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CMBS DELINQUENCIES RISING TO HIGHEST EVER

LOIS WEISS

Friday, July 06, 2012 - Trepp, a provider of information, analytics and technology to the CMBS, commercial real estate and banking markets, released its June 2012 U.S. CMBS Delinquency Report at http://www.trepp.com/knowledge/research). The delinquency rate for U.S. commercial real estate loans in CMBS moved up 12 basis points in June to 10.16 percent. This new all-time high comes just one month after cracking through the 10 percent barrier. Late last year, Trepp had predicted that the market could easily see a spike of 70 basis points in the short term. As the CMBS market has now seen the rate increase 64 basis points since late 2011, that forecast was pretty close. Since February, the delinquency rate is up 79 basis points. Currently, $59 billion in loans are delinquent. This excludes loans that are past their balloon date but are current in their interest payments. There are $75.9 billion in loans with the special servicer. The good news for the CMBS market is that most of the five-year loans originated in 2007 were made in the first six months of that year. Having just hit the halfway mark in 2012, the number of 2007 five-year loans reaching their maturity dates will fall off sharply over the next six months. "With the level well over 10 percent now, the delinquency rate is equally uncomfortably high for CMBS investors. Driving the rate up has been the fact that only 28 percent of the loans from 2007 due to mature in 2012 managed to pay off in full. Now that most of the 2007 loans coming due in 2012 have passed their maturity date, the delinquency rate should start to level off soon," said Manus Clancy, senior managing director at Trepp. The increase in the delinquency rate was driven by weak performance among lodging, office and retail loans. The only major property type to improve in June was the industrial segment. Multifamily loans ended the month unchanged.

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