Maturing 2007 Loans Drive CMBS Delinquency to Record 10.16%, According to Trepp

Only 28 percent of the loans originated in 2007 that were due to mature in 2012 have managed to pay off in full, according to Trepp.

The U.S. CMBS market has entered into new territory. According to Trepp L.L.C.’s new report, the CMBS delinquency rate has reached an unprecedented 10.16 percent.

Taking into consideration the results from May, it’s a situation of big news followed by bigger news. After having jumped 24 basis points to 10.04 percent in May, thereby crossing the 10 percent threshold for the first time, the delinquency rate rose 12 basis points to 10.16 percent in June. All told, the CMBS market has experienced a 64-basis point increase since late 2011.

Trepp saw it coming. In December of last year, the information and analytics provider predicted that what had then been a steady rate in the 9.51 percent range could skyrocket by 70 basis points within the next several months.

“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,” Manus Clancy, senior managing director with Trepp, said. “Just as the heat should break by September, investors should see some relief, too. 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.”

But for now, the numbers are still staggering, due in no small part to the lackluster performance of nearly every commercial real estate type. The delinquency rate for hotels did the most damage with a surge of 68 basis points to 12.95 percent; although the sector still hasn’t surpassed multifamily, which held steady in the top spot at a rate of 15.17 percent. The jumps in office and retail were relatively modest at a respective 19 and 10 basis points. However, there was one shining light in the group. The industrial sector experienced a head-turning drop of 128 basis points to an 11.54 percent delinquency rate.

And a little improvement is better than none at all. Approximately $59 billion in loans, excluding those with a special servicer, are delinquent, compared to $59.1 billion in May.