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CMBS Delinquency Up, Spreads Down

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The rate of late payments on securitized commercial real estate loans rose for the second consecutive month and has only been eclipsed once before. Meanwhile, spreads in the commercial mortgage securities market tightened — though that might not be enough to resolve a host of upcoming balloon payments coming due.

Last month’s 30-day delinquency rate on loans included in commercial mortgage-backed securities came in at 9.77 percent. That worked out to around $60.2 billion in past-due CRE loans.

A month earlier, the rate was 9.56 percent.

Trepp LLC, which provided the data, said that it was the second month in a row that CMBS late payments were worse. In fact, the information service provider explained that the rate sits at its second-highest level ever.

The record was set in July: 9.88 percent.

Securitized multifamily loans had a delinquency rate of 16.73 percent in October — the highest of any property type. Still, that was 23 basis points better than September.

Hotel delinquency rose 82 BPS — more than any other category — to 14.12 percent.

The rate on industrial property mortgages deteriorated 21 BPS to 11.59 percent, and delinquency on CRE loans secured by office properties soared 66 BPS to 8.95 percent.

Retail loan delinquency was 7.61 percent, down 1 basis point from a month earlier and the lowest rate of any property type.

Trepp Managing Director Manus Clancy noted in the report that CMBS spreads improved in October after three months of “taking a beating.” Spreads had reached their highest levels since the middle of last year. The market was even worsening for much of last month as CRE originators and CMBS issuers were laying off employees.

But the improved market conditions in late October are unlikely to immediately prompt an improvement in CMBS issuance or delinquency.

Trepp said that “a bevy” of five-year loans originated in 2007 are coming due next year, and it looks unlikely that these balloon notes will be resolved through new CMBS issuance.

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