CMBS Delinquency Rates 5%-6% By Year-End
From Commercial Real Estate Direct: Moody's Sees Delinquency Rate for its CMBS Universe at 5-6% by Year-End
The delinquency rate for securitized commercial mortgages tracked by Moody's Investors Service increased 40 basis points in June to 2.67% and the ratings agency expects it to reach up to 6% by the end of the year.
The rate compares to 0.46% a year ago and the low of 0.22% in July 2007.
Moody's tracks $620.5 billion, or 78% of the total CMBS universe, and counts as delinquent loans that are 60 or more days in payment arrears.
It expects the delinquency rate within its CMBS universe to continue increasing through year-end, noting that the pace of delinquency increase has been intensifying for all property sectors. That pace is being driven by properties unable to generate sufficient cash flow due to tumbling fundamentals.
The hotel sector led the delinquency surge in June as its rate rose 1.24%age points to 3.26%, the second highest rate among all property types. Weak hotel property performance resulting from reduced travel is seen getting worse, as Smith Travel Research has projected that revenue per available room for hotels nationwide will drop 17.1% this year.
Industrial's delinquency rate rose 56 bp to 1.96%, while retail's increased about 50 bp to 2.92% and office's rate increased 26 bp to 1.6%.
The multifamily sector level increased a scant 2 bp to 4.58%, which is still the highest of all sectors. But the delinquency rate's apparent leveling off may not last for long.
Multifamily's June delinquency rate was skewed downward by a $164 million loan against a Phoenix-area portfolio owned by the bankrupt Bethany Group, which became current in June but is likely to return to its former delinquent status. The loan, securitized through LB Commercial Mortgage Trust, 2007-C3, was made current with a payment made by Trigild Inc., which was installed as receiver of the portfolio after Bethany filed for bankruptcy protection.
While Trigild made the payment with reserves it uncovered from its cash sweep of the portfolio's operations, the properties do not appear able to generate the amount of cash flow needed to fully meet their debt-service requirements going forward.
Moody's also said the retail sector's delinquency rate is being complicated by the bankruptcy of the retail REIT, General Growth Properties.
It said that about half of the loans backed by GGP properties are technically 30- to 59-days late, which means that in the coming weeks they will become 60 days past due, which is Moody's threshold for being termed delinquent. The rating agency said it will not count as delinquent loans on GGP properties unless they're past their maturity dates or if lenders have begun foreclosure. The loans continue to pay interest, but have stopped making principal payments, as a result of the bankruptcy.
The rating agency noted that many of the REIT's properties are still generating adequate cash flow to pay off their loans.
The delinquency rate for securitized commercial mortgages tracked by Moody's Investors Service increased 40 basis points in June to 2.67% and the ratings agency expects it to reach up to 6% by the end of the year.
The rate compares to 0.46% a year ago and the low of 0.22% in July 2007.
Moody's tracks $620.5 billion, or 78% of the total CMBS universe, and counts as delinquent loans that are 60 or more days in payment arrears.
It expects the delinquency rate within its CMBS universe to continue increasing through year-end, noting that the pace of delinquency increase has been intensifying for all property sectors. That pace is being driven by properties unable to generate sufficient cash flow due to tumbling fundamentals.
The hotel sector led the delinquency surge in June as its rate rose 1.24%age points to 3.26%, the second highest rate among all property types. Weak hotel property performance resulting from reduced travel is seen getting worse, as Smith Travel Research has projected that revenue per available room for hotels nationwide will drop 17.1% this year.
Industrial's delinquency rate rose 56 bp to 1.96%, while retail's increased about 50 bp to 2.92% and office's rate increased 26 bp to 1.6%.
The multifamily sector level increased a scant 2 bp to 4.58%, which is still the highest of all sectors. But the delinquency rate's apparent leveling off may not last for long.
Multifamily's June delinquency rate was skewed downward by a $164 million loan against a Phoenix-area portfolio owned by the bankrupt Bethany Group, which became current in June but is likely to return to its former delinquent status. The loan, securitized through LB Commercial Mortgage Trust, 2007-C3, was made current with a payment made by Trigild Inc., which was installed as receiver of the portfolio after Bethany filed for bankruptcy protection.
While Trigild made the payment with reserves it uncovered from its cash sweep of the portfolio's operations, the properties do not appear able to generate the amount of cash flow needed to fully meet their debt-service requirements going forward.
Moody's also said the retail sector's delinquency rate is being complicated by the bankruptcy of the retail REIT, General Growth Properties.
It said that about half of the loans backed by GGP properties are technically 30- to 59-days late, which means that in the coming weeks they will become 60 days past due, which is Moody's threshold for being termed delinquent. The rating agency said it will not count as delinquent loans on GGP properties unless they're past their maturity dates or if lenders have begun foreclosure. The loans continue to pay interest, but have stopped making principal payments, as a result of the bankruptcy.
The rating agency noted that many of the REIT's properties are still generating adequate cash flow to pay off their loans.
posted by ENSO Advisors at
12:23 PM
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