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CMBS Lates Rise, But Outlook Improves

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During December, delinquency on securitized loans backed by commercial real estate moved 16 basis points higher. Poor performance on apartment building loans helped drag down overall performance. But the ratings agency that reported the numbers sees better times ahead.

Delinquency of at least 60 days on loans included in commercial mortgage-backed securities finished last year at 8.79 percent based on Moody’s Investors Service’s Delinquency Tracker reported today. The rate reflects all loans in U.S. conduit and fusion deals issued since 1998.

The level of late payments represented around $3.7 billion in newly delinquent loans and $2.6 billion in loans that were cured — bringing the collective portfolio of delinquent CMBS loans to 4,104 mortgages for $54.9 billion.

The resulting CMBS delinquency rate was 16 BPS worse than November.

Compared to a year earlier, delinquency soared 389 BPS. Still, Moody’s noted that the rate of increase slowed during the second half of last year.

While the New York-based ratings agency sees further deterioration ahead, with the default rate climbing to between 9.5 percent and 11.0 percent by the end of this year, the pace is expected to be slower than it has been over the past two years as capital markets strengthen and special servicers see less new business.

“The commercial real estate markets are beginning to show signs of a turnaround,” Moody’s stated.

Loans secured by hotels saw delinquency fall to 16.37 percent — the highest rate among all commercial property types — from 16.42 percent in November.

Multifamily delinquency rose, however, to 14.38 percent last month from November’s 13.90 percent. The 46-basis-point increase was more than for other loans types.

Retail property delinquency climbed to 7.44 percent in November from 7.14 percent, while office delinquency edged down to 6.71 percent from October’s 6.72 percent. Loans secured by industrial properties saw the rate rise 16 BPS to 6.54 percent.

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