Trepp LLC has released its November 2012 U.S. CMBS Delinquency Report, which found that the delinquency rate for U.S. commercial real estate loans in CMBS inched slightly higher in November, rising two basis points to 9.71 percent. This tick upward came after three consecutive months of decline. From July through October, the rate fell 65 basis points from an all-time high of 10.34 percent in July to 9.69 percent in October. One of the main contributors to the rate moving up in November was an increase in newly delinquent loans. November saw around $3.7 billion of such loans, which compares to $2.6 billion in October. As a result, the pressure these delinquent loans put on the rate outweighed the sizeable amount of loan resolutions in November.
Loan resolutions have remained high over the past few months. Over $1.7 billion in loans were resolved with losses during November. The removal of these loans from the delinquent category put downward pressure on the rate, but compensated for just less than half of the newly delinquent loans. Loans that cured during November put a similar amount of downward pressure on the rate.
Among the major property types, lodging loans were hit particularly hard. Loans backed by hotels saw their delinquency rate jump 100 basis points in November. The only other major property type to see a rate increase was office. Retail, multifamily and industrial loans all improved modestly.
“The market cooled off somewhat in November,” said Manus Clancy, senior managing director of Trepp. “After months of seeing spreads plummet and delinquency rates fall, both inched up in November. Despite the time-out, CMBS continues to be issued as a feverish rate—so the enthusiasm for the asset class remains high.”
For the foreseeable future, Trepp expects the level of loans resolved each month by special servicers to remain elevated. Borrowing costs remain extremely low and the appetite for distressed real estate remains high. This should allow special servicers to continue to resolve loans at a high speed.
