Less than 40% of CMBS make balloon payment: Trepp
Commercial mortgage-backed analytics firm Trepp found less than 40% of loans paid off when reaching a scheduled balloon payment in August. Last month, 39.5% of loans reached their maturity date, generally unmoved from the July pay-off rate of 39.6%. Both months are down from June when the payoff rate still hovered about 40% at 42.4%. Balloon payments are a hallmark of the CMBS market. Mortgages in the space do not fully amortize and, when the balloon payment comes due, the expectation is to refinance that large chunk of debt. The August payoff number hovered slightly above the 12-month rolling average of 39.2%. Prior to the financial meltdown in 2008, the percentage of loans paying off on their maturity date remained well above 70%. In September 2008, the pay-off rate was at 80%. "Since the beginning of 2009, however, there have only been two months where more than half of the balance of the loans reaching their balloon date actually paid off," Trepp said. Trepp said about 40% of CMBS loans managed to pay off on their scheduled balloon dates in July, down from 42.4% in June. While the July number was still above the 12-month rolling average of 38.9%, it is far below the pay-off rates prior to the 2008 financial crisis, which typically ran well above 70%. Write to Kerri Panchuk.