U.S. Commercial Real Estate Loans Hit 10% Delinquency

U.S. 10 Year Treasury Hits

a Record Low Low yet...

NEW YORK, May 30, 2012 /PRNewswire via COMTEX/ -- Trepp, LLC, the leading provider of information, analytics and technology to the CMBS, commercial real estate and banking markets, released its May 2012 U.S. CMBS Delinquency Rate today (full report available Friday, June 1 at http://www.trepp.com/knowledge/research ).

The delinquency rate for U.S. commercial real estate loans in CMBS jumped 24 basis points in May to 10.04%. In the process, the rate broke through the 10% threshold for the first time ever.

Back in December, Trepp predicted that 2012 could be a rocky year for CMBS in terms of the delinquency rate. This prediction was in anticipation of five-year loans securitized in 2007 beginning to reach their maturity dates. At the time, the delinquency rate was around 9.51%, and it was expected that these maturing loans could lead to a spike of 70 basis points in the short term.

It appears that this prophecy has come true. Up 24 basis points in May alone, the delinquency rate has increased 67 basis points in total since February. Whether the rate finally breaching the double-digit mark will carry some psychological impact remains to be seen.

The good news for the CMBS market is that the five-year loans originated in 2007 were heavily front-loaded. This means that by the end of this June, the number of these loans reaching their maturity date will start to dwindle.

"While cracking the 10% barrier might weigh on the market's psyche for a short time, there are likely better days ahead in terms of delinquencies over the next six months. A big driver of the recent surge in the delinquency rate has come from loans that were originated in 2007 that are coming due now. As we get later in the year, the impact of this trend will dissipate. The next two or three months could be bumpy, but the second half of the year should bring a leveling off of the rate," said Manus Clancy, senior managing director at Trepp.

Currently, $59.1 billion in loans are delinquent. This excludes loans that are past their balloon date but are current in their interest payments. There are $79.2 billion in loans with the special servicer.

The increase in the delinquency rate was driven by weak performance among hotel and industrial loans. Overall, four of the five largest property types saw delinquencies rise. Only the apartment sector improved, and that was by a single basis point.

Delinquency Chart

CMBS Overall Delinquency Rate Up 52% Year Over Year (Trepp) as REITS Continue Launch

Overall CMBS Delinquencies Hit a

Record 9.2% in December as

REITS Spend 2010 Partying in the Exosphere.

Trepp Reports CMBS Delinquency Rate Hits

Record High of 9.2% in December Despite Market Optimism

(NEW YORK – JANUARY 5, 2010) - Trepp, LLC, the leading provider of CMBS andcommercial mortgage information, analytics and technology to the global securities and investment management industry, released today its December 2010 Delinquency Report. This month’s report contains a special section on the Major CMBS Events of 2010 as well as Delinquency Rate and Triple A Spread charts covering the past 10 years.

The U.S. CMBS delinquency rate rose again in December with the percentage of loans 30 or more days delinquent, in foreclosure or REO climbing 27 basis points to 9.20%, the highest in history for U.S. commercial real estate loans in CMBS. The value of delinquent loans now exceeds $61.5 billion.

The decline in the delinquency rate in October 2010 now appears to have been a blip, as the rate has since increased by 62 basis points. December’s 27 basis point jump comes despite the fact that new issues continued to make their way into the calculation and servicers continued to resolve troubled loans. The new deals - which theoretically should have low delinquencies for a while - will continue to put downward pressure on the delinquency rate as issuance continues to grow in 2011. Similarly, the resolution of troubled loans will also help to lower the rate.

“Many have speculated that between the emergence of new CMBS lending, the resolution of many troubled CMBS loans and an uptick in trophy property sales, that the commercial real estate crisis was nearing its final stages,” said Manus Clancy, Managing Director, Trepp. “The December delinquency rate underscored that there still may be some nasty surprises in store even as the market shows some signs of healing.” Trepp Report

Delinquency Rates (Percent 30 Days + delinquent)

• 8.97% Industrial (up 125% YOY)
• 14.31 % Lodging (up 11% YOY)
• 16.48% Multi-family (up 78% YOY)
• 6.93% Office (up 103% YOY)
• 7.86% Retail (up 43% YOY)
• 9.20% Overall (up 52% YOY)