Posted by Stacy-Marie Ishmael on Dec 10 21:10.
Moody’s published the results of its latest CMBS “delinquency tracker” on Thursday and, as usual, they made for less-than-cheery reading.
The rating agency said the aggregate rate of delinquencies among US CMBS conduit and fusion loans stood at 4.47 per cent as at the end of November, an increase of 46 basis points compared with the prior month. That increase was the largest yet of the economic downturn, Moody’s said.
Other stats from the report, emphasis FT Alphaville’s:the balance of delinquent CMBS loans stood at $6.7 billion in December of 2008 and has increased by more than $23 billion in the past twelve months.
“The delinquency rate has now increased 29-fold over its low point of 0.22% reached in July 2007″, said Moody”s Managing Director Nick Levidy. “Most of this increase has occurred in 2009, as delinquencies started the year at 0.95%.”
…
The delinquency rate on loans backed by hotel properties increased by 160 basis points during November, to end the month at 7.80%. Multifamily properties saw the second largest increase in its delinquency rate, increasing more than 90 points to 7.40%.
Meanwhile, the delinquency rates on loans backed by industrial properties increased 28 basis points to 3.11%, while office property delinquency rate rose 25 points to 2.95%.
“As we pointed out in our recent Commercial Real Estate and CMBS outlook, the property sectors with the shortest lease terms have suffered the most so far in this downturn,” says Moody”s Levidy. ” However, those sectors are also expected to be the first to recover.”
The chart above - figure 5 - struck us particularly interesting due to its contrast with the behaviour of prime and subprime residential mortgage back securities, which have tended to show the highest rates of delinquency in more recent vintages.
As Moody’s noted:
The 1999 vintage currently has the highest cumulative delinquency rate at 16.0%. Prior to 2009, the cumulative rate for the 1999 vintage was 8.8%, with 762 loans from that vintage having ever experienced delinquency. In 2009, that cumulative rate nearly doubled, as an additional 436 loans moved into delinquency from the 1999 vintage. Of these 436 loans, nearly 85% were maturity defaults, reflecting the lack of liquidity in the sector throughout the year. Although the 1999 vintage has seen significant increases in delinquency this year, losses for the vintage are currently less than 2%. We expect losses on loans from this vintage to be very low overall because they were underwritten before the frothy market that developed in later years.
But the news coming out of the CMBS market wasn’t all negative, as Reuters reported that JP Morgan sold a $5o0m security backed by the Inland Western Retail Real Estate Trust. The sale was met with “strong demand for its high-rated parts,” Reuters said, citing investors.
The 10-year CMBS, just the third U.S. deal since issuance broke an 18-month void in mid-November, was oversubscribed, according to documents reviewed by Reuters on Wednesday.
Inland Western’s two top-rated classes sold at yield premiums of 1.5 percentage points and 2.05 percentage points above an interest-rate benchmark, about a third of current levels on existing CMBS made at the height of the real estate boom. The yield spreads were at the low end of expectations.
Still:
investors who bought the BBB-rated portion demanded higher yields than first offered by underwriters, suggesting risk-aversion is lingering in the commercial real estate market that is beset with falling values and revenue.
Related links:
CMBS loan delinquencies tick ever upward - FT Alphaville
CMBS resecuritisation, datapoint du jour - FT Alphaville
All roads lead to retranching in CRE crunch - FT Alphaville
http://ftalphaville.ft.com/blog/2009/12/10/88336/us-cmbs-delinquencies-hit-45-per-cent-moodys-says/
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