CMBS information provider Trepp released its April 2011 U.S. CMBS Delinquency Report.
The U.S. CMBS delinquency rate increased again in April with the percentage of loans 30+ days delinquent, in foreclosure or REO rising 23 basis points to 9.65%. This is the biggest spike since December 2010 and the highest in history for U.S. commercial real estate loans backing CMBS. The value of delinquent loans is now over $62.8 billion.
The increase happened inspite of two considerable factors that are putting downward pressure on the delinquency rate. These are new and generally current issues being added to the calculation As new CMBS issues are added to the data set, the delinquency rate benefits from a larger denominator. Trepp addeed new CMBS issues to its calculations once a deal has been seasoned for six months. Many of the 2010 deals are currently a part of the calculations. These loans, since they are generally current, have pushed the rate lower.
The second factor is that there is a larger number of troubled legacy CMBS loans being resolved by special servicers versus 18 months ago. With troubled CMBS loans leaving the universe as they are sold off or modified, the balance of troubled CMBS loans is lessened, which, in turn, places downward pressure on the delinquency rate.
Even with these factors, the April's rate rose sharply. The 23-basis-point increase was above the twelve-month rolling average of 18.5 basis points per month. The latter number comes after backing out the Stuyvesant Town impact in March 2010 and the Extended Stay Hotels liquidation in October 2010.
But, according to Trepp, the retiring of defeased or performing loans push the number higher. As these leave the pool, the denominator shrinks, thus pushing the rate higher.
The percentage of loans that are seriously delinquent (60+ days delinquent, in foreclosure, REO or nonperforming balloons) is currently at 8.90%. By that measure, the rate increased only one basis point from March 2011.
“With the delinquency rate showing very small increases in February and March, and CMBS lending beginning to pick up, most of us thought that the worst was behind the CMBS market,” said Manus Clancy, managing director at Trepp. "But instead, the month indicated that the ride to recovery won't be without some bumps along the way."
