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CMBS Delinquency Down But Could Deteriorate in 2015

Performance on securitized commercial real estate loans improved last month and is likely to get even better before the year is out. But there is concern about an upcoming wave of maturing loans.

The rate of 30-day delinquency on loans that are a part of commercial mortgage-backed securities was 4.21 percent during September.

That was a 13-basis-point improvement versus the 30-day rate as of a month earlier.

Compared to a year earlier, the CMBS delinquency rate has tumbled 180 BPS.

Morningstar Credit Ratings LLC — which reported the performance data based on the $763.07 billion in CMBS it rates — said the improvement came as new issuance continues to outpace loan portfolio runoff, pay downs and liquidations.

Morningstar expects the declining trend will continue for the rest of 2014.

“That said, Morningstar cautions that expectations regarding the delinquency headline figures should be considered within the context of the upcoming wave of maturing loans,” the report said. “Morningstar estimates some $77.81 billion in performing CMBS will mature throughout the remainder of this year and next. Of the $61.11 billion of CMBS loans scheduled to mature over the next 12 months, $2.38 billion, or 3.89 percent, already is delinquent; $3.71 billion, or 6.07 percent, is specially serviced, and $14.48 billion, or nearly 24 percent, is on the Morningstar Watchlist.”

A 40-basis-point improvement from August left delinquency on hotel loans at 4.4 percent.

Industrial property loan delinquency dropped 30 BPS to finish last month at 6.9 percent.

Delinquency on office building loans improved 20 BPS to 6.0 percent.

No change from August put the multifamily past-due rate at 2.5 percent.

Delinquency on CMBS loans secured by retail properties worsened, rising 10 BPS to 5.3 percent in September.

The worst performer was the health care property category, with the 30-day rate climbing 40 BPS from August to 3.0 percent.

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