest pool last year. Ratings agencies are also helping shape the new CMBS market by influencing players to create pools marked by diverse geographic location and product type. That runs counter to the trend in the two previous years toward the comparatively granular—and therefore more easily analyzed—loan pools that often characterized CMBS securitizations in 2009 and 2010, Cushman & Wakefield Sonnenblick Goldman observed.