CMBS gets ‘whiff of volatility’ as June delinquency rate changes course

After dropping sharply in May, the June delinquency rate for US commercial real estate loans in CMBS moved in the opposite direction, according to data and research firm Trepp.

After dropping sharply in May, the June delinquency rate for US commercial real estate loans in CMBS moved in the opposite direction, according to data and research firm Trepp.

After a 17 basis point (bps) drop to 5.40% in May, the biggest since November 2014, the rate rose by five bps in June to 5.45%.

Clancy
Clancy

“In late June, the CMBS market got its first whiff of volatility in 2015, as spreads began to widen outside of the range from the first half of the year,” said Manus Clancy, senior managing director at Trepp. “With Greece putting everyone on edge and liquidity retreating, we will get a taste of just how resilient the CMBS market is in the face of this uncertainty.”

The rate however is still 60 basis points lower than the year-ago level and 30 basis points lower year-to-date.

“For most of the year, the commercial real estate markets have been the model of stability in terms of CMBS spreads, delinquency rates, and lending levels,” Clancy said.

In June, $1.4bn in loans became newly delinquent, while about $400m in loans were cured. CMBS loans that were previously delinquent but paid off either at par or with a loss totaled over $1.1bn, helping to offset new delinquencies.

The percentage of loans seriously delinquent (60+ days delinquent, in foreclosure, REO, or non-performing balloons) moved up nine basis points to 5.32% in June (5.75% on the 30-day rate, not counting defeased loans).

The industrial delinquency rate had the greatest month-over-month drop, declining 38 bps to 7.12%. Multifamily was the worst performing property sector when it dropped 30 bdp in May, but it reversed course and rose 11 bps to 8.73% (still the highest among the asset types monitored). Lodging remains the best performing asset class, with a 3.75% rate.

 

 

SHARE