Trepp LLC has released its January 2013 U.S. CMBS Delinquency Report. The delinquency rate for U.S. commercial real estate loans in CMBS fell 14 basis points in January to 9.57 percent. This is the lowest level in 11 months, since February 2012 when the rate was at 9.38 percent, and the improvement marks the resumption of the downward trend in the rate that began in August 2012. Loan resolutions experienced a slight bump in January, with over $1.2 billion in loans resolved with losses. The removal of these loans from the delinquent category helped drive the delinquency rate down 22 basis points. Loans that cured put an additional 40 basis points of downward pressure on the rate.
There was approximately $2.8 billion of newly delinquent loans in January, putting 50 basis points of upward pressure on the rate. This total was less than the $3.2 billion of newly delinquent loans reported in December 2012.
"If the CMBS market was cycling, people would think that someone had been dumping performance enhancing drugs in the water cooler," said Manus Clancy, senior managing director of Trepp. "New issue volume hit a five-year high in January; spreads on legacy AJ and mezzanine paper collapsed; pricing levels on new deals came in remarkably tight across the credit stack; and the delinquency rate fell once again–all very positive signs for the market."
According to the Trepp report, refinancing activity is expected to increase in 2013 and will offset some of the downward pressure on the overall delinquency rate by removing some performing loans from the equation. In addition, performing loans past their balloon dates continue to show dramatic improvements, specifically during the past six months.
Among the major property types, the multifamily delinquency rate remains the worst major property type, despite falling 55 basis points in January, followed by office loans, which dipped 18 basis points. Industrial, lodging, and retail loans all saw substantial improvement in their rates, with retail remaining the best performing major property type.