New CMBS Deals Under Construction as Market Continues to Deteriorate
Two new commercial mortgage-backed securities (CMBS) are being developed even as delinquencies in the market doubled from a year ago. Citigroup (C) and Goldman Sachs (GS) are securitizing a $750m multi-borrower deal. JPMorgan is constructing a $650m CMBS deal on behalf of Vornado Realty Trust, according to market participants. Both are transactions under Rule 144A, meaning it’s a private placement among large institutional investors. But delinquencies are still increasing on existing CMBS. The delinquent unpaid balance of loans backing commercial mortgage-backed securities (CMBS) passed $60bn in June, a 111% increase from a one year ago, according to the analytics firm Realpoint. Realpoint tracks delinquency data on nearly $800bn of CMBS pools for its monthly reports. In June, the unpaid balance of these loans increased $3.1bn from the previous month. The delinquent loans make up 7.7% of those reviewed, up from 7.27% in May. It’s over two times the 3.5% reported a year ago and more than 27 times the 0.2% low point recorded in June 2007. Four of the five delinquency categories increased from May. The only one to fall was the 60-day delinquency bucket, dropping $2.06m from the previous month. There was a $3.2m increase of loans that fell 30 days behind. The 90-plus day, foreclosure and REO categories grew for the 30th straight month, up another $2bn, or 5%, from May. The amount of loans falling into that category has more than tripled from a year ago, up $30.7bn. Realpoint still maintains that the delinquency rate could grow to between 11% and 12% by the end of 2010. Fitch Ratings reported earlier in the month that eight loans in CMBS portfolios and hold balances greater than $20m are likely to default in August. Analysts at Deutsche Bank said the amount of these loans falling into special servicing is continuing to outpace the workouts, meaning a shadow inventory of commercial foreclosures is building. Earlier in the year, another analytics firm, Trepp, reported that these spiking delinquencies could cause bank failures to increase as much as 30% in 2010. There has already been more than 100 closings this year. Write to Jon Prior.