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Trepp: CMBS loan delinquencies rise for first time since June

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Default rates for securitized U.S. commercial real estate loans last month increased for the first time in nearly a year, according to Trepp.

The overall March delinquency rate of 4.55% for CRE loans backing commercial mortgage-backed securities was 4 basis points higher than the February mark.

The “rare” increase was a “modest” hike, Trepp reported Tuesday, but was the first upward tick in the rate since June 2017.

The rate had fallen for eight consecutive months, in a cumulative 120-basis-point drop in the rate since last June. The March rate was 82 basis points lower than the year-ago level of 5.37%, according to Trepp.

The percentage of loans that are seriously delinquent — such as 60 days overdue, in foreclosure, or in bank REO portfolios — was down 5 basis points to 4.39%.

The vast majority of delinquent loans are pre-crisis loans issued before 2009 (or CMBS 1.0), with a delinquency rate of 47.84%.

The highest industry concentration for delinquencies remains real estate loans at 5.99%; that level was a decline of 17 basis points from March, however. The largest jump in delinquencies (34 basis points) occurred among office properties, now at a 5.8% delinquency level.

Multifamily development (2.39%) had the lowest delinquency rate.

The largest defaults for the month were the $156 million nonperforming loan for the JPMorgan International Plaza I and II property in the Dallas suburb of Farmers Branch, Texas, and the $147.2 million office property in Chicago’s Loop district at 175 W. Jackson.

The JPMorgan office complex along Dallas’ North Tollway is part of pre-crisis CMB — Greenwich Capital Commercial Funding Corp., 2006-GG7 — and was transferred to special servicing after anchor tenant JPMorgan did not renew its lease and moved out in February. The departure coincided with a modified loan maturity ending in February, leaving the building with no ongoing revenue.

The Chicago property, owned by a joint venture of Extell Development and Strategic Investment Property Fund, fell into special servicing in March after falling into 30 days delinquency on a $280 million loan split among three CMBS conduits.

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