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Signs of Life in CMBS

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While the market for securitized commercial mortgages remains weak — with delinquency still on the rise — signs of improvement emerged last month.

The 30-day delinquency rate on commercial real estate loans included in commercial mortgage-backed securities was 9.56 percent in September.

That was a 4-basis-point increase from August.

Trepp LLC, which reported the data, said CMBS delinquency “stabilized in September and reverted to its pattern from earlier in the year when modest bumps in the rate were the norm.”

September’s delinquency rate reflected $59.6 billion in delinquent loans.

Almost all categories saw an increase, with multifamily loans turning in the worst performance.

But the rate on hotel loans was 13.30 percent, falling from 13.76 percent a month earlier. The improvement reflected the resolution of a portfolio of Red Roof Inn loans — though at a 50 percent loss. The Red Roof activity resulted in the removal of two distressed loans.

“There is no denying that the tone in the CMBS market has been acutely negative for the past three months,” Trepp Managing Director Manus Clancy said in the report. “The market has taken a series of body blows over that time period: spreads have risen sharply, lenders have pulled in the reigns on new loans, the economy has weakened, and many have speculated that the pricing of trophy properties has come too far too fast.”

However, Trepp noted that the sale of several “trophy” properties and improving CMBS spreads last month are good signs for the market.

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