NEW YORK, NY - Trepp, LLC, the leading provider of information, analytics and technology to the CMBS, commercial real estate and banking markets, released its May 2013 U.S. CMBS Delinquency Report.
The Trepp CMBS Delinquency Rate inched up modestly in May after posting the lowest reading in more than two years in April. May brought a four basis point increase, bringing the delinquency rate for U.S. commercial real estate loans in CMBS to 9.07%. This followed a 47 basis point drop the month before.
"Until about two weeks ago, optimism was everywhere for the CMBS market," said Manus Clancy, senior managing director at Trepp. "With spreads at their best levels in five years and incredibly low Treasury yields, borrowers could refinance properties they would not have dreamed of three years ago. This helped drive the CMBS delinquency rate lower. In the last two weeks came the realization that, at some point, the Fed will announce last call on QE3. The Fed's ability to execute a smooth landing in this capacity will have a lot to do with how the CMBS market looks over the next 12 months."
Over the past few months, the resolution of distressed CMBS loans has been a major factor in driving the delinquency rate lower. Loan resolutions stalled in May, with the amount of loans resolved roughly 46% less than amount resolved in April. The removal of these distressed loans from the month's total delinquent assets, paired with delinquent loans that paid off without a loss in May, put downward pressure on the delinquency rate.
Loans that cured put further downward pressure on the May delinquency rate, which was aided by a number of eight-figure hotel loans that saw their delinquency status flip. These loans also helped the lodging sector's individual delinquency rate, which experienced the greatest improvement of the five major property types in May.
Putting upward pressure on the rate, which led to the month's four basis point uptick, were $2.5 billion in newly delinquent loans. This compares to $1.6 billion in newly delinquent loans in April. While a huge month over month increase, the May reading is more in line with the results from previous months. Therefore the low April reading is the true outlier. May's new delinquencies offset all aforementioned improvement.