Friday, July 31, 2009

CMBS Delinquency Jumps 53% in June

CRE Weekly: CMBS News

Friday, July 31, 2009 Vol. 4 Issue 31

The volume of delinquent CMBS loans skyrocketed by 53 percent in June to $28.65 billion. That increase includes a $9.87 billion jump, to $11.24 billion, in the volume of loans that became at least 30-days late in June, the biggest-ever monthly increase. It could be explained in large part by the classification as 30-days late of some $3.4 billion of loans on properties owned by General Growth Properties, which filed for bankruptcy in April.

Take out the GGP loans and the overall delinquency rate is still a whopping $25.27 billion. As a result of the Chicago REIT’s bankruptcy, it is making only interest payments on its mortgages, even if they also require principal payments. While some servicers have classified loans they’re handling as delinquent as a result of the missing principal payments, others have classified them as performing. That could indicate that they’re either advancing principal payments or they’re accounting for the loans differently.

Even if you exclude the GGP loans, the delinquency rate has jumped to never-before-seen levels. That’s the result of the continued freeze in the credit markets, where few maturing mortgages are able to refinance, and declining property fundamentals that have stymied the ability of some properties to stay current on their indebtedness.

Realpoint now expects the delinquency rate to breach the 6 percent level before the end of the year.
That’s to be expected given the continued increase in the volume of securitized loans that are now in special servicing. As of the end of June, 5.54 percent of all CMBS loans were in special servicing.
The delinquency rate could jump even higher soon after this year ends as some very large loans exhaust their interest reserves and property cash flows are insufficient to fully service their debt.

The best known such loan is the $3 billion of securitized debt on the Stuyvesant Town/Peter Cooper Village apartment complex in Manhattan. The debt is scattered among five CMBS transactions and reserves tied to it are expected to run out early next year.

Every delinquency category save the 60-day bucket saw an increase in volume during the month. The 90-day bucket jumped in size by 38 percent to $9.57 billion from $6.94 billion.