Late payments on securitized commercial mortgages dipped in August, but there is a growing divide between the performance of loan originated before and after the financial crisis.
After five consecutive months of increases, the delinquency rate, as measured by both Fitch Ratings and Trepp, reversed course in August and dropped for the first time since February.
Trepp puts the delinquency rate for U.S. commercial real estate loans in CMBS was 4.68% in August, a decrease of eight basis points from July. The rate is 77 basis points lower than the year-ago level and 49 basis points lower since the beginning of the year. The multi-year low of 4.15% was reached in February 2016. The all-time high was 10.34% in July 2012.
Fitch puts loan delinquencies for the month at 3.15%, a decline of five basis points from July.
Both index providers report that the improvement came through a combination of previously delinquent loans that paid off and loans that were cured.
A breakdown of Trepp’s index by industry shows that delinquencies fell for industrial properties (by six basis points to 5.57%), multifamily properties (13 basis points to 2.38%, and office buildings (20 basis points to 6.03%). Late pays continued to rise for lodging (three basis points to 3.15%) and retail (five basis points to 5.81%).
Fitch note that a single loan, on the JQH Hotel Portfolio, accounted for most of the increase in the lodging delinquency rate. This mortgage, originated right before the real estate bubble burst, consists of a $127.9 million A-note (securitized in JPMCC 2006-LDP7) and an $8.4 million B-note (securitized CD 2007-CD4).
According to Fitch, delinquencies on CMBS 1.0 have risen since the start of 2016 and are nearing 11%. Over 50% of the outstanding CMBS 1.0 delinquencies are repossessed properties, with an average aging of approximately 23 months.
The largest new delinquency was the $113.7 million SBC-Hoffman Estates loan, which was securitized in two transactions: a $55.7 million in a Fitch-rated transaction (BSCMS 2006-PWR11) and $58 million in a non-Fitch-rated transaction (MSCI 2006-TOP21).
