CMBS Delinquency Rate Spikes by Most on Record

CMBS Delinquency Rate Spikes by Most on Record from Wolf Street

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Commercial Mortgage-Backed Securities backed by hotel and mall properties get hit the hardest. Mall-REIT CBL failed to make bond interest payment yesterday.

By Wolf Richter for WOLF STREET.

The delinquency rate for commercial mortgage-backed securities (CMBS) spiked from 2.29% in April to 7.15% in May by loan balance, according to Trepp today, which tracks securitized mortgages for institutional clients. This spike of 481 basis points in the Trepp CMBS Delinquency Rate was the largest in Trepp’s data going back to 2009:

This 7.15% delinquency rate is composed of mostly 30-day delinquencies. The way 30-day delinquencies shot to such prominence, far above the later stages, indicates how sudden this event was:

  • Delinquent 30 Days: 4.98%
  • Delinquent 60 Days: 0.12%
  • Delinquent 90 Days: 0.18%
  • Non-Performing Matured Balloon 0.46:
  • Foreclosure: 0.33%
  • REO (Real Estate Owned by a lender, waiting for foreclosure sale): 1.08%

But the five biggest categories of commercial real estate – multifamily apartments, retail, offices, lodging, and industrial – had very different delinquency rates, ranging from minor to catastrophic.

Industrial CMBS: the delinquency rate ticked up to 1.82% (from 1.36% in April). This sector includes warehouses and fulfillment centers for ecommerce, which is booming and is probably one of the biggest beneficiaries of the lockdowns, as retail shifted that way. Industrial properties are a still fairly hot sector, whose delinquency rate of 1.82% was less than 1/10th the delinquency rate of Lodging.

Lodging CMBS: The delinquency rate in May shot to 19.13% (from 2.71% in April). Many hotel properties are still closed and travel has essentially shut down. The sector remains in a death spiral.

How bad is it? In California, the state has made a deal with some hotel chains that would be otherwise shut down to house the homeless during the pandemic. It remains uncertain how well this plan is working, given the number of homeless people I still see, but at least it’s some revenues for the hotels.

Multifamily CMBS: The delinquency rate rose to 3.25% in May from 1.92% in April, according to Trepp. Apartment buildings are under some pressure as some tenants are taking a rent holiday and as in many areas have imposed eviction holidays. But at least for now, tenants are still mostly paying their rents, given that stimulus payments and state and federal unemployment benefits arrived in many households.

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.