Offices Lead Steep Rise in CMBS Delinquencies in December


Late payments on securitized commercial mortgages climbed sharply in December to a 14-month high, led by office buildings.

The delinquency rate for U.S. commercial real estate loans in CMBS is now 5.23%, an increase of 20 basis points since November.

The delinquency rate has now moved higher in nine of the last 10 months, and all of the gains from early 2016 have been reversed.

The biggest rise in late payments last month was for loans backed by office buildings, which increased by 56 basis points to 7.13%. December over December, the office rate jumped 134 basis points. That was the biggest increase among major property types in 2016.

The year began on an extremely positive note, as the delinquency rate fell 102 basis points over the first two months of the year. At one point in 2016, the rate reflected a year-over-year improvement of 143 basis points. However, a large part of that decrease was due to the resolution of the $3 billion Stuyvesant Town/Peter Cooper Village loan. Since then, the rate has steadily climbed as loans from 2006 and 2007 have reached their maturity dates and have not been paid off via refinancing.

With a cascade of loans from the 2007 vintage coming due in 2017, it is hard to see the rate going down any time in the near future, according to Trepp. That’s because many of the stronger performing loans from 2006 and 2007 were either defeased (replaced with other collateral) prior to maturity or paid off during their open period. “Those that make it to their maturity date tend to be loans with more middling debt service coverage or uncertainty in their rent rolls,” the index provider said in its monthly report.

After offices, the biggest jump in the delinquency rate in December was in multifamily buildings, where late payments rose by 22 basis points to 2.72%. However, multifamily is still one of the best performing sectors. The December 2016 delinquency rate is still 556 basis points lower than it was in December 2015.

The delinquency rate for retail loans also added 19 basis points to 6.37%. Year over year, the retail rate was up 61 basis points

Late payments for two other sectors, industrial and lodging, actually fell in December. The industrial delinquency rate dropped six basis points to 5.62%. Year over year, the industrial rate improved 11 basis points.

The lodging delinquency rate fell six basis points to 3.57%. Year over year, the lodging rate increased 75 basis points. A year ago, lodging loans had the lowest delinquency rate among major property types, but that is no longer the case.

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