CMBS Delinquencies May Double by 2012, Says Fitch
An increase in defaults across property types pushed total commercial mortgage-backed securities (CMBS) delinquencies 42 bps higher, closing 2009 at 4.71% delinquent, according to credit-rating agency Fitch Ratings. The rate of growth in delinquent CMBS looks set to continue in coming years, with a potential peak at 12% in 2012.
"Though delinquencies have increased approximately five times from a year ago, they may not peak until 2012," said Fitch managing director Mary MacNeill. "An increased amount of loans are coming due over the next two years that will result in delinquencies possibly peaking at 12%."
Property types rose across the board since December 2008, from delinquent multifamily growing by 196%, to delinquent hotel swelling by 1,175%.
Multifamily properties reached 7.54% delinquent in December 2009. The dollar volume of multifamily delinquencies is $5bn, from $1.6bn in December 2008. These figures look likely to grow as the owners of Manhattan's Stuyvesant Town and Peter Cooper Village properties - bought in 2006 for $5.4bn - late last week defaulted on the specially serviced loan.
Hotel properties mark the largest single category in terms of percent delinquent - 9.13% or $4.6bn - while retail properties claim the highest dollar amount delinquent - $5.7bn or 4.25%. Office properties squeak by Industrial as the lowest delinquency rate - 2.66% or $3.9bn - while industrial properties claim the lowest dollar amount delinquent - $851.3m or 3.57%.
Not only are the occurrence of delinquent loans growing within CMBS, but the delinquent loans are increasing in size. There are now 25 delinquent CMBS loans greater than $100m, compared with four in December 2008. The four most recent vintages grew to more than 75% of the total delinquencies by balance, from just under half one year earlier.
The news comes after commercial real estate information provider Trepp reported 6.07% of CMBS loans fell behind by 30 days or more in December - about five times the rate from a year earlier. Trepp analysts aren’t the only ones noting the surging delinquencies in CMBS. Data from the credit-rating agency Realpoint showed the delinquent unpaid balance rose more than 16% in November to $37.93bn. According to the report, the climb was “an astounding” 440% from a year earlier.
Guardian Solutions, a commercial mortgage workout service provider, this weekend also warned of a sharp decline in the commercial real estate market this year. Value declines will total 40-50% off market highs, according to Guardian's review of research conducted by the Urban Land Institute and PricewaterhouseCoopers. The research indicates 2010 may present the worst year for the sell-side in the report's 30-year history, Guardian Solutions said.
Write to Diana Golobay.
Don’t miss out: get HW delivered via email
- Current Chg.
- NASDAQ 3498.97 33.722 ^ixic
- S&P 500 1667.47 17 ^gspc
- Volatility Index 12.45 -0.62 ^vix
- KBW Mort. Financial Index 33.25 0.53 ^mfx
- MSCI US REIT Index 1061.59 6.49 ^rmz